How Do I Know I'm Ready to Invest?

Anyone with the idea to buy property outside of their primary residence needs to understand their risk tolerance and the work that comes from owning and maintaining such a property:

Do I want to make an immediate profit from such an investment, or am I more concerned about long-term growth in the value of this property as part of my estate? Do I have a time horizon on this investment?

How well do I know the area I'm thinking of investing in, and how much time will I have to monitor my property myself?

Do I like dealing with full-time or part-time tenants (if this is a vacation property)?

How would I feel if appreciation slowed or the value of this property actually dropped for a specific period of time?

Am I ready to handle the debt involved in owning this property? Do I have a plan to reduce this level of debt?

Am I ready to treat this as a business?

In addition to all the information you must know to become a successful real estate investor, it helps to know yourself first.
What's “Rent-to-Buy?” “Rent-to-buy” or “Rent-to-own” deals got a lot of traction during the recent real estate boom and are borrowed from the world of appliances. But beware. Many unscrupulous property owners and developers advertised these offers allowing tenants to rent until they had enough money, usually 10 percent, toward a down payment, but they also hid lots of surprises in the fine print.
One common loophole was declaration of a payment as late and thus restoring all the payments to rent. Another would demand a full payment of $5,000, $10,000, or more by the end of a particular lease term. If the borrower couldn't come up with the full amount, including on-time rent paid in, they'd lose the opportunity to buy that way. If you can't afford a down payment, check with local or federal loan programs like the FHA that may allow you to make a down payment on a new home of as little as 3 percent.

by Lisa Holton