Buying real estate has long been the most effective way of building generational wealth. But as with any type of investment, it’s essential to know what you’re getting into and to make sound decisions through each step of the process. if you are thinking about purchasing your first investment property, consider these tried-and-true tips:
Set Up a Company
While there are a lot of steps to buying an investment property, things will start moving quickly once you find the perfect property. Before you get too deep into the process, establish an LLC for your real estate investment business. Doing so will provide liability protection both for yourself and your assets, and it may even yield some tax benefits. To form your LLC, work with an attorney or a formation service so that you can focus on the other aspects of your venture.
Learn to Evaluate Properties
You will quickly learn that there is usually more than meets the eye when it comes to property. To help safeguard against a bad investment, make sure you know how to analyze the costs, time, energy, and potential profit of any investment home you are considering.
When evaluating a property, consider the overall condition of the property and any repairs and upgrades you would need to make. Moreover, factor in taxes, insurance, HOA fees, and any other expenses you could incur.
Research the Market
If you have already found a profitable location for your investment property, start researching homes in the area to get an idea of your options, how much you can spend, and how long you have for making decisions. For instance, the average house is selling for 0.9% over the list price and staying 47 days on the market.
Determine Your Funding Strategy
Another essential step when purchasing your first investment property is to decide how you will fund the project. Some investors choose to rehab a property, which means that they buy a foreclosure or distressed property at a low cost and renovate it to rent out to tenants for a higher rate.
If that’s not your goal, you will likely want to get a loan. Even if you have the cash for an investment property, paying for your first property with a loan will leave you more cash for buying other properties or diversifying down the road. Rather than going through your bank to get a home loan, consider working with a reputable group like The Hard Money Co.!
Find Good Contractors
If you buy a property that requires extensive repairs, then you will need to find reliable contractors in your area. Ask around your network for referrals of contractors that provide quality services and stick to their timelines. If you don’t have any luck there, then you can search online. Just make sure you don’t commit to a candidate before reviewing their past work and checking their license and insurance.
Know About Refinancing
Finally, you may find that you want to refinance your investment property at some point. This is a great way to lower your interest rate, renegotiate your loan terms, or cash out your equity. Refinancing can also allow you to increase your rental rate and finance other investment ventures.
Be well prepared going into the process. Gather all the necessary documents, lock down your new interest rate once your application is approved, and keep your investment home in pristine condition through the appraisal period.
Investing in real estate has been an effective wealth-building method for hundreds of years. But it’s also a complex venture that requires you to prepare thoroughly, make smart decisions, and run into a little bit of luck. Follow the tips above, and you will get off to a strong start for growing your investment portfolio!
Would you like to see what funding options and other financial resources we offer? Reach out to The Hard Money Co. today for the answers to all of your questions.