Buying a Starter Home

Three Signs You're Ready To Invest In Real Estate

4 August 2017

Capucine Leroux

If you've already bought your first home, you probably noticed some signs prior to your purchase that the time was right for you to look at homes for sale. For instance, you may have felt that you reached a point in your career that offered the level of stability necessary to make a financial commitment to home ownership, or maybe the time came when living in an apartment no longer made sense due to an expanding family. If you're thinking about purchasing real estate for investment purposes, you may be looking for similar signs that the time is right. Following are three indications that you're ready to buy real estate as an investment. 

You Can Absorb a Certain Amount of Loss

One of the major mistakes that many people make when they buy real estate as an investment is not making certain they've got enough financial leeway to absorb a certain amount of loss. For instance, you should be able to take the loss if residential or commercial rental property tenants are remiss in paying their rent. Hopefully, that won't be a part of the picture, but it is always a good idea to err on the side of caution and prepare for worst case scenarios when it comes to any type of financial investments. 

You should also have the cash on hand to handle any unexpected repairs that may arise -- keep in mind that when you're renting a residential or commercial property, you don't have the luxury of putting off necessary repairs until you can afford it. You have a legal obligation to your tenants to keep your property up to code.

You Have a Large Down Payment

You should have at least a 25-percent down payment if you're considering padding your financial portfolio with a real estate investment. Investors of the past were sometimes able to get into properties with smaller down payments and sometimes none at all, but today's financial climate requires a significant down payment for investment properties. That's just good sense anyway because it provides you with enough instant equity to guard against the possibility of going underwater. 

You're Willing to Invest Locally

You may be tempted by financial management services that offer real estate investment opportunities in other states or even other countries, but there's nothing like first-hand experience to help fledgling investors learn the ropes. You'll gain invaluable experience and learn the nuts and bolts of property maintenance and tenant management if you've got physical proximity to your property. 

Your local real estate expert can help you further explore whether or not the time is right for you to begin your journey with real estate investments. 

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