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4 Factors to Consider Before Investing in Real Estate

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4 Factors to Consider Before Investing in Real Estate

Investing your hard-earned cash into real estate may seem like a much safer investment than investing in the stock market. While no one truly knows what the stock market will do from day to day, there’s almost no question that the land you own today will just as much – and probably more – as time goes on.

However, this doesn’t mean that investing in real estate is a 100% foolproof way to earn some extra cash throughout the years. There are many factors to consider when deciding whether or not to purchase a lot of land. If you don’t know what you’re getting into, you might end up getting yourself in more trouble than it’s worth.

Know Your Purpose

Well, duh: Your purpose is to make money, right?

That’s pretty obvious.

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But you need to think about how you want to make money through your real estate investments.

Are you looking to make some quick cash off of a sure thing, or are you looking to invest in the long haul? Do you plan on improving the property you purchase, or leaving it as is? Do you want to rent the property out to other tenants, or is your prime motive to sell for a profit?

If you don’t really know what you plan on doing with a piece of property once you purchase it, you shouldn’t be investing in it in the first place.

On the other hand, once you know what you plan on doing with your investment, you’ll be able to focus your efforts in order to maximize your potential profits.

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Know the Property and Area

You can’t just decide to purchase property without understanding the its nuances, as well as the nuances of the surrounding area.

Okay, you can. But you definitely shouldn’t.

Different factors come into play depending on whether you’re purchasing property in a residential or commercial area. This includes leasing terms, interest rates, and other factors which will ultimately affect your bottom line.

Are you looking to invest in high-demand areas or more low-end housing? Once again, this all depends on your purposes for investing, as well as the amount of time and energy you can expend working on the property.

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Know the Market

You might know exactly what piece of property you want to invest in.

You might know exactly what you’re going to do with the property once it’s yours.

However, there are factors beyond your control that determine whether or not now is the right time to invest your money.

Just as when investing in the stock market, when it comes to investing in real estate you want to buy low, and sell high. That’s pretty straightforward: If you want to make money by flipping your investment, you’ll want to sell your property for more than you bought it for.

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But if your plan is to rent out your property, you need to know whether or not people or businesses looking to live or operate in the area are able to afford a price that will make the investment worth it on your end. In other words, you need to know that your property isn’t going to just sit there with a “For Rent” sign for months while you pick up the monthly cost of maintaining it without any income to show for it.

Know the True Cost of Investing

As alluded to, investing in real estate isn’t as simple as shelling out one lump sum payment and watching dividends roll in.

No matter which type of property – residential or commercial – you invest in, you’ll accrue costs throughout your ownership of the property on a monthly basis. You’ll want to anticipate these costs – such as for maintenance, utilities, taxes, and interest rates – so you’ll have a good idea of your net profit per month.

You’ll want to obtain copies of the amount paid toward utilities, taxes, and insurance for the property in years past. Of course, these documents will only give you a general idea of future expenses, but it’s much better than going in blind.

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Regarding loans available and interest rates being offered, consult a mortgage broker. They’ll work to find you the best deal possible that saves you money on interest payments that can ultimately be used to improve the quality of your newly purchased property.

Featured photo credit: Real Estate Photography / Marcel Suliman / Flickr via farm4.staticflickr.com

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Matt Duczeminski

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Last Updated on January 5, 2022

33 Painless Ways to Save Money Now

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33 Painless Ways to Save Money Now

In a difficult economy, most of us are looking for ways to put more money in our pockets, but we don’t want to feel like misers. We don’t want to drastically alter our lifestyles either. We want it fast and we want it easy. Small savings can add up and big savings can feel like winning the lottery, just without all of the taxes.

