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3 Things To Consider Before Investing In Property

Kevin Gomer
31 Aug 2016

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Entering the world of real estate investing may have a large effect on your personal finances. Instead of jumping the gun with your first rental property, why not be 100% sure that your ready to embark on investing on this journey by reviewing your current financial status completely.

Imagine you are training for a marathon and wanting to get into the best physical shape you can be in, but at the same time you continue to eat all of the junk food that is so fattening and unhealthy. These two activities, exercising and eating junk food, work against each other. In the same way, trying to enter the real estate market doesn’t make sense when you are still throwing away money each month on credit card debt. So here’s 3 major things you need to do before buying a house.

1. Make sure your free of debt


You will need to make sure your debt is paid off first and foremost in order to improve your chances of getting approved for a home loan, but you also want to eliminate this debt so you can reallocate those funds into your real estate investment plan.

 

2. Get a adequate level of insurance


You should also remember to protect yourself and your family by making sure you have adequate home, contents and personal insurance. If you have a spouse or children who depend on you financially, life insurance is really something you should consider. You should also consider purchasing disability insurance to protect your income in case you become temporarily disabled. Other types of insurance including excess liability insurance can also be considered.

 

3. Make sure your 100% ready to make repayments


You also want to take a look at your overall finances and try to understand whether you’re ready to invest in real estate. As we never know what the future may hold in the finance market, whether it be a downturn or not you may have difficulty selling properties and renting them out.  Would you be able to continue making the mortgage payments each month if something like that were to happen to the market?

If you are considering taking out adjustable-rate mortgages, you need to ask yourself.. “would i be able to handle higher interest rates and a correspondingly higher monthly mortgage payment?” What if things got much tougher for several months because rental income dropped or you lost your job? Would you be able to cover your monthly expenses for several months? This is where an emergency fund really make sense so you can cover your expenses for at least six months (although the more the better) if you hit a rough spot for a few months.

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