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The 5 Important Questions to Ask Before You Invest in Real Estate

01 July 2023

For many investors, real estate is the most attractive investment, but they don’t know how to approach it.

“Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.” – Franklin D. Roosevelt, U.S. president ~realtymogul~

Therefore, it is important to know how to approach all types of real estate investing methods.

A good investment begins with knowing how to ask the right questions. This is where this article can help.

Whichever method you plan to use to invest in real estate, these are the questions you should consider first. By reading these points, you can learn some important ways to evaluate an investment before committing your money.

Let’s start with the questions that any potential real estate investor should think about, regardless of the investment model they are considering.

Do you have the time and expertise to invest actively or will passive investing be better for you?

There is a big difference between active and passive real estate investing, and most investors will prefer one over the other. However, if you’re just starting to think about real estate in general, you may not have figured out exactly where your interests lie. Once you’ve done that, you’ll likely have identified the option that’s right for you.

For example, do you like the idea of ​​owning a house? Look at the active options. Otherwise, you just don’t have the time to deal directly with the property and tenants? Think about passive investments. These decisions can have an immediate impact on the specific investment you’re looking for and how much it costs you to get started.

What’s your investment timeline and how important will liquidity be to you in the future?

Determining an investment’s timeline or duration is crucial for any investment, although some are particularly illiquid. This makes determining a comfortable time frame even more important when investing in real estate. Make sure you know if you need cash and if so, whether the investment can meet your specific needs.

What potential tax benefits are you likely to get?

The tax advantages the investor offers depend on the investment.  Each tax benefit package can help investors achieve a different goal. That’s why it’s important to identify the tax benefits that will best help you achieve your investment goals.

What makes a real estate investment attractive to you? How do you define success?

Knowing what is most important to you in an investment will help you get a clear idea of ​​the likelihood of that investment being successful. This will most likely involve the return goal, but it will include every other aspect, the benefits. or responsibility.

How will real estate affect your overall investment portfolio?

Real estate has the ability to diversify an investment portfolio. But not all diversifications are created equal.  You need to  understand clearly how adding a new investment will impact your overall risk and earning potential. For example, whether an investment is in public or private markets can play a huge role in its ability to diversify.

Who’ll answer these questions?

Of course, you can only answer these important questions on your own, depending on your financial situation, personal preferences, experience, and the specific opportunities you have access to.

Have you begun to answer some of the key questions above?

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