Buying Investment Real Estate
Buying Investment Real Estate
Choosing your real estate professional is, perhaps, the most important decision you will make when buying property. I believe the more you look around, the more you will see the value of working with me.
However, no matter whom you choose, these simple tips will help you find and purchase the home of your dreams more quickly and efficiently. If you're a first-time buyer you can find more information here.
Before you shop:
Be a smart consumer. Learn the financing basics. Real estate investment financing versus owner occupant financing is like comparing apples to oranges. Additionally, investors are treated like any other business person by lenders. Debt to income, cash flow, and your own exposure to risk are among the things considered by lenders.
Get pre-approved. This is crucial! Pre approval demonstrates that you are serious, and a pre approval letter from a lender may cause an offer to be accepted that otherwise wouldn't be. I view a lender letter as a tangible asset and key part of the negotiation...sellers do too.
Know what you want. Draft your business plan at a minimum. Determine your long and short range goals and financial abilities. Talk with key associates to your investment business for advice..Your Realtor, lender, other investors...and learn. Ask me about my library of materials that I make available to my clients.
Keep your debt load to a minimum. As I mentioned previously, Debt to income and cash flow are very important. Pay down credit cards and other unsecured debt (RE debt is OK, it's secured). Remember, financial institutions evaluate your financial situation on your gross monthly income and debt (cash flow) among other things.
Be prepared to view new properties quickly. Although we are presently in a buyer’s market, good deals still go quick. I just love the phone calls I get saying "find me a home at 20% below market, with lots of upside...call when we can go look" everyone is looking for an improbable deal, especially in a slow market. So go look, don't delay, you will find good deals; and the occasional great one.
Before you buy:
Submit a strong competitive offer. Don't get hung up over a few bucks...if the deal pencils go for it. Some investors actually give up because of so many rejections of low ball offers; these are the same people that complain that they can never find a good deal.
Try to minimize the number of contingencies. Fewer contingencies mean a stronger offer.
Hire an inspector. A professional building inspector or appraiser is a must until you get your feet wet. Even though I am a licensed (experienced) contractor, I still hire an inspector. He is disinterested, and will look at the property with a different perspective. Inspections are well worth the money.
Check zoning regulations and covenants. Good residential neighborhoods will be zoned to keep out commercial and industrial users. Read any restrictive covenants and make sure they fit your investment goals. Ask me about feasibility considerations and how they impact contracts.
Request an updated property survey. This is especially critical with raw land. If you are in doubt, don't depend on a plat map. Neighbors who can demonstrate use of a portion of the property, may have a claim on it. We still operate under the same adverse possession laws that have been around for more than a century.
Make sure you know what stays or goes.
Your contract should be very specific about which items (appliances, etc) are included in the sale. If your business plan calls for physically distressed properties, make sure to factor into your budget the junk and old cars that come with them.
Get agreements in writing. Make certain verbal agreements are written into the final contract to avoid any stressful and expensive issues later.