If the past few decades have been any indication, owning real estate versus renting remains a viable long-term solution for a lot of folks who want to boost their net worth while simultaneously paying for accommodations. (If we are not paying a landlord, we are paying a bank). And at this point in the economy and housing market, owning real estate now is as good a time as any given the lower prices as well as extremely low mortgage rates.

But there are instances where owning your own home may not make the best financial sense, as the past few years have indicated. The following three risk points provide some indication as to when individuals might be better off renting than owning.

1. Do you need two incomes to support your housing expenses. In instances where people are either married or working multiple jobs, ensuring that a single income can support the housing expenses is ideal. Better yet, ensuring that a single income can pay all necessary expenses allows for tremendous flexibility in the event of job loss or pay reductions. What people will want to avoid is having to sacrifice the basic necessities in order to make large mortgage payments if one income were to be reduced or eliminated altogether.

2. Do you have at least 25% equity in your home. Although coming up with equity to make your home purchase is definitely not easy when purchasing, ensuring that you have at least 25% equity in your home provide a substantial comfort zone should market conditions deteriorate. Of course, this might not have eliminated all risks associated with the recent housing market correction, but it would certainly provide enough initial comfort in the event of a fire sale. Equity also gives mortgage borrowers an edge in terms of negotiating restructures to the mortgage with a lender who is dealing with hundreds of other short sales and negative equity situations. Lack of equity exposes you to real long-term risks like bankruptcy and litigation.

3. Can you handle substantially higher payments in the event of increasing interest rates or higher rate resets. One of the problems that led to the housing crash is attributable to rate resets that people who lost their job and could not refinance had to take on. Anticipating higher rates during the house-shopping phase will allow borrowers to see just how financial flexibility they have. Planning for rates that at 2 times what the existing rates are may be aggressive, but working with such high numbers will provide enough of an indication as to whether you can withstand what is inevitable — higher rates.

These tree pointers provide potential home buyers and mortgage borrowers with a few basic tips that they can use when planning for their home purchase. By anticipating such risks, borrowers will reduce the potential for losing what is arguably the largest investment they will make.

You would be much delighted if investment of your hard earned money pays off. A sound planning is essential while investing your money in the real estate because of the ups and downs in the market. It thus becomes necessary to get sound property investment advice before you plan to investment in the real estate. You need to take into account various factors like rising prices in the market, shortage of rental properties, demand for properties in a specific location and more before devising your investment plan.

Planning

You should study and monitor the market with utmost care as it will help you in understanding the position and direction of prices in the properties market. Understanding this is very crucial as the prices vary consistently. It will also help you to estimate the actual value of proposed property investment by monitoring the market. Apart from that, you also get an idea on the future of the investment and mortgage dealings.

Various Aspects of Investment

When you wish to invest in a property, there are certain peripheral expenses than the actual cost. Real estate investment gets taxed according to its value. This is over and above the money spent for the maintaining and repairing the property. You will have to take into account all these factors when you actually project the incomes and resale value for the proposed property. Positive or negative gearing means the profits or the loss incurred from the investment. The additional income also gets taxed while the deductions are from the surplus amount and not the bare minimum amount.

Multitask with Equity

You can arrange sufficient capital for your new investment from the real estate equity which you own already, which is advisable instead of going for a financial assistance from a bank. This method is an ideal way to start your new investment. But you have to allocate only certain percentage of the price for new investment if there is no problem in repayment.

Identify and Pool your resources

Quite often, it becomes difficult for a new investor to completely own a property with his money. It is not possible always to fund for the entire investment from your pocket as most are common investors. Hence, using the collective property deal is a better and wise idea. Identify likeminded friends, family, relatives or colleagues and pool your resources in order to fund the investment in a new property. But ensure to make an agreement among your partners regarding the method of sharing the benefits and losses, so that there would not be any hassles in the future. It is advisable to go for a legal agreement depicting the proportion of investment and sharing methodology to prevent problems. Sharing of benefits or liabilities is generally proportional to the investment ratio.

Help from Professionals

A professional counselor or a real estate agent can provide you the required Property investment advice to plan your investment methodology. They will also assist in assessing the scope and future value of your investment as they have more knowledge about the market.