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The Number One Question to Ask Before You Buy

Letting your emotions rule your investment decisions can get you in trouble. Always make sure you can truly afford the money, sweat equity, and hassles before you invest in real estate.

By: Lisa Moren-Bromma

IRA & 401(k) Insights

As the uncertainty in real estate markets continues, I hear investors asking: “Is now the time to buy?” I believe we all have to step back and evaluate the basics of why we consider buying real estate in the first place.

There are four main factors: Income, appreciation, cash flow, and tax benefits. Which are most important to you? Once you have assessed this question, you must ask yourself is: Can I afford it? If not, can I find a lender? Can I get the seller to help? What is the real cost in money and effort, and can I really afford it?

Property Insurance, taxes, and maintenance can add 30% to your cost of ownership in a property. It’s true that you make money in real estate when you buy, but even if you buy cheap, ask yourself if you can really afford the money, manpower, sweat equity, and hassles with tenants. The most successful real estate investors I know make unemotional decisions, and have that question in their mind every time they buy or they pass on a deal.

Letting your emotions rule you will get you in trouble. Ask yourself if you can really afford the full cost of ownership any time you think you want to buy a great investment property, or I guess it could work with any investment for that matter!

Lisa Moren-Bromma has 30 years of investing experience, primarily in real estate and in the cash-flow industry, and has taught more than 1000 seminars on the subject. She is the author of Wise Women Invest in Real Estate and Real Estate Investing for the Utterly Confused, and is the editor of the Wise Women Investor blog and newsletter.