Looking to Diversify Your Investments Into Real Estate? Here Are 4 Things You Should Know
Wednesday, December 2, 2020, 6:00 AM | Leave Comment
Investing in real estate is a time-tested way to make your money work effectively for you.
If you jump into it without knowing what you’re doing, though, this type of investing can backfire and cost you large amounts of money.
Here are four things you need to know before you diversify your investment portfolio with real estate holdings.
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Maintenance Costs Will Likely Exceed Your Expectations
Many new real estate investors go in with overly optimistic assumptions about cash flow. The reality, though, is that maintenance will eat into your returns considerably. Unexpected expenses and ordinary maintenance will begin to add up over the course of a year. By budgeting appropriately for repairs and maintenance, you can start with a more realistic picture of your profits.
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You May Have to Put up a Large Down Payment
If you’ve only ever purchased a home as a primary residence, you were likely able to get away with a fairly small down payment. Banks typically look for larger upfront payments when offering mortgages on investment properties. As a result, you’ll need to have a fairly large amount of liquid cash available to make the down payment on your investment property.
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Managing a Property Can Be Time Consuming
First-time landlords often believe they’re creating a totally passive income stream when they buy investment properties. The reality is that managing a property can take up a good bit of your time, especially when maintenance work needs to be done. You can, however, solve this problem by engaging a property management service. Property managers take care of day-to-day tasks, allowing you to take a more hands-off approach and enjoy your time.
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You’ll Want to Expand as Early as Possible
Once you have an established rental property generating cash flow, your next move should be to start looking for another one. Expanding your portfolio of properties will allow you to build your wealth and your income more rapidly. Over time, continuing to acquire new properties can allow you to create a large stream of income and achieve complete financial independence. The sooner you begin expanding, the more quickly you’ll be able to build a larger property portfolio.
Getting into real estate investment is one of the best things you can do to improve your overall financial standing. By knowing these four things, you can improve your chances of success as a property owner. Now, you just need to find the right property to start building your real estate portfolio.
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