Going into a real estate investment is a big commitment. You want to make sure that you are making the right decision for your personal finances. Investing in real estate can be a great opportunity, but you want to make sure it’s the right one for you. You want to make sure you evaluate your personal financial situation as well as research any property that you might be considering. You also need to assess your risk tolerance. How comfortable are you with risk? This is an important consideration since no matter how much research you do there is some element of risk. Are you in a financial situation to absorb a financial issue? Do you have enough extra cash flow just in case something goes wrong and you take a loss? Below I will review some of the big considerations when investing in real estate in Florida.
- Income – Is your source of income stable?
You want to make sure that you aren’t going to lose your income suddenly and then be in a tight spot if you lost your income source and had to pay for another mortgage. You should consider if you have a salary job that you can count on a certain amount every month. You might have retirement income, but you want to make sure that amount will be stable and steady as well. If you have a job with commissions you want to make sure that you have enough cash reserve to cover and lack of income.
- Rental income
Many real estate investors are investing with the idea that they will earn rental income from the property over a number of years. You want to evaluate if you have enough income to withstand a period of no rental income. This can happen periodically. Even if you research a high demand market for rentals and it looks like quite a promising investment you need to be prepared for this possibility. Sometimes it can take a while to find the right tenant or a long term tenant. You might find you are not happy with a current tenant and need to find a new one. Sometimes despite your research on a tenant ahead of time you could end up with someone not paying. Make sure you can handle a few months of this just in case this situation happens to you. If you do some good research your chances of this are lower, however it is better to be prepared. You should only go forward with investing in Florida real estate if you can wait out any dips in the market or lack of rental income.
- Check your credit
You want to make sure you have a strong credit score. This will help you get a more affordable mortgage loan with a better interest rate. Make sure you don’t have a lot of outstanding debt that is going to bring down your credit score and cost you to pay more then you want to for your loan. You want to make the most possible profit, having a good credit score will help you pay the least for your mortgage loan on your investment property.
- Real estate prices
Look at the overall real estate prices in the area of Florida you are considering buying in. Are prices stable for homes and condominiums in the area. Are they increasing? Are they decreasing? You want to make sure that you are not buying on the high end but on the lower end of prices. You want to make sure there is a desire and people are selling properties relatively quickly making the homes and condominiums more desirable.
These are a few of the considerations to make sure you are in the best position possible to invest in Florida real estate. Keep an eye out for future posts on areas to look at and other considerations.