What You HAVE To Do Before Investing in a Residential Property?
Before investing in a residential property, it is important to take some steps to ensure your financial interests are properly protected. While there are no guarantees in real estate investing, you will help to increase the chances of a positive outcome by taking these steps before investing in residential property.
Step #1: Get Your Finances in Order
It doesn’t make sense to start investing in real estate if you are already dealing with overwhelming credit debt or other financial issues. Get your debts paid off and work on obtaining a solid credit score in order to increase your chances of being approved for a loan with favorable terms.
Step #2: Look Into Loan Options
There are many different types of loan options available for purchasing investment property. In addition to conventional mortgage loans, there are also portfolio loans and private loans that can be used for these purchases. Investigate the various loan options in order to determine which is the best option for your financial situation and goals.
Step #3: Perform Due Diligence on the Property You are Considering
As you start looking at properties, be sure to perform due diligence on each property you are considering purchasing. This means looking into the history of the property, including any loans or other liens that might be against, and researching the local market. Due diligence also includes thoroughly inspecting the property so you are not caught off-guard by repairs or maintenance costs that may need to be completed after purchasing the property.
Step #4: Crunch the Numbers
Once you have a good idea of the overall costs associated with the property, including both upfront costs and long-term costs, you can really begin to crunch the numbers to determine if it is a solid investment. Be sure to consider the costs of maintenance as well as insurance costs and property taxes. If you will use the property as a rental, look into rental costs in the area and with comparable properties. If the investment will not yield a healthy return, it is time to move on to a different property.
Step #5: Find the Right Companies to Assist
As a real estate investor, you will be responsible for performing all of the routine maintenance and making all of the repairs that are associated with the property. If you will not have the time or if you do not have the skill to complete this work, you will need to hire an outside contractor to do it for you.
In addition to performing routine maintenance and repairs, you will also need to manage the day-to-day operations associated with the property. If it is a rental property, for example, you will need to find and screen potential tenants, complete all of the necessary paperwork for your rental agreement and collect rent from your tenants on a regular basis. If you don’t have time to perform these tasks, you will need to higher a manager for the property.
Of course, another option is to hire a property management company to do all of the management work for you. In this way, you can free up your time to look for additional ways to better invest your money.