With interest rates on the rise and housing inventory low, you might be hesitant to invest in real estate right now. But Barbara Ginty, CFP, host of the “Future Rich” podcast, said that it’s still a good investment — if it’s something you can actually afford.
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“Real estate can be a very good investment as long as you are able to support the investment financially,” she told GOBankingRates. “A lot of people get in trouble by overextending themselves financially to purchase real estate. What I like to see is [that] you can support this investment whether or not it is rented.”
If you can afford to pay the mortgage on a property without needing to rely on income from a tenant, your next step is deciding where to invest.
Consider These 2 Factors When Choosing a Real Estate Investment Property
Ginty said that being intentional about where you buy property is the key to ensuring that it will be a good investment. The first sign of a good place to buy is an area where rents are typically higher than your out-of-pocket costs.
“I would buy a property where the rents would allow for a nice profit over the total cost of the property — so, mortgage, taxes, insurance [and] other miscellaneous expenses,” she said.
The next factor you need to take into consideration is taxes.
“[Buy property in] a location that has low property and school taxes,” Ginty said. “For instance, [at] my property in New York the school/property tax is more monthly than the mortgage. [At] my property in Utah, the school/property tax — which here is just one bill versus two bills in New York — is about 10% of my mortgage payment. The effect of school/property taxes is significant on your profit margins, especially if you plan for that to continue to rise over time.”
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Gabrielle Olya contributed to the reporting for this article.
This article originally appeared on GOBankingRates.com: Barbara Ginty: 2 Things You Need To Consider When Choosing a Real Estate Investment