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Looking at the housing market, it's clear that real estate is a solid investment. Since 2000, home prices have grown by an average of 2% per year. Real estate agents will tell you this information to prove how good an investment buying property can be.
However, there are also two common pitfalls new investors face when investing in a single-family home. First, they may not be able to handle the house's maintenance costs. Second, they don't thoroughly understand the pros and cons of financial products that tie into real estate (such as mortgages).
The following are three important points when it comes to investing in a single-family home.
First, you must be able to handle the maintenance costs. Second, you should understand how mortgages work and hedge against higher interest rates. Finally, don't forget to consider taxes and insurance.
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The first point is important because future owners will pay for all your current expenses; this includes property taxes, repairs, utilities, and more. These costs can add up, making it hard for some to make ends meet.
So how can you be sure that your maintenance costs will stay at a manageable level? Your best bet is to hire a service provider who can take care of all these expenses beforehand, which brings to the second important point: understanding mortgages (and hedging against higher interest rates).
Every investor must know how mortgages work. Mistakes here can significantly increase the cost of your home, which will eat into your profit in the long run.
Finally, Joseph Cianciotto reminds everyone to consider taxes and insurance in their calculations. Unless you have a strong relationship with an accountant who understands real estate investments, it's best to ask for help from a professional for this part.
Learn more about Joseph Cianciotto’s insights on family life by checking out this blog.
