5 Questions to Ask Before You Invest in Real estate

by Joe N. Pollifrone 06/24/2019

Regardless of the kind of investment model you are considering, it is crucial that you think about some questions before venturing into real estate as an investment portfolio. Before you commit your hard-earned money, here are the questions that you must be able to answer:

Do you have the expertise and time for full-participatory investment or would it be better if you invest passively?

First, you must know the difference between active and passive engagements in real estate. Once you can differentiate between the two, you will be able to weigh the requirements of each level of real estate investing. If you are new in real estate, it is essential that you identify the option that is suitable for you. For instance, the active option is the right one for you if you want to become a landlord. And, if you don’t have time to deal directly with tenants, the passive option is for you. 

What is your investment timeline? Of what importance will liquidity be to you in years to come? 

Defining a timeline is very critical in real estate investment. Identifying a manageable schedule is essential as far as real estate investment is concerned. You must be able to know if and when you will need liquidity. Also, you must be sure if the investment will meet your particular needs. 

How will real estate investment affect your overall portfolio? 

A well-known advantage of real estate investment is the ability to diversify a portfolio. You should be aware of the fact that all diversification is not the same. It is vital that you know how your new investment will affect your overall risk as well as the earning capacity of your investment. For instance, an investment can play a significant role in its power to diversify whether the business is in a private or public market. 

What makes a specific real estate investment enticing to you? What is your definition of success?

An answer that might seem obvious here is the profit, but a lot of people might have different answers to this question. When you know what matters most to you in an investment, you will be able to define success in such investment. 

What are the potential benefits when it comes to tax? 

These advantages are available for both active and passive real estate investors. The tax benefit derivable from real estate investment is dependent on the type of investment - active or inactive.

Whether you are a first-time investor in real estate or experienced, it is essential that you consider the above questions before making any investment decision in real estate.

About the Author

Joe N. Pollifrone

For over 30 years, Joe Pollifrone has practiced real estate full-time as a licensed Real Estate Broker in California. Joe’s vast sales experience includes duplexes, tri-plexes, four-plexes, apartment buildings, land, condominiums, townhomes, fixer-uppers, estate properties, and bank-owned properties (REOs). He also is active in selling non-owner occupied properties and is well-versed in 1031 tax-deferred exchanges, property management, tenant/landlord issues, and local laws. During Joe’s career to date, he has sold in excess of $200,000,000 of real estate, including over $32,000,000 in REOs. 

Joe brought his deep experience to Sereno Group Willow Glen as a Broker Associate in 2012. He was the Sales Manager and lead a top-producing office. Joe would mentor new Sereno hires, making sure that they’re comfortable with the ethos of the office, plugged into Sereno’s network of contacts, and well-versed in the technology required of today’s real estate professionals. 

Joe prides himself on his proven ability to negotiate, extensive knowledge of contracts, and securing close of escrows in a timely manner. Both he and his clients credit his success to effective communication skills, honesty, and hard work. Joe is a native of San Jose and resides in Willow Glen with his wife of twenty-seven years, Kimi, his daughters Milan and Micaela and their two Goldendoodles, Tony-Luca and Marco.