Five tips that you need to put into practice before making a real estate investment

Real estate investment is one of the best ways to build personal or family assets , whatever the type of property you decide to buy. Plus, an undeniable advantage is that it can help you build the financial freedom you long for the future. So this time we have prepared for you the best tips that you need to put into practice before deciding to invest in real estate .

1. Diagnose your current financial status

Before taking the next step, we highly recommend making a diagnosis of your current financial status , so that you are clear about your economic reality. 

  • Control family expenses : Check the cash flow you have, considering the family income and total expenses . Remember that you must include basic and mandatory expenses, eventuals, possible unforeseen events and even ant expenses. 
  • Calculate your debt capacity: A real estate investment is a long-term financial commitment. Make sure that your debt capacity is adequate to assume an obligation of this type. Calculate it by subtracting the total expenses from the total income and multiply the result by 0.40 .
  • Analyze your job stability: If you work in a dependency relationship, analyze how stable your job is. If you have your own business, analyze its growth expectations, review the financial statements and your personal or family projection for the future.

2. Decide what type of property you want to buy

Once you have confirmed that your finances support a new long-term financial obligation, it is time to decide on the property that best suits you according to your family or personal dreams. In Banco Pichincha you can opt for mortgage loans for the payment of:

  • New or used housing
  • Public interest housing
  • Sustainable housing
  • Office or business premises
  • Expansion or remodeling
  • Ground

Keep in mind the total cost of the property , your debt capacity , the family budget and the future projections that you have made for yourself and your family. Often times, finances are affected by fulfilling very big short-term dreams of well-being and long-term uncertainty.

3. Project a family budget

Another tip that you cannot ignore is to make a family or personal budget . This tool is ideal for keeping your accounts clear and under control! In addition, it helps you make projections and adjustments according to your reality and economic goals. Do not forget to include the fee that you will have to pay on your real estate credit . Now take note!

  • Record variable income:consider the lower amount of the last six months or the average amount , to avoid being overly optimistic . Better be cautious! 
  • Project changes in the family: keep in mind the possible arrival of a new baby or the change of your children to primary, secondary or university. All these are variables that , when the time comes, will make you modify the budget . 
  • Don’t minimize eventualities: do not undervalue the ability of unforeseen events to affect the family economy. Therefore, assess whether you have the financial capacity to deal with an emergency.

Let’s look at the three possible scenarios that you might come across when making your budget.

  1. Surplus:If the amount of your income exceeds that of your expenses , then you have the ability to pay to face your debt.
  2. Balance:If the amount of income is equal to the amount of expenses , any unforeseen eventuality could put your financial well-being at risk. We recommend that you start making some adjustments to expenses to reduce them.
  3. Deficit:If the amount of income is lower than that of expenses , we recommend adjusting your finances and reducing expenses first, as this scenario will not allow you to meet your financial obligations, including the installment of your new real estate loan.

4. Start changing financial habits

Thanks to real estate loans, many can fulfill their personal or family dreams. Therefore, all family members, including children, must make commitments to adapt their lifestyle to the new financial conditions. This means reducing inconsequential expenses or eliminating them altogether. Thus, they can also work on saving for possible eventualities or purchases that improve their quality of life.

It is best if you make short-term decisions together and begin to change unhealthy financial habits. We leave you some ideas!

  • Reduce impulse purchases.
  • Come down ant expenses.
  • Limits meals away from home.
  • make a list grocery shopping and respect her.
  • Controls budget and take corrective action if necessary.

5. Make sure you have enough savings

Finally, one of the most important tips that we can give you is that, to make your investment, make sure you have enough savings for the entry of the property. This will make it easier to get financing.

Remember that normally it is suggested to finance 30% of the total value of the property with savings and 70% with bank credit . In fact, depending on the cost, many construction companies or owners will ask you between 20% and 30% as input.