3 Questions To Ask Yourself Before Buying A Rental Property
There are fundamental basics that you need to know about investing in real estate. A question that I get quite often is "How do I start?" Real estate investing can be intimidating- I get it. My goal is to break down the process and simplify it as much as possible. Beginning with the end in mind, answering these 3 questions correctly will be critical to begin your journey. Let's jump in!
1. Can you comfortably pay all of your current expenses and obligations?
If the answer is:
A. Most of the time
B. Yes, but only if nothing unexpected comes up or goes wrong
C. I'm not sure...Do I?
Get your house in order: Living below your means will enable you to save 3-6 months of living expenses then begin saving towards the purchase of your investment property.
2. Have I sought wise counsel?
Highly regarded and experienced mentors will be critical to your success. They will be able to call out your blind spots and anticipate factors that you don't know to look for. Isolating yourself trying to learn everything on your own is very dangerous. Please ask lots of questions!
Characteristics of this person should be: Trustworthiness, great reputation, local, experienced, and a willingness to work with you.
How to find your mentor:
Ask a Realtor/Broker to refer you, utilize your current network (church, school, community organizations), local Real Estate Investment Association, through your accountant, or even a family friend.
3. What are my goals?
Why are you interested in Real Estate Investing? In a previous post I discussed the importance of setting short-term and long-term goals. Your goals should be broken out in segments and time-bound. Financially, as it relates to real estate you need to know:
Targeted Return on Investment: Cash on Cash return and/or Monthly Cash Flow
How will I finance my rental property?
How will I find these deals?