How To Buy Investment Property

Posted on: March 9, 2011

Categories: Buy

Author: lbuen

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How To Buy Investment Property – Taking The First Step In Real Estate Investing

The rising popularity of real estate investing makes many people interested to learn how to buy investment property. Acquiring a property is the first major task that a real estate investor has to perform, preceding rehabbing, renting out or selling. Acquisition is not a simple task because you need to painstakingly research and analyze the property by weighing numerous factors. Due diligence is necessary to ensure that your bottom line will not bleed red with deficits.

How To Buy Investment Property – Knowing What You Want

Acquiring a property starts with knowing your preferences for the type of property you want to invest in. You may prefer renting out a 3BR, 2 bath house, an apartment, a multi-unit building, a condominium, mobile homes, a commercial complex, store fronts, among others. If you already have a vision, this is the easiest part in the research phase. All you need to do is replay that vision in your mind, daydream. People curious on finding out how to buy investment property may already be dreaming of owning a multi-door apartment, passively receiving rental income every month and making a hefty profit when selling the property years later due to appreciation.

How To Buy Investment Property – Locating What You Want

Having known what you want, the next logical thing to do is look for that kind of property. This is not limited to the type of building, it also includes the particular area or location of the property. A real estate investor pro said that it is better to buy an inferior building in a great location than buying a sensational building in a poor location. A great location means an area that hosts a diverse economic bustle that bespeaks of work and entrepreneurial opportunities for tenants. This good area must also harbor good schools, transportation and shopping malls to cater to the needs of the tenants. It is not just their needs you think of when you choose an area. Consider areas that are in close proximity to your residence so that you can regularly check your property.

Another important thing about location that affects your game plan on how to buy investment property is that it has an influence over the price of your investment, both in terms of rental fees, your acquisition cost and eventually your selling price should you decide to sell it later. The location even has a say on the marketability of the property and the kind of tenants you will be letting in. Avoid areas with high crime rate.

How To Buy Investment Property – Obtaining An Investment Property Loan

While still searching for the property to buy, start researching about financing options. It would be a great idea to apply for a pre-approved mortgage loan so that when you find the property, financing is ready. A pre-approved loan also helps you asses your finances and gives you an idea of how much you can afford.

How To Buy Investment Property – Evaluating The Property and Doing The Numbers

Once you have a candidate property to invest in, check out the condition of the property. Note any repairs needed and the corresponding repair costs. Find out why the seller is selling it, check for any outstanding liens, how much the going rental rate is, and if there are current tenants still in the premises. Also ask about other expenses such as closing costs and agree on who is paying what.

Using the data you have gathered, do the numbers. Factoring in the costs and expenses, compute for your monthly cash flow. Also work out the maximum offer you can give to the seller, given all the data to ensure that you do not buy it overpriced.

How To Buy Investment Property – Negotiating An Offer

Having done all the research, evaluation and financing preparations, you are now ready to put your negotiating skills to the test. Be guided with your computed maximum offer. Beyond that amount, drop the deal and start looking for another one.

The best way to learn how to buy investment property is to do the actual thing, so start researching and securing a pre-approved loan immediately; after all, the scariest part is when you ink the contract that stamps finality.

 How To Buy Investment Property
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