Investing in real estate has always been a great way to build wealth. You’ve likely heard Andrew Carnegie’s famous quote: “Ninety percent of all millionaires became so through owning real estate.”
Some of the reasons real estate is such a good investment is because the asset itself – your building – will continue to increase in value over time. Against an economic backdrop like the one we’re facing today, it can also be a good hedge against inflation.
Moreover, real estate is a relatively low-risk way of diversifying your investment portfolio while also taking advantage of generous tax breaks bestowed upon real estate investors – say nothing of the passive income you can earn while renting it out.
Factors to Consider When Investing in Real Estate
Before pursuing a real estate investment, there are some important considerations to think through so you can feel confident about the property(ies) you ultimately move forward with pursuing.
- Location – No doubt a top priority for any real estate property, location has always – and will always – rule when it comes to the value and returns your property will yield.
- Valuation – The value for rental properties is often calculated slightly differently than it is for single-family residential homes. Whereas most home values are based on comparable sales of similar properties, real estate that’s intended to generate cash flow should be looked at according to its Net Operating Income, or NOI for short. This is calculated by taking gross income generated by the property minus any expenses. To learn more about valuation, take a look at this post.
- Your financial footing – If you’ll need to borrow money to invest in a real estate property, you’ll have to have a strong credit history so you can qualify for the best mortgage terms. With any investment, it’s always helpful to come back to the numbers again and again before committing to purchase.
- Your comfort level managing real estate – The good news is that owning real estate properties can be a completely hands-off experience if you choose to work with a property management company, but it can also be a full-time job if you want it to be. Assess your comfort level in managing rental properties as you consider exactly how far you want to go with your real estate investment.
Being successful with your real estate investment starts well before you make a purchase. For guidance and advice, we’re always here to help. Give us a call at 614-725-3059 with any questions about investing in Franklin County, Ohio.