1. Hire a REALTOR® and get Pre Approved
You need to know the average price homes are selling for, and the types of home being sold. If you’re a REALTOR®, this information can be obtained through the MLS (multiple listing services). If you’re not a REALTOR®, the job is going to be a bit more involved as you won’t have access to the MLS. There are other places to find comps for non-realtors like websites such as Realtor.com and ejjohnsongroup.com. While these can be helpful when looking for recent sales, the problem is that this information will not be as detailed or accurate, as the MLS. Choosing to work with a REALTOR® will get you the MLS access, but what’s more is you’ll have access to their experience, knowledge and you’ll have someone looking out for your best interests.
Seeing as most new property investors don’t have bags of money to start investing in real estate with all cash, the most common way to finance buying an investment property, is with a mortgage. Getting Pre Approved before you start the process, gives you the ability to know your budget so you can search for properties within that budget. Finding a REALTOR® and a Lender who understand the needs of investors doesn’t have to be difficult. The strategy for finding someone to work with is the same for investors as it is for consumers. Get a referral!
2. Do the Math
Once you’ve been Pre Approved and know what you can afford, you need to do some further calculations. Deposits, Closing Costs, Repairs, Monthly Mortgage Payments, Income Property Taxes, Insurance, Maintenance Costs—all of these are expenses that, if overlooked or miscalculated, can eat into your positive cash flow and profits. The main goal of buying an investment property is to start making money, right? So, one of the worst things that could happen to an investor is losing money by not keeping up with the costs that come with the real estate investing process.
3. Find the Right Neighborhood and the Right House to Invest In
When searching for an investment property, it’s good to be knowledgeable of the location, desirability of the neighborhood, school district, floor plan, etc. For example, a home that is 1 level with 3 bedrooms, 2.5 bathrooms and a large yard in a subdivision near a great school district might be more desirable for potential tenants than an outdated 2 bedroom 1 bath home in need of some major t-l-c located in a high traffic location. Some subdivisions also have HOA rental restrictions so it’s important to know the market and be knowledgeable when you’re on the search for the right investment. Also, different investment properties have different profitability. When you’re considering buying an investment property, calculating the cash on cash return, cap rate, rental income, and occupancy rate values is important to determine whether or not the property will bring a good return on your investment.
4. Consider Hiring a Property Manager
If you’re investing in Real Estate with the intention of being a landlord and leasing the property- one thing to consider is whether or not you’ll hire a property manager. Some things to consider would be your schedule, availability, contacts and location. It’s 2pm on a Monday afternoon and your tenant calls in a panic because there’s a huge leak. Are you able to immediately address the situation? Do you have a contact that you’ve established a relationship with and you have pull to get someone out there immediately? What about if your property is available for lease and 5 different individuals/families want to see it at different times throughout the day? If the answer is no, then maybe hiring a property manager is something that would best suit your lifestyle.
Investing in real estate is not often referred to as a walk in the park, but the perks of becoming an investor can definitely make the process worth your money, time, and energy. If you’re a beginner real estate investor, remember that starting any type of business is intimidating at first but with time you’ll gain experience and with the right people working alongside you, you’ll find yourself more confident and glad you took the leap.
If you’ve been considering investing in real estate and have questions- Call/text or email us!
We’d love to help turn your dreams into reality!