Real estate is one of the most popular investment choices in the United States. Low interest rates make buying affordable, whether you want to stop paying rent or are looking for investment properties to manage. However, just because you have an eager lender and decent down payment in your account balance doesn’t mean you are ready to buy a home. Follow these steps to make the right investment that sets you up for success in the future.
Diversify your portfolio
Real estate tends to have a high return on investment, but that doesn’t mean it’s a guaranteed source of profit. Any investor will talk about the importance of a diversified portfolio to lower your risk levels.
Every investment comes with risk. Bond funds and retirement accounts, for example, are typically low-risk because they grow slowly over time. Real estate can be a higher-risk investment if you want to flip a house or sell it in a few years. By evaluating your risk tolerance, you can develop a growth portfolio that you feel comfortable with.
If you aren’t sure what to invest in, reach out to professionals who have your best interest in mind. Schedule a review with a human advisor who wants to help you reach your financial goals. They can work with first-time investors to get you on the right track.
Buy within your means
It may be tempting to buy a larger home than you can afford. You might want to invest more in the real estate market immediately or simply want to plan for when you have children. While thinking in the long-term is mostly good, you need to be realistic about your current financial situation.
Look into different mortgage options in New York or any U.S. state you want to buy in. You can also meet with a financial advisor to understand how much home you can afford. This is one of the basic principles of responsible investing. Don’t overdo it.
If you buy a house that is too large, you likely won’t be able to keep up with the taxes, insurance, and repair fees. You might not have spare change for basic expenses like eating out. Don’t let your account balance dwindle because you over invested. Choose a home responsibly with the help of a financial planner.
Create a timeline to liquify your assets
Real estate isn’t liquid. You can’t sell off your garage for cash but keep the rest of the home. If you want to liquify your asset, then you will need to sell your home. When you buy a house, keep a mental timeline of how you will profit from it and when you plan to sell it.
If you are investing, when can you rent it out? If you are a millennial, will you live in the house for a few years or until you retire? Even if you plan to sell your house in a few years, the housing market might not make that possible. You could have to keep paying into the home longer than you plan.
You may want to speak with a financial expert about keeping a diverse investment portfolio. It may be better to buy a smaller home now so your asset allocation is spread across more liquid options.
It’s never too late or too early to grow your investments. Millennials become investors each day while older Americans can still take steps to become first-time homebuyers. Whether you are an individual investor in the United States or working with a partner, you can grow your wealth. Take steps today to meet with a financial planner and become a hot new investor in the market.