Are you thinking of buying an investment property? If so, you’re in good company. Investment property is a great way to grow your wealth, and there are plenty of opportunities out there for savvy investors. But buying an investment property can be a daunting prospect, especially if you’re not familiar with the process. One little-known but very valuable real estate investment strategy is to target the low end of the market.
At MY SMART COUSIN, we specialize in helping new property investors conceptualize, fund, and build their Real Estate empire. As seasoned Real Estate Investment coaches, we work with clients to penetrate the lucrative market of buying a house for the price of a car, or buying at a higher price point if preferred. Our expert team works with aspiring homeowners and investors, with a special focus on Black and Brown folks and women, and customizes a tailored strategy and roadmap to gain entry into the real estate industry and thrive.
Are you looking for ways to invest your money and see a good return? If so, buying an investment property may be the right choice for you. But, investing in Real Estate can be tricky – especially if you’re new to it. That’s why we’ve put together this guide on how to buy an investment property. Keep reading for steps that will help make the process smoother and more successful.
WHY BUY AN INVESTMENT PROPERTY?
When it comes to investing in real estate, there are many different options to choose from. However, one of the smartest choices you can make is to invest in an investment property. Here are three reasons why an investment property is a wise choice:
· First, an investment property will provide you with a steady stream of income. Unlike other investments, such as crypto, precious metals, stocks, and bonds, an investment property will generate rental income that you can almost set your watch by every month. This rental income can help offset the costs of the mortgage and other expenses associated with owning the property.
· Second, an investment property can appreciate over time. While housing prices have cooled some since the Spring-time highs earlier in the year, prices remain robust throughout most of the U.S. due to high demand among renters for affordable housing. This underlying foundation will likely support the value of investment properties for many years to come, providing solid annual returns when you eventually sell the property.
· Finally, an investment property can offer significant tax advantages. The IRS allows owners of investment properties to deduct a portion of the mortgage interest paid on their taxes. This deduction can save you thousands of dollars each year, making it easier to afford your monthly mortgage payments.
Buying an investment property is one of the smartest choices you can make when it comes to real estate investing. With a steady stream of rental income and potential for appreciation, an investment property can offer significant financial rewards. And with tax advantages that can save you money each year, owning an investment property is a wise choice for any investor.
SEVEN STEPS ON HOW TO BUY AN INVESTMENT PROPERTY
1. FIGURE OUT JUST HOW MUCH YOU CAN AFFORD
Just because a property is a good deal doesn’t mean it’s a good deal for you. If you can’t afford it, then it likely will be a terrible and painful investment. Be realistic about your budget and make sure to factor in all of the associated costs, such as repairs, preventative maintenance, property insurance, and property taxes. Once you’ve done this, add a contingency factor of ten percent, or more, to account for any expenses that were under-estimated, or never estimated at all. As the old saying goes, you don’t know what you don’t know. Thus the reason for a contingency: is to add a fudge factor that helps absorb these expenses.
2. RESEARCH THE MARKET
Not all investment properties are created equally. It’s important to do your homework and understand the market conditions in the area where you’re looking. Look through news articles and property valuations to see what the trends have been over time. Likewise, read forward-looking city plans and local economic reports to see what’s on the horizon for your target market. If an environmental hazard has recently occurred in the area with the little political will or economic focus on fixing it— think Flint, Michigan’s water crisis in the early days— view these as red flags.
3. GET PRE-APPROVED FOR A LOAN
Once you know how much you can afford to spend, it’s time to start talking to lenders. Getting pre-approved for a loan will give you a better idea of what kind of interest rate you can expect to pay, and will help streamline the property-investment buying process. You want to ensure that when you make a purchase offer, you can actually follow through on it if it is accepted. Lining up financing in advance will lend credibility to your offer.
4. HIRE A QUALIFIED REAL ESTATE AGENT
A good real estate agent will have experience with investment properties and will be able to guide you through the process of purchasing an investment property, which can differ from purchasing a primary residence. An investor-focused real estate agent can also offer helpful advice on negotiating prices and finding contractors.
5. MAKE AN OFFER ON THE PROPERTY
When you find a property that you want to buy, your real estate agent will help you make an offer that takes into account the current market value of the property as well as any repairs or upgrades that may need to be made.
6. HAVE THE PROPERTY INSPECTED
Hard money and other non-conventional lenders may not require a property inspection. That said, a property inspection can still play an important role, especially for new investors. An inspection shines a light on what needs to be fixed or replaced, and how urgently. This information is vital in helping to determine the fair market value of the property.
7. CLOSE ON THE DEAL
Once your offer is accepted and all of the paperwork is signed, congratulations! You are now the proud owner of investment property! Be sure to stay on top of things like repairs and maintaining your rental unit so that it remains attractive to tenants. Particularly if you are a buy-hold-rent investor, the surest path to collecting rental income is to ensure your property remains rent-ready.
CONCLUSION
So, are you ready to buy your investment property? It can be a little daunting, but if you follow these steps, you’ll be well on your way. Buying an investment property is a big decision, but it can be incredibly rewarding in the long run. We hope this article has helped give you some insights into what goes into the process and what to expect. If you have any questions or would like more information, please don’t hesitate to reach out to us – we’re always happy to help!
YOU CAN ALSO READ: THE BEST REAL ESTATE INVESTING STRATEGIES
FOLLOW US: @MYSMARTCOUSIN