Should You Buy Investment Real Estate Right Now?

Historic low rates have piqued the interest of potential investment real estate buyers – but is this a smart time to buy?

If you’ve ever considered getting into the investment real estate game, it makes sense that you might be thinking about it more seriously these days. Homes for sale seem to be flying off the market, and rates are probably as low as they will be for awhile. 

However, there are other factors that make this a risky time to buy.

Here are some things to consider first:

Investment real estate: Primary residence

Do you want to buy a property to live in, or to rent out? Because there are important caveats in both of these situations.

If you want to buy a home to live in, think about why you want to move. Do you actually need to move, or are you tempted by lower rates and a change of scenery? 

If you were planning to move this year regardless of the pandemic and have a plan in place, then you’re in luck: you’ll probably be able to secure a mortgage at a low rate. But you might run into a shortage of options since fewer houses are on the market.

But if you’ve suddenly decided to move because you’re tired of your house, proceed with caution. A lower mortgage rate might not offset upfront costs like hiring a realtor, paying for the down payment, hiring movers or making necessary repairs.

Investment real estate: Rental property

There are several factors to be aware of before you invest in a rental property, especially now.

First, make sure you’re well-versed on the expenses that come with running a rental property. This could be things like fixing up the property, putting more money down than you would as an occupier, or hiring someone to manage the property.

Next, look at the area your property is located in. How much are renters usually willing to pay? Have the renters in your area been deeply impacted by the pandemic? Is your property in a hot real estate market? Make sure you’re very familiar with the area and what potential renters look for.

Should You Move and Rent Out Your Home?

Many people also consider renting out their current residence when they buy a new one. This option does have some perks: You don’t have to sell your house before buying a new one, and you’ll get recurring monthly income as long as your home is being rented.

But it’s not quite that simple. Like I mentioned above, you also have to handle repairs, collect payments and deal with renters. You do have the option to hire someone to manage all of that for you, if you can afford to do so.

Here are some other considerations before you rent out your house.

The Bottom Line

If you’ve been planning to purchase real estate for a while now and have built it into your financial plan, then historic low rates could work in your favor. But if it’s a knee-jerk reaction to the current economic climate, proceed with caution. 

So much is still in flux, and what seems like a smart investment today could be a burden down the road. 

About Your Richest Life

At Your Richest Life, Katie Brewer, CFP®, believes everyone should have access to financial resources and coaching. For more information on the services offered, contact Katie today.

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