If you've ever had a landlord, you probably haven't dreamt of becoming one. Dealing with calls about oversized bugs and overflowing toilets doesn't exactly scream glamour. However, when done correctly, real estate investments can prove highly profitable.Even in our current climate of higher interest rates, it remains a viable option. Moreover, real estate investment can effectively diversify your existing portfolio and, over time, generate a passive income stream. The best part is that many top-notch real estate investments won't require your constant attention to tenant demands.Real estate presents a plethora of benefits, but it can also carry potential risks, especially for those new to real estate investing. At BB Constructions we are committed to ensuring that your inaugural Real Estate investments experience is both rewarding and lucrative.
How to Plan Ahead Before Your Real Estate Investment
Before you decide buying property make sure you're financially and mentally ready. Whether you want to be hands-on or hands-off in real estate, plan to fix and flip, or own rental properties from afar, keep these important things in mind:Potential Risks

Overestimating Fair Market Rent Leading to Negative Cash Flow
To prevent investing in a property that loses money, you can utilize a simple rental property analysis spreadsheet, such as the one linked here. This tool helps you assess the potential financial performance of the property.Unexpected Major Repair Bills
When you purchase a property from a private seller or the MLS, you run the risk of encountering substantial and costly repairs. Issues like air conditioning or furnace breakdowns or major plumbing repairs may require expensive licensed contractors.To avoid surprises, establish a capital reserve account for emergency repairs or consider purchasing a turnkey investment property that's been thoroughly inspected and is already occupied by a reliable tenant.Vacancy Rate Exceeding Expectations
In some cases, due to local market conditions, finding a qualified tenant may take longer than anticipated. During this time, expenses like landscaping, property taxes, and the mortgage still need to be covered.When creating a pro forma financial statement for your first investment property, stress test it by experimenting with different vacancy rates. This will provide you with a clearer understanding of how much cash you should have in reserve if the property remains vacant for an extended period.Planning Ahead
Prioritize Your Personal Finances
Some real estate investment companies invest everything they have into their first property, borrowing from friends and family, and leaving no room for personal emergency funds. While TV real estate gurus may encourage this approach, life's unexpected challenges could force you to sell your rental property at an inopportune time.So, consider your personal needs by maintaining 6-12 months of savings and contributing to an IRA or 401(k). This not only provides tax-deferred savings but also allows you to set up a self-directed IRA for real estate investments, enabling you to build a tax-sheltered investment property portfolio.Strengthen Your Credit Score:
Most lenders require a credit score of at least 740 to provide you with the best mortgage rates and terms for a residential investment property. Pay down high credit card balances and address any negative marks on your credit report before applying for a loan and making an offer on a rental property.Build Business Cash Reserves
When purchasing your first investment property, you'll need funds for the down payment, escrow fees, legal fees, closing costs, and potential repair or renovation expenses if it's not a turnkey property. Some lenders may also require you to maintain six months or more of cash reserves, ensuring you can cover the mortgage in case of unexpected vacancy.10 Steps for Buying Your First Investment Property
