Before you stake your money in real estate, read through and find out if you’re ready for investing…
Real estate is, no doubt, a lucrative market and lots of lucky investors have been able to make millions out of it.
But the ones who made it big went into it prepared…
Because on the other hand, haven’t we also heard plenty of real estate ‘failure’ stories?
Those failure stories are usually about those who went into this business unprepared.
You might also be burning to have a house of your own or to invest in a property but, are you actually ready to invest?
Because real estate is not really a piece of cake, and jumping into it unprepared has some serious consequences.
So, before you make your move into investing you’d better go through the FIVE signs below…
If one or more of them fits your current situation it’s a signal that you’re NOT yet ready to invest!
And the first sign that you aren’t ready to invest is…
1) You’re Already In Big Debt!
Being in debt isn’t always a problem…
How long can you really avoid it in today’s debt-driven economy, right?
So being a bit in the red is normal!
The real question is, how much of your monthly income goes to the financing of those debts?
The high-rate interests that fall upon you with those debts are the real troublemakers.
If you’re tied up in extortionate high-interest personal loans or credit card debt it’s best to postpone investing until you’ve fully recovered from your borrowings…
Because no one is going to lend you a mortgage in the first place.
And if you still talk a lender into lending you money, you’ll find yourself losing your asset within months – once you fail to meet the mortgage payments!
Next…
2) You Can’t Afford the Down Payment
Now, let’s for instance assume that you’re debt-free from head to toe and you’ve got no liabilities consuming your monthly budget…
Can you afford to pay the down payment there and then?
A standard down payment is 20% of the total property value.
So, for an $80,000 property, you might have to put in $16,000 right away.
While it’s true that today it’s possible to invest with as little as 5% or even 3.5%, even then you have to factor in taxes, fees, possible immediate renovations, and more…
So 20% is still a good benchmark to aim for.
Can you afford that or does it sound too big?
Well, if you can’t afford the amount as an initial lump sum then it’s advised to postpone the investment, cut your monthly expenses and save for it.
3) Your Credit Score is Too Low
Another big problem could be that your credit score isn’t high enough…
Because to get a mortgage you need a good credit score too!
In fact, even if there are alternate ways around it, a good credit score gives you the best chance at getting financing.
If your financial ratio is bad and you have a low credit score lenders won’t even bother!
And even if they do, they won’t offer you the best deals so you might be stuck with a 25-year mortgage that has a higher interest rate, more fees, etc.
So you’d better improve your credit score before jumping into real estate investing.
4) No Emergency Fund Available
Again, it comes down to your financial capability…
Emergency funds are the savings set aside for emergency purposes in case you get into a crisis. Emergency dental procedure, car repair, temporary unemployment, etc.
Ivory Johnson, a Certified Financial Planner, suggests that you should have up to three months of emergency funds readily available at any time.
Because what will you do if you bump into some trouble that requires urgent cash while you’re stuck with your investment?
And then you’d have to choose…
Make your mortgage payment but ignore a real emergency, or fix the trouble you’re in and miss payment… possibly losing your home in the process?
So, the point is:
If you’re living from paycheck to paycheck you should not begin a real estate investment yet, because in the case that you fall short on cash you’d (most likely) lose the investment altogether!
5) You Don’t Plan to Stay There Long Enough
If you don’t plan to stay in the property for at least five years it’s not really an investment… It’s a crash & burn!
Why?
Because the reason why people invest in real estate is to make a profit from it.
And if you sell it before… Well, don’t expect to get your money back.
That’s right… It’s not an investment if you’re planning on selling any sooner since any profits you earn will just go into fees, expenses, etc.
You might even end up losing money!
So ask yourself…
Are you ready to settle down and stay in this property for a long time?
Or are you just looking for a place for a few years before you move somewhere else?
If it’s the second, then again…
If that’s your choice then you might want to wait to invest in real estate, or it might be more of a burden than an investment.
6) You’re Not Well-Informed…
Have you taken up real estate investing as a result of a whimsical urge or are you making a well-informed decision?
Look, the real estate market is full of ups and downs and prior market research is super important.
If you’ve not yet done your research you’re simply not ready to invest!
Gaining the information is very easy. Just hire a reliable, licensed property agent or broker to walk you through all the necessary points…
And, meanwhile, also carry out your own research.
It would definitely pay off if you start listening to a real estate podcast, or read one or two books on real estate in your region before you carry on with the investment!
7) Your Job Security Is Questionable
Yeah, if you’ve got a shaky employment history, then there’s no doubt that the mortgage lender will think a thousand times before giving you the money!
The thing is that a very consistent job and income history is required for you to appear as a reliable borrower to any lender…
Take it this way: would you lend someone your money if they had a patchy, unsafe work history?
Absolutely not, right?
Then with an inconsistent job history how can you expect to get a mortgage on your investment?
So, to ‘get ready’ for a real estate investment, work on having a strong job with a consistent cash inflow (of 2 years at least) to qualify as a top borrower.
In Conclusion!
Having a house of your own is definitely a thought most people love to think about…
But so many take wrong impetuous decisions on their house, mortgage, and lease which they regret later.
So, if one of the above seven points currently defines your situation it’s best NOT to invest.
But circumstances change with time, and if you get ready to settle down and work hard enough on improving your financial abilities – you’ll soon be able to have a house of your own.
And when that time comes, come view the properties on sale on AQRE Home!
From luxury to affordable, urban to rural, renovated to fixer-upper, we have hundreds of active listings sure to fit every need.
And when you’re ready to invest, just send a message to the seller with our built-in chat and get the process moving quickly…
Because once you’re ready to invest, why wait?
Best of luck to you!