As I have mentioned, I am looking to buy a real estate property. Yet, at the same time, I know that I don’t want to invest when it is inappropriate to do so. Investing in real estate at the wrong time can not only be a horrible decision, but it can hinder your future investments. Currently, I’m not in a great place to invest in real estate and I know it. If you are wondering whether you should invest in real estate now, make sure to consider these situations that would make it a bad time to invest.
Unstable Day Job: The worse thing that you can do when your job is uncertain is invest in real estate. Real estate investments are a great long-term source of income, but they come with unexpected expenses. This includes maintenance, taxes, insurance, and vacancies. If you have a vacancy for several months while being unemployed, it could cripple your finances.
Small Emergency Fund: Do you have a “rainy-day” fund? How well prepared are you for an emergency? Do you have enough income to last you 6 months? 12 months? Most Americans don’t have an emergency fund at all. Taking on another residential property may prove to be a great investment, but you need to have the liquid cash for the inevitable costs of maintaining the property. Tenants generally don’t care for property as well as owners do. You not only have to take this into consideration, but you also have to be prepared with the money to pay for these costs.
Moving in the Near Future: One of the things that can keep you from investing in real estate right now is the expectation that you will be moving soon. While many people take liberties to invest away from their family’s residence, I believe that knowing the market is crucial to making a positive cash flow. Getting ready to re-located doesn’t immediately disqualify you from investing in real estate. It it possible to invest in the market that you are currently living and hiring a friend or property manager to watch over the property in your leave, but that involves more contingencies. Make sure to take this into consideration when you are determining the value of the rental property.
While I would love to jump into buying a rental property right now, I know that 1) I don’t have the necessary income for a down payment or emergency fund to protect myself as much as I would like. I am saving towards having enough money to put towards a down payment and have enough left over, but it will take time. For the time being, I am in the stage of researching and planning. It is important to invest in real estate properly from the beginning (so as not to get in a bad situation) and I am taking all of the precautions necessary to do that.
Are you ready to invest in real estate?