By Steve Bodtke
When considering buying your first investment property I always ask my client, “Are you sure you want to do this?” That generally gets them thinking, “Who is this guy?…Isn’t he just supposed to show me stuff?” The reason I ask is simple—there is a lot to consider.
I encourage my clients to ask themselves the following questions:
- Since real estate is not liquid—do I have enough “liquid assets” if I need some cash?
- If I want/need to sell—what is my buyer pool? Is it just other investors, parents, first time home buyers, etc.
- Do I have enough “risk capital” as a down payment to pay cash for the property, with all potential expenses considered? Do I have enough of this capital to continue to pay the mortgage on the property if the market were to decline, and can I sell it if I decide to?
- What is my real “return on investment” for my cash with all expenses considered, and does it make sense to buy this investment property?
These are the most basic questions that should be asked, and when they are asked—the decision may be to NOT buy an investment property. I have probably told more potential buyers NOT to buy a property than any other agent I know. I live by the “Golden Rule” and that comes first. I have been very blessed with my success and I feel that comes from doing the right thing and not the expedient thing to get a paycheck.
There are many more factors to consider and investment real estate has a long track record of being a very solid investment. However, over the last 20 years, real estate has been “traded” more like day trading stocks than the LONG TERM investment it should be. To be successful in real estate investing the old saying goes, “You don’t have to be a genius to make money in real estate investing—you just need to live long enough.” That, coupled with smart initial choices in general and a little luck.
If you consider solid property and all current and long term expenses, and the idea of holding the property for a long time (10 years is the absolute minimum), then there are very good choices out there. Don’t be pulled into the “no money down real estate fortune” nonsense—just like any real asset—buy and hold.
Steve Bodtke and Jim Sarver are an Associate Broker & Realtor© team at Nest Realty New River Valley. Promoting the Blacksburg area and looking out for the best interest of their clients are their passion. With 32+ years of combined experience, Steve and Jim provide a level of knowledge, service, and professionalism that always puts the client first and looks out for their best interests. To learn more about Steve and Jim, visit their agent page.