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Financing

How to Make Sure Your Dream Home Is a Good Investment, Too

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You've probably heard real estate can be safer than the stock market, while still yielding decent returns. This can be true, but adding real estate to your portfolio is very different from investing in stocks, bonds, and certificates of deposit. Finding success in the housing market often requires being able to find good deals and ripe opportunities. Check out some tips below to help you launch your housing market investment career.

1. Assess your goals

It's important to check your credit and have your finances in order before you get into the housing market. (You can get a free credit report summary from Credit.com to see where you stand.) If you are struggling to make your own mortgage payments, real estate investment might not be the right move. But if you are willing to put the time in to research a good location and deal, crunch numbers to test a property's financial potential, and can manage the maintenance needed, then it might be a good fit for you. Just be sure you know what you are looking to gain from the experience and understand what it will take to get there.

2. Know the market

It's a good idea to spend some time learning about the process of real estate investing. Real estate rules vary by state, so it's important to know about the state you are looking at. You can read books or ask a local real estate expert.

3. Consider multiple buying sources

You can look beyond the local multiple listing service to find homes available for purchase. With your criteria set you can check the newspaper, Craigslist, and real estate auction sites for properties that match what you are looking for. You can also find good opportunities through word of mouth.

4. Find a good real estate agent

Not all real estate agents have experience or know how to help investors find the right type of properties. Before the real estate crash, only a small percentage of real estate professionals would even work with housing investors. As the market slowed, more became open to the idea and some have even taken courses to understand the ins and outs. It's a good idea to choose a real estate agent who has sold several investment properties and understand your goals as well as the ideal return on investment.

5. Play by the numbers

If you are investing in real estate to increase your net worth, it's a good idea to make sure it's part of a balanced financial plan. Whether you are trying to build up a retirement fund or eventually replace income from a traditional job, it's important to make sure the choices you're making continue to fit into that plan.

You may find you need to hold on to a home you intended to flip, if repair or closing costs were more than expected. In this case, you can consider renting it out until you are able to sell it for the profit you are aiming for. Likewise, if you were planning to rent out the property, but someone offers you more than expected to buy it, you may want to sell and move onto the next property. It can be a good idea to let your goals and the numbers be your guide.

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This article was written by AJ Smith and originally published on Credit.com.

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