Some easy ways to save money:

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  1. Online rebate sites. Many online sites offer cash back rebates and online coupons as well. MrRebates and Ebates are two I like, but there are many others.
  2. Sign up for customer rewards. Many of your favorite stores offer customer rewards on products you already buy. Take advantage.
  3. Switch to compact fluorescent bulbs. The extra cost up front is worth the energy savings later on.
  4. Turn off power strips and electronic devices when not in use.
  5. Buy a programmable thermostat. Set it to lower the heat or raise the AC when you’re not home.
  6. Make coffee at home. Those lattes and caramel macchiatos add up to quite a bit of dough over the year.
  7. Switch banks. Shop around for better interest rates, lower fees and better customer perks. Don’t forget to look for free online banking and ease of depositing and withdrawing money.
  8. Clip coupons: Saving a couple dollars here and there can start to add up. As long as you’re going to buy the products anyway, why not save money?
  9. Pack your lunch. Bring your lunch to work with you a few days a week, rather than buy it.
  10. Eat at home. We’re busier than ever, but cooking meals at home is healthier and much cheaper than take-out or going out. Plus, with all of the freezer and pre-made options, it’s almost as fast as drive-thru.
  11. Have leftovers night. Save your leftovers from a few meals and have a “leftover dinner.” It’s a free meal!
  12. Buy store brands: Many generic or store brands are actually just as good as name brands and considerably cheaper.
  13. Ditch bottled water. Drink tap water if it’s good quality, buy a filter if it’s not. Get 
      a reusable water bottle and refill it.
    • Avoid vending machines: The items are usually over-priced.
    • Take in a matinee. Afternoon movie showings are cheaper than evening times.
    • Re-examine your cable bill. Cancel extra cable or satellite channels you don’t watch. Watch the “on demand” movie purchases too.
    • Use online bill pay. Most banks offer free online bill paying. Save on stamps and checks, and avoid late fees by automating bill payment.
    • Buy frequently used items in bulk. You get a lower per item price and eliminate extra trips to the store later on.
    • Fully utilize the library. Borrowing books is much cheaper than buying them, but in addition to books, most local libraries now lend movies and games.
    • Cancel magazine/newspaper subscriptions: Re-evaluate your subscriptions. Cancel those you don’t read and consider reading some of the other publications online.
    • Get rid of your land-line. Do you really need a land-line anymore if everyone in the family has a cell phone? Alternatively, look into using VOIP or getting a cheaper plan.
    • Better fuel efficiency. Check the air pressure in your tires, keep up with proper auto maintenance, and slow down. Driving even 5MPH slower will result in better fuel mileage.
    • Increase your deductibles. Increasing the insurance deductibles on your homeowners and auto insurance policies lowers premiums significantly. Just make sure you choose a deductible that you can afford should an emergency happen.
    • Choose lunch over dinner. If you do want to dine out occasionally, go at lunchtime rather than dinnertime. Lunch prices are usually cheaper.
    • Buy used:  Whether it’s something small like a vintage dress or a video game or something big like a car or furniture, consider buying it used. You can often get “nearly new” for a fraction of the cost.
    • Stick to the list. Make a list before you go shopping and don’t buy anything that’s not on the list unless it’s a once in a lifetime, killer deal.
    • Tame the impulse. Use a self-enforced waiting period whenever you’re tempted to make an unplanned purchase. Wait for a week and see if you still want the item.
    • Don’t be afraid to ask. Ask to have fees waived, ask for a discount, ask for a lower interest rate on your credit card.
    • Repair rather than replace. You can find directions on how to fix almost anything on the internet. Do your homework, and then bring out your inner handyman.
    • Trade with your neighbors. Borrow tools or equipment that you use infrequently and swap things like babysitting with your neighbors.
    • Swap online. Use sites like PaperBack Swap to trade books, music, and movies with others online. Also, look for local community sites like Freecycle where people give away items they no longer need.
    • Cut back on the meat. Try eating a one or two meatless meals every week or cut back on the meat portions. Meat is usually the most expensive part of the meal.
    • Comparison shop: Get in the habit of checking prices before you buy. See if you can get a better price at another store or look online.

    Remember that saving money is not about being cheap or stingy; it’s about putting money into your bank account rather than giving it to someone else. There are many ways to save money, some you’ve never thought of, and some that won’t appeal or apply to you. Just pick a few of the ideas that sound doable and watch the savings add up. Save big, save small, but save wherever you can.

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    Featured photo credit: Damir Spanic via unsplash.com

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