What to Consider When Making a Smart Real Estate Investment

Real estate is the largest purchase most people with make in their life so it is crucial to think about a long term investment strategy when doing so. The old adage “location, location, location” is the key to smart real estate investing. Purchasing a home in sought-after areas is an easy to way to ensure you are making a smart investment. These areas tend to have low crime, great schools and accessibility to highways, which leads to more demand than supply. Keep in mind that just because a home appears to be a “deal” doesn’t mean it is necessarily a good investment. You still want to take in consideration the location, the neighborhood and other surrounding factors before making a final decision. I like to remind my clients that the actual house is secondary to these other external factors that you cannot change and have no control over.

Getting a good price on a home is also an important strategy when making a real estate investment. You definitely want to make sure you are buying within the area’s price range, if not lower, to ensure you won’t be in a negative equity situation. Reviewing comparables with your Realtor will help educate you on what a fair, or even aggressive, price is for the home you want. If a home needs some cosmetic upgrades, many buyers will ignore that house as an option because they tend to overestimate how much (or little) time and money it will take to get the home up to par. Many times a home is listed 10k below market value simply because it needs 3k worth of paint and carpet! This scenario would make for a terrific investment!

Lastly, you are going to want to stay in your home long enough to build up some equity. Sometimes this may mean possibly selling your home when the market is at its peak, which could be only 2 years after buying it. Other times it could mean staying in your home for the long haul so that you can wait for the next peak to arrive. Be sure you have decided on a home than is flexible if your life circumstances suddenly change. Things like a new baby, aging parents or sudden injuries or surgeries can sometimes make people feel like their current home just can’t work anymore and are forced to move before having enough time to build equity. So while not every house can fit every life circumstance, it is important to consider the “what ifs” when finding your new home.