Everyone understands the upside of acquiring a real estate property. It offers residual returns, sustained price appreciation and the relieve of having a hard asset. Acquiring a property is the first step to real estate investing. If you’re a beginner in the industry, you can have missed feelings of excitement and frustration. By having the knowledge, understanding and the necessary tools, you’ll develop the knack of dealing with first-time purchase.
So, what are some of the considerations that come on top of your list of things to do?
1) Do Your Research
Living in a certain community/ location barely guarantees that you understand the market value of the properties around. You also need to understand the future projections in market value with regards to an area.
Because you’re targeting a certain type of home shoppers, research helps you find the best location that captures your target clients; one that offers the most prospects or renting out or selling.
Research doesn’t mean that you use your personal preferences to make decisions. Proper homework comprises thorough market analysis to come to rational financial conclusions. Besides, people invest for economics, not emotions.
2) Set Investment Goals
One of the major mistakes that property hunters make is setting out on a buying process before setting their financial objectives. Without goals, it becomes challenging to find a property that will enable you meet the income levels you desire.
It barely makes sense when you purchase a low value property if you wish to have a quick passive income. Likewise, you cannot target fast capital growth if you settle for a home in the countryside. You can make informed decision to reach your goals if you take time and understand what is required and the amount of effort required to achieve the objectives.
3) Do Your Calculations
It is often said that the paranoid is the one who lives longer. Not all the times, but in the landholdings industry, being a bit cautious and calculating the numbers beforehand is a plus. Find out the amount you have at hand, and the expenses required to renovate the property. Also factor in the operational costs. Next, calculate the listing price of the property and subtract the overheads to get a rough approximation of the expected returns.
Your mortgage lender will also require a down payment, which is usually about 18%-22% of the total purchase price of a property. Other calculations including the deal finalization expenses.
4) Apply for a Mortgage Loan
One of the drawbacks during real estate investment is securing the financial power to buy a property. First-time real estate investors have several alternative ways they can get funding for their first property. The method one chooses depends on financial stand and how much income they make. However, because most beginners have limited financing, the best option is a mortgage loan.
The mortgage lending process requires the borrower to first undergo a pre-approval process for a mortgage. Therefore, approach a bank and inquire about the various types of mortgage loans on offer. Find one that best suits your financial position and clearly detail how much money you can afford for the home-buying. That comprises the start-up capital and the projected rental proceeds of the property. Remember to ask about the interest rates attached to a mortgage, as they vary from one property market to another.
5) Hire a Realtor/ Agent
Unlike experienced industrial players, beginners in the real estate industry require the guidance of a professional agent. A realty agent is a certified professional who represents both home buyers and sellers in the property market.
A lot of people shoulder themselves with the task of buying an income property themselves. That’s because they want to avoid paying agent fees. Well, as complicated and dynamic as property markets can be, only agents have the knowledge and experience in the industry and can help you make the right investment decisions.
Having an agent saves you money, time and the frustrations that come with negotiations, handling documents and closing a deal. Furthermore, an agent provides help in finding a property that meets your preference and budget. S/ He also comes in handy when trying to select high income communities that yield the highest returns on investment (ROI).
6) Carry Out a Property Inspection
It becomes frustrating to acquire a property using a huge sum of money, only to find out that the property is aging and has critical maintenance issues. As understandable as it is to contract your budget, it is equally important to hire professional home inspection services. With an expert inspector, you can identify areas on the roofs with leaks, termite-breeding areas as well as a weak building foundation. Inspection are an effective way of ensuring that your preferred income property meets market standards.
7) Choose a Low-Cost Property
Regardless of whether you can spill a million dollars on your first real estate investment, you should first consider venturing in the low or mid-range price homes. Industrial experts recommend a property that costs a little less or more than $150,000. At the edge of your brain, remember that the amount will shoot because of the expenses involved in renovation.
Moreover, keeping your property investment on the low-price markets alleviates many financial risks. Whether you reach your expected profit margins or fall short, you still fall in the safe zone.
8) Settle Your Debts
When you intend to make your first move into real estate investing, you should not go in with a bundle of debts to your name. Most probably you’ll consider a mortgage loan. Adding it to your student loan or medical bills just makes it difficult to set off other creditors. You need to first pay your debts before you can consider venturing into the landholdings business.
9) Select Your Investment Partners Carefully
A considerable number of property investors opt to partner with their friends and colleagues instead of choosing a mortgage loan. Beginners need to exercise due care when they elect their investment partners. That includes how comfortable you communicate or relate with them as well as the implications of entering into a partnership.
Purchasing a real estate property is a daunting task. However, considering the financial benefits that come with making an informed purchase, the work may be just worth the money, time and the frustrations that comes with the purchase process. If you consider buying your first rental property, you should know that, like any type of start-up, the first time is always daunting. But if you keep in mind the tips and tricks mentioned in this piece, you can have a good kick-start that propels you to become an industrial professional.