16
May
2022

What Makes Your First Home A Great Real Estate Investment

If you’re young and looking for a new place to live, consider turning your home into an investment property. While most individuals wait until they’ve purchased their first or second house before investing in real estate, you may be able to get started much sooner than you think. Taking on such an endeavor, however, is no easy undertaking. Before you make any decisions, talk to a financial expert about your plans.

Purchasing a Home as an Investment

Many individuals have wondered, particularly in the aftermath of the mortgage crisis, “Is buying a house a wise investment?” Renting properties that are lots for sale in tulum mexico out the first home you buy is one approach to alleviate your concerns about whether or not buying a house will pay you. You may leverage your less-than-perfect credit, less-than-perfect lifestyle, and limited obligations into an investment by turning your home into an investment property. It only takes a little bit of foresight and real estate expertise.

Making your first home an investment goes against the grain of conventional financial wisdom. In fact, it goes against the grain of how most individuals approach life after college. A typical financial timeline for an average American adult can include going to college, getting a first job, renting an apartment, marrying, and buying a house, and so on.

There’s nothing wrong with sticking to that schedule because it allows you to develop credit, save money, and enjoy your youth. However, if you’re a 22-year-old college graduate with a stable career, waiting until your 30s or 40s to begin investing in real estate may not be prudent.

Here are four reasons why you should consider real estate investing while you are still young.

Reason #1: When you’re young, you can take on greater risk.

Being young and self-sufficient can be a wonderful experience. You can live wherever you want, purchase whatever you want, and travel whenever you want. However, this can rapidly become tedious, especially if you have other objectives in mind.

All of the money you’re now wasting “living the life” in a run-down apartment may be put to better use. Saving money and building credit aren’t hard, and they’re both requirements for getting a mortgage (more on that below). Your current lifestyle may allow you to save money in ways that you won’t be able to later in life when you have more responsibilities.

You can save enough money for a down payment if you understand how to handle your money wisely.

Reason #2: Certain real estate markets provide great deals.

Home prices are rising, according to recent statistics from the National Association of Realtors. In most real estate markets, however, distressed sales provide many deals to potential purchasers. Homes or properties that have been foreclosed on that the bank is willing to sell at a loss in order to clear its books are known as distressed sales. These foreclosed sales also assist to bring the cost of all properties in the region down.

There are many foreclosed houses for sale. Purchasing one would allow you to own an investment for a fraction of the market value, especially when prices climb. However, before purchasing any property, you must ensure that it is within your financial means.

Reason #3: You’ll be able to supplement your income.

If you buy a house with the intention of renting it out, you’ll be able to profit from your investment as soon as you locate renters. The money you earn can then be used to reinvest in your home or to pay off other obligations and debts.

Reason #4: You may qualify for an FHA loan.

When purchasing a home, industry guidelines state that you must pay down at least 20%. If you can’t afford that, you might be able to receive an FHA loan and put down as little as 3.5 percent on an investment property.

FHA loans allow persons with less-than-perfect credit to become homeowners. If you determine that investing is right for you, an FHA loan may be the best option for you. However, there is one snag: FHA loans require you to live in the property you want to buy. To get around this restriction, you can buy a home with up to four rental apartments and live in one of them.

Conclusion

Taking out a large loan for real estate may seem scary, but there could be significant benefits. This is especially true if you can take advantage of the FHA loan’s different benefits. However, before investing in anything, make sure you do your homework.

How to Become a Real Estate Investing Expert

If you think real estate investing would be a good fit for you but aren’t sure where to begin, a financial advisor can help you sort through your possibilities. It doesn’t have to be difficult to find a qualified financial counselor.

SmartAsset’s free tool matches you with up to three local financial advisors, and you may interview them for free to choose which one is best for you. Start looking for a financial advisor today if you’re ready to attain your financial goals.

There are other methods to get into real estate if you’re afraid of making a significant investment. To understand more, read SmartAsset’s REIT and real estate investing guide.

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