Preparing to invest in a property requires a very careful balancing act, even for the experienced investor. The real estate market is one of the most stable ways to build wealth over the long term, but its short term volatility and uncertainty in trends can make the right decisions harder to see. As you prepare to put your money towards real estate, you will face one critical question: do you opt for a home that is most affordable for you now, or do you seek to maximize your potential investment value?
Let's consider a few of the elements necessary to make the right choice.
Why Affordability Matters
If you purchase a property intended as an investment with no regard for the price, you'll put yourself at a disadvantage right from the beginning. Maxing out the amount of credit you can receive from the bank or a mortgage broker is not the best way to start your new investment. Affordability matters because you may need to leave funds aside for making improvements to the home that will make it an attractive investment.
At the same time, there is often a ceiling on how much value very cheap properties can generate. You can only do so much, after all, and a property that is too low-priced may cut into the investment value of the property.
The Weight of Investment Value
Investment value is what the property could be worth to you once you factor in how you will use it to generate revenue alongside other financial concerns such as taxes and insurance. This value is based on your goals and how you will use the property, such as renting it to tenants versus improving and re-selling. Calculating your investment value requires examining many elements and looking into the future. Still, it is the ultimate goal of anyone purchasing real estate with an eye on making money later.
Balancing The Financial Elements
Should you seek to maximize your potential investment value, or should your purchase emphasize affordability? Ultimately, it should be a blend of both. A more affordable property can allow you to realize its true investment value by keeping your mortgage payments lower and your opportunity to capitalize higher. However, that can be easier said than done — especially in the highly competitive market we find ourselves in today.
Finding Help With Your Investments
Charting the right course for your investment can be a process fraught with uncertainty. Understanding how to make the most of your spend can be tricky, too, especially when you're up against other investors who are ready to make all-cash offers. It's essential to avoid being caught up in these high-pressure sales, as you can quickly find yourself in an untenable position that does not align with your investment goals.
Omid Akale with Twin Cities Portfolio Group is here to provide you with keen insight and tailored advice to help you find a way to invest that is affordable while also creating potential for future value. With years of experience and an in-depth understanding of the market and investment strategies, sound advice is only a phone call away. Learn more about how to make intelligent choices today.