5 Important Things to Do Before Buying Your First Investment Property
As a first-time real estate investor, you’re probably eager to get the ball rolling and put a down payment on your first property. But there are some important things to take care of before you commit. After all, buying a home is a very large investment—and one that does not come without its risks. Make sure you’re prepared to mitigate these risks and ensure your new venture will be a success. Here are some essential tasks to add to your to-do list before you buy your first investment property.
1. Get a Home Inspection
Getting a home inspection (usually costs between $300 and $500) is crucial whether you’re purchasing a property as an investment or for personal use. Without a home inspection, you could wind up facing some very expensive problems down the line, like a leaking roof, hazardous electrical wiring, or faulty plumbing.
Keep in mind that a home’s HVAC system is a common point of failure, and repairs can get costly very quickly. For example, HomeAdvisor reports that replacing a gas furnace alone can cost anywhere from $2,000 to $10,000! And you’ll likely have to spend up to $500 just to have your old furnace removed. If your home inspection reveals HVAC problems, you may be able to use this information to negotiate with the seller for a better price. Just make sure you research cost information before starting your negotiations.
2. Secure Your Financing
Don’t start looking for properties until you have been preapproved for a mortgage. The last thing you want is for an amazing property to pass you by because you have not secured your financing. Get preapproved for a mortgage so you can snatch up a good deal when it comes along! This will also prevent you from looking at properties that are out of your budget, which is both a waste of time and a serious disappointment. To prepare yourself for the pre-approval process, Investopedia recommends getting together your proof of income, employment verification, and proof of assets to submit to your lender.
3. Look at Several Properties
One of the biggest mistakes you can make is looking at only two or three properties before buying. If you do this, you could miss out on a great deal that is just waiting to be discovered. Try to look at as many properties as you can! Thankfully, the internet makes the process much easier than driving around town searching “For sale” signs in front yards. Take advantage of property search tools to help you find homes within your budget that have the potential to be profitable.
4. Research the Neighborhood
Make sure you research the area before buying a property. Discover Bank recommends starting your investigation online, looking at important factors like house prices, taxes, crime rates, transportation, climate, weather, demographics, and the quality of schools in the neighborhood. That said, there’s only so much information you can find out online about any given area. Get out there and talk to some locals! Chatting with people who live in the neighborhood will give you unique insight into what’s desirable about the area, as well as any drawbacks that may discourage tenants from renting your home.
5. Plan Your Property Management Approach
How involved do you want to be in managing your property? It’s important to answer this question now, since hiring someone to take on your landlord responsibilities will require some additional budgeting and cash-flow considerations.
Hiring a property manager may seem costly—most charge between 4 and 12 percent of the monthly rent. However, experienced property managers can help you reduce vacancies and avoid costly repairs by staying on top of marketing, tenant screening, rent collection, lease enforcement, and seasonal maintenance. Crunch some numbers to decide which would be the best option for you, and remember to factor in these additional expenses when searching for a property to purchase.
As you prepare to purchase your first investment property, don’t rush. It’s easy to get excited and make emotional decisions that don’t align with your financial goals. Try to stay emotionally detached and remain patient as you evaluate your property options and make calculated decisions to find the best deal. A slow and steady approach will lead you to the right decision!
Please don’t hesitate to contact our team. If you are looking to make an investment, we can help you. We are your local experts. #mountainstarteam #ashevilleinvestors #ashevillerealestate #yourlocalexperts