You’ve probably heard the expression renting money when talking about how some people choose to spend their money, but what does that mean? Does it make sense? Where do you even start if you want to buy investment properties? This article will discuss our top 7 tips for buying an investment property!
Tips for Buying an Investment Property
Tip #1 Research the Best Areas
If you’re looking to buy an investment property, one of your first steps is to research cities and neighborhoods. Doing so will give you a better idea of which parts of town are seeing positive growth; it’ll also help you identify areas that could use some attention.
Go beyond just knowing about a city or neighborhood – know its residents! Visit popular hangouts, watch which TV shows they binge-watch, read up on their favorite sports teams and political figures.
Tip #2 Have a Plan B
You may feel ready to invest in a rental property today, but things can change quickly. While having a Plan B is generally a good idea, it’s beneficial when buying rental properties.
Before committing to one investment property, have a Plan B of at least three other options. That way, if one option falls through or you don’t feel comfortable with it anymore, you still have other options available.
Tip #3 Know How Much You Can Afford
The single most important thing to consider when buying an investment property is how much money you can afford to spend on it. While that may seem obvious, you’d be surprised at how many people get tripped up by their dream purchase before they even finish signing on the dotted line.
Before going any further, sit down and determine how much you can comfortably spend on a new rental property. Then, find properties that fit your budget and don’t exceed it by more than 10 percent.
Tip #4 Get Pre-Approved for a Loan
Before you start your search, it’s essential to get pre-approved for a loan. A lender will run a credit check and evaluate your income and debt-to-income ratio to make sure you qualify.
Pre-approval is not required before putting in offers on properties but can be valuable when trying to purchase a property under contract or negotiating with sellers who might ask for first right of refusal or seller financing (where they hold onto part of your mortgage).
Tip #5 Inspections Are Important
When buying a rental property, you need to ensure that everything is in good working order and has no structural defects.
Sometimes these problems can get overlooked during a seller’s open house because people are so eager to see what’s inside, but it’s essential to take your time and do thorough inspections with an inspector you trust.
If you rush through your review, you could end up spending thousands of dollars later on repairs.
Tip #6 Get Professional Help with Negotiations
One of the most challenging parts of buying an investment property is negotiating a fair price. Because you are not using your own money, you don’t have to worry about going over budget, but it is still hard to walk away from a deal if there’s even a chance it might make money.
The key here is to get someone on your side who understands real estate investing and has plenty of experience in negotiations.
Tip #7 Get Professional Help with Managing It
As you start to look into buying a property, it’s essential to seek out as much professional help as possible. Getting a licensed real estate agent to help you find and purchase a property is one of your best options.
Agents deal with investors regularly and know what is new in the market. They will guide you through the process and help you avoid common mistakes new investors make.