Do You Have A Case Of Investment Anxiety
Investment Anxiety is a caveat of the time that we are living in. One of the reasons, I’m sure is because many of you have seen the TV ads, heard it on the radio, and have entertained the idea of investing in real estate. Everyone is trying to find the next best investment to make a lot of money and retire early. And seeing as how technology and social media makes witnessing the extravagant lives of the wealthy so easy. It seems that we are all running to the next big thing!
Is It Or Is It Not The Right Time To Invest?
Now whether or not this season is the right time to invest simply depends on a number of things. And with all of the information available to us, the questions are laid out we just have to answer them. Here are a few beginning questions to ask yourself before investing in anything:
- What am I investing in?
- What are my investment goals?
- How well do I understand what I am investing in?
- How much does it cost?
- Can I afford it, and any possible loss?
- Will I spend more than I profit in the long run?
- What if it doesn’t sell right away?
As I said before these are just a few questions to ask yourself. If you are unsure of any answers to any one of these questions, maybe you should let your investment dreams bake a little longer. Investing is not a fairweather hobby, it requires some serious commitment. Many define it as being a parent to a child from conception until full grown adulthood. Even making comparisons by saying things like “if you take care of it, it may very well take care of you”! Which makes it safe to say if you are not ready to be a full-time parent, you are not ready to be an investor.
Good News Is Always First
Sure, everything is going to sound awesome at first. Especially with real estate investments being one of the major topics of discussions. Therefore, let’s review the benefits of investing:
- Cash Flow is at the top of everyone’s list when the thought of investing comes to mind. Spending money to make money as the name of the game. Let someone else pay for your vacations in the sun!
- Appreciation is what makes that extra cash flow possible. The more a property appreciates on the market, the more it is worth in a sale, and maybe even as a rental.
- Control working for corporations is all the rave in the beginning of those long college years for many. Yet, there are those who realize earlier than later that working for others is not for them. Ergo, they begin to explore other ways to live the life they desire instead of the life their corporate paycheck says they can afford. What better way to do so, some assume, than by investing in rental properties. Or maybe even lucking up on a few run down homes in economically booming neighborhoods to flip and reap a big profit.
- Hedge Against Higher Cost Of Living this may not always be the case for invest and sell endeavors. Oops (this is the good news section, we will talk more about that in the next section). For investors who own paid off rental properties, the potential hedge exists. Just think about it this way, if the economy turns upside down, and people begin to default on their mortgages the rental market is there to accommodate. Especially big families who dare not entertain apartment living.
- Federal Tax Benefits rental properties reduce your tax burdens. Henceforth, who wouldn’t want to invest after witnessing the power of tax breaks. Biggerpockets.com puts it this way “If you have enough depreciation and work full time as a real estate professional, this can be an amazing benefit!” Sounds good to me.
Bad News Bearings
I hate to even mention all of the cons after a list of pros like the ones spelled out above. The hard truth is that there are just as much bad’s as there are goods if not more. Again this depends on how serious you are about investing, not just money; But a lot of time, commitment, loyalty, and devotion. Simply because many fail in the first wave of investing and bow out due to:
- Not Having The Right Guidance if you do not understand the market you are investing in, then you will not know what to expect as a return. You cannot just go out and buy a home because it is cheap, invest all of your coins, and expect a big return if the area you purchased in does not anticipate an appreciation. No one wants to buy or rent a nice home in a crime riddled run down neighborhood. And if you buy to flip in such, consider it a loss.
- How Costly it is to Buy, Sell, and Operate many get into the investment business thinking they are going to birth cash cows and reap immediate profits. However, it does not matter if you buy to flip and sell or buy to flip and rent out. Both involve a lot of costs. Based on the type of property you invest in determines what the cost will be. So, really assess the quality and location of the investment you want to make. As well as keep sight of the amount of money you have can afford to spend, and possibly lose in case the property does not sell or lease right away.
- The Market Rollercoaster real estate as with anything can be a very fickle, and hard to peg market. There is no guarantee that your property(s) will sell. The housing market constantly increases and decreases. From quarter to quarter there is no sure fire way to know if and when the market will appreciate. Only predictions, and if you are not a risk taker investing may not be the right direction for you. And let’s face it, depreciation happens.
- Legal Issues investing is no walk in the park. If something happens to that property you assume all the risk.
- Failing to Manage The Investment(s) keep in mind that selling a property does not require any special screening. Yet, if your investment(s) are going to be rental properties, you not only assume all of the legal risks. But people are so unpredictable. There is no guarantee that the residents you lease to, will take care of your property. So additional unexpected cost may arise in the process.
Don’t let this be you! Do your research, seek guidance so you can make smart decisions, and smart investments.