Is the Spring homebuying season kicking off in January? Some experts think so, with lowered interest rates drawing buyers back to the housing market. There’s no doubt that the decline will be gradual over the next few years, but it won’t stop activity from kicking back up. 

Just as the smallest rise in rates meant adding hundreds of dollars to mortgage payments, a decline – even a tiny one – represents greater savings and housing affordability. It should be no surprise that investors want to make acquisitions in 2024. But how does a real estate investor wisely prepare?

This is your quick and easy guide to low-risk, low-stress property purchases.

6 Steps to Smart Property Acquisitions

Step #1 – Get Your Financial House in Order

First things first: finances. Whether you’re buying your first investment property or your fiftieth, the need for financial diligence never changes. As you plan, you’ll want to:

• Eliminate high-interest debts, like credit card balances. Keep your debt-to-income ratio under control and avoid overleveraging.
• Make concerted efforts to improve your credit score.
• Finish any changes in new bank accounts or credit accounts and avoid them during the buying process.
• Secure a downpayment.
• Gather necessary financial documentation.
• Secure lender pre-approval.

Step #2 – Investigate New Investment Markets

Where do you want to invest? Portfolio diversification is important, after all. You can either buy more properties in the markets you’re already in or expand your reach to a new area. There are benefits to both options. Staying put only diversifies your portfolio on the level of an additional asset; you already know the market and have established vendors and management there. It makes the process more streamlined simply due to familiarity.

Expanding, however, means further diversification and risk mitigation. Yes, it might take more research on the front end, but expanding your reach is worth it. Take the time to evaluate your portfolio and envision what you want it to be.

Step #3 – Consult Your Portfolio Advisor

It never hurts to work with your portfolio advisor. Even if you know what to do, they may present things you hadn’t thought about. They can offer clarity, perspective, and an extra layer of risk assessment. Let your advisor help develop an action plan. They can assemble next steps and lead you closer to your ultimate wealth-building goals. 

Step #4 – Reiterate Your Long-Term Goals

Before you buy another property, you must consider how it fits into the big picture. What role does it serve in your portfolio? Are your choices strategic? What are the criteria worth prioritizing? Each time you make a decision for your investment portfolio, examine your options within the context of your long-term goals. It safeguards against choices that don’t ultimately serve your ambitions.

Step #5 – Crunch the Numbers

Because we live in an economy impacted by inflation and fluctuating costs, investors must crunch new numbers when they want to buy another property. It’s not just about the interest rates but the myriad factors that impact a property’s income-producing potential. The labor, renovations, property management, utilities, and other expenses add up. They might be different across markets or due to inflation. And then, you must factor in what you can reasonably charge for rent. 

Rental rates are increasing to the point where an average household may struggle to afford it. That’s trouble when you’re between buying a house or renting a home, and you can afford neither! Investors should be mindful of their bottom line while setting rates conducive to resident retention.

Step #6 – Set Your Timeline

Finally, you must set a timeline for acquiring a new investment property. How should that timing look if you resolved to buy more than one property this year? Plans may change – and that’s okay – but investors should at least intend to close within a specific timeframe. This forces you to take active, committed steps towards portfolio growth. To say you “want to buy an investment property this year” is too nebulous. 

Saying, however, that you want to buy an investment property in XYZ market by XYZ month creates specific benchmarks to meet. And that, ultimately, holds you accountable. If you don’t know a realistic timeline, work on developing one with your portfolio advisor.

Our Portfolio Advisors at REI Nation make investing in real estate stress-free. Tap the button below to start!