Buying real estate is an exciting, frustrating, and potentially long process. For real estate investors, it’s also completely unavoidable.
We have to do it! If that’s the case, we might as well get good at it. There’s no use in fumbling our way through the process every time.
There’s also a ton of advice out there when it comes to buying properties. It can get very specific, especially when it comes to the financing!
The advice we have to offer here definitely won’t be able to cover everything, but it will cover some integral parts of the process that are key to your success when buying investment properties. Just know that there’s a lot more out there.
6 Keys to Property-Buying Success for Investors
1) Research the Neighborhood
There’s more than one reason to check out the neighborhood when buying an investment property. One, you want to know what the prices are like in the area. That way you’ll know if the list price is actually accurate to the area values—is it a good deal, or overpriced? You can also see what area rent prices are like, giving you a gauge of what you’ll be able to earn.
When you investigate the area, you’ll also be able to get a feel for the demographics and climate of the region. Where are things headed? Is the area growing? Are amenities nearby? Does it have a future and forward momentum? This will help you determine if it’s a good place to invest or not.
2) Get to Know the Seller
Buying a property isn’t like buying anything else. So much of it is a relational process. If you can tap into the seller’s desires and situation, you may have a big advantage on your hands! For instance, a motivated seller—a divorcee, someone who already has a new job or new home, or for whatever reason they just need to sell and sell fast—is going to be advantageous to you, the buyer.
3) Have Your Financing In Order
Speaking of buying quick, the whole process is going to go so much faster if you have your financing in order ahead of time. That means you already have the down payment—at least 20%—and pre-approval from your bank. If you’re making an all-cash offer, have everything ready to go for that, too. It can be a big incentive to the seller, even if your offer is lower, if you can offer a quick and clean deal where someone else can’t. That doesn’t mean you don’t negotiate—it just means you try to be pleasant to work with and that you have your act together.
4) Do That Due Diligence
Speaking of negotiation, it’s probably a wise idea to have an inspection contingency in your deal. Due diligence is more than just having a home inspection done, however—sure, you need to make sure there are no surprises lurking in your new property. But you also have to run the numbers! Think about your cash flow. Does the price of admission make sense compared to what you’re going to be making on the property in rent? Including the costs in things like insurance, fees, maintenance, and other expenses? Due diligence is one of the most important pieces of the puzzle.
5) Don’t Fall in Love
If you’ve ever been caught up in the heat of the moment, you know some really bad decisions can come out of it. Even the most rational, level-headed, intelligent people can make regrettable choices. The same can be said in real estate investment! Maybe you get caught in a bidding war. Maybe the thrill of negotiations sways you and you just want to win. Maybe you just really, really think you want that property. Either way, when you let emotions start getting in the way, you can start neglecting due diligence and making excuses. You buy properties you really shouldn’t.
Don’t let emotions get in the way of logic!
6) Only Rely on Real Estate Agents So Much
Real estate agents can be a valuable asset when it comes to buying properties. They can really help out with the finer details of negotiation and finding properties. However, not all agents are experts in the niche of investment. If you rely on an agent, make sure they’re suited to your needs and that they have a lot of experience helping investors find properties that are suited and successful for that purpose.
You also need to be able to do this on your own! Don’t totally rely on an agent to get the job done for you.