How to Decide If Investing In Rental Properties Is Currently Right For You

How to Decide If Investing In Rental Properties Is Currently Right For You

The real estate market is in one of its hottest periods. Properties are snatched up as fast as they’re put on the market. Thanks to this, investors are reaping the benefits. If you’ve thought of dipping your toes into the field, here’s how to decide if investing is right for you.

Assess Your Current Financial Situation

Though there’s real estate for sale around you, don’t consider investing until you assess your financial situation. You need to examine your DTI (debt to income) ratio. Generally, your earnings should be greater than two-and-a-half times your debt. In other words, enough to pay it down and have plenty left over.

On the other hand, if your DTI ratio is nearly even or reversed, then investing is off the table. It’s better to pay down as much debt as possible first before delving into the real estate market.

Pre-Qualify for a Loan

The next thing to do is pre-qualify for a loan. Similar to the DTI ratio, you should have close to three times the value of the desired mortgage. This informs the financial institution that you’re a safe investor. It also helps to lower your interest rate even further than current values.

The sky isn’t the limit if you’re investing for the first time. In other words, most financial institutions won’t approve a million dollar loan off the bat. So, consider a property with a lower selling price.

Check the Area for Available Properties

Though present investors are reaping the increased values of real estate for sale, you have to be careful. Should your area have a lot of available properties, then there’s a better chance that you’ll pay less for one of them. Conversely, the lack of residential or commercial buildings means higher prices for available properties.

Determine Where You Want to Invest

If there isn’t any real estate that interests you, then consider looking outside your local area for real estate for sale. These could be properties in another city or state. If you do find one that suits you, then you must decide how you’ll support the structure and its tenants. In this case, you probably need to hire a property management service to assist.

Needless to say, there are several things to consider when you decide to invest in rental properties. Don’t rush into things. Since this is an important decision, take your time and assess the positives and negatives. If you decide to go for it, then ensure your finances are in order.

About Brooke