Investing in real estate can be a wise decision. You might purchase properties and then start renting them out to others for a constant stream of income. That profit combines with increasing levels of equity in your properties to improve your financial situation. You may also choose to purchase properties and then resell them at a higher price.
Regardless of whether you want to rent properties out or flip them by reselling them for a profit, one of the first questions you will have to answer is whether you want to purchase turnkey properties or properties that need a little work, often called fixer-uppers. Which choice is a smart investment decision for someone just starting to invest in real estate?
Your skills and finances play a role in the decision
Whether a fixer-upper or a move-in ready property is a better investment will depend on various factors.
For example, do you have enough capital and good enough credit to purchase more competitive, move-in-ready properties? If you intend to flip the property by selling it for a profit later, will cosmetic upgrades be enough to command a higher price? Do you have the skills necessary to do any of the labor yourself, or will you have to hire the process out to others?
For those who don’t have much money to invest, fixer-uppers can be a great option. You might even be able to live in the property temporarily as you start making repairs to it. For those with enough capital, move-in-ready properties can be a great investment, especially if you want to start renting them out to someone else right away.
The state of the market when you buy also affects what is best for you
Real estate markets fluctuate dramatically from season to season and year to year. Everything from the price to the kind of supply available for purchase can change.
If there aren’t many properties ready for people to move into, you may have to compete when making an offer with people who want to own the home to live in themselves. If the region has numerous active real estate investors, it might be harder for you to find fixer-uppers.
Thinking about the money, physical effort and time that you want to invest in your real estate enterprise can give you a better idea about what sorts of properties to purchase.