There are m
any reasons people invest in real estate, but the general consensus is to make money. With interest rates at record lows and the inventory of homes for sale at a record high, it is an excellent time to begin to invest in real estate.
Getting started as an investor in the housing market is not as hard as many believe, especially if a few simple guidelines are followed. Let’s take a look at the very basic strategies you’ll want to have in place before you make the commitment to invest:
Money
Successful investors in real estate will take action to get a line of credit in place. This begins with creating a working relationship with one or two loan officers at a lending institution. The loan officer will review the investor’s credit scores, analyze debt-to-income ratios, review other investments, and provide input as to the best forms of credit the investor should utilize. The line of credit will usually be in the form of a mortgage.
Depending on whether or not the investor is purchasing the property as a primary residence or as a simple investment, the interest rate will vary. Usually if the property is being purchased as an investment and not a primary residence, the lender will require a larger down payment, especially if this is a first investment property. The interest rate will also typically be at least one percentage point higher when borrowing funds for an investment property versus an owner occupied property.
Agent
Successful home investors develop a strong working relationship with a trusted real estate agent. The agent provides information on real estate trends, fair market value of properties, leads on properties that are good deals, and up-to-date lists of HUD homes and foreclosures.
A real estate broker will prepare and handle all of the paperwork, contracts, and disclosures. He or she will also manage communication between all the parties involved in the transaction. The real estate agent’s role is invaluable to the successful home investor. To get started, interview several real estate agents to discover the one, or two, who will best provide information and assistance. As a buyer’s agent, the commission is usually always paid by the seller, so it does not cost the investor any more to use a buyer’s agent.
Location
Choosing the right location to purchase is critical, especially if reselling or renting the property after purchasing. Look out for locations that don’t suit your use of the property. If you’re buying a house to rent to a family, beware of run down neighborhoods, construction sites, busy streets, proximity to industrial properties, and general undesirable atmospheres. However, if you’re looking to get in on the redevelopment of an abandoned area or building, then by all means do your homework and buy in before prices rise once the rejuvenation is complete.
This is where a real estate agent comes in handy again. A good real estate agent knows what’s happening in their town. If there is a group of small houses for sale in the proximity of a school, your agent will know this ‘hot spot.’ If there are apartment buildings being sold now as condos, your agent will know all about it. Don’t look at a house for sale without considering the surroundings very carefully. That location translates into dollars for the investor.
Repairs
When investing in real estate, be crystal-clear as to the cost of any and all repairs and necessary remodels to be conducted on the home being purchased. And, don’t forget the maintenance. Investors are usually great at costing-out the upfront expenses, like repairs, but can sometimes be short-sighted when it comes to the long haul drain of routine maintenance. The uninformed investor will overlook this area, underestimating theses costs, and end up losing money instead of seeing a positive return on investment. Repairs and maintenance to consider before investing include, but are not limited to the following:
- Roof condition
- Structural condition
- Foundation condition
- Heating and air conditioning unit issues
- Plumbing issues
- Grounds condition and drainage issues
- Windows and doors condition
- Electrical fixtures and wiring condition
- Bathroom and kitchen fixtures condition
Successful real estate investors understand the importance of surrounding themselves with professional people who understand the business of real estate. This ensures they will receive excellent advice. Don’t go it alone when investing in real estate, whether it’s your first time or your hundredth time. Start right by hiring the best real estate professionals, and enjoy a profitable investment.