Unlike a primary residence, buying an investment property calls for you to be more deliberate about the property you wish to buy. Since this property is for a passive income rather than your everyday home, you will be looking at the property with a different set of eyes. Rather than looking for all the aspects of a home you prefer, it is important to look for facets other people would be interested in. We will explore 5 steps that allow you to successfully purchase an investment property that will ensure you will get tenants lining up.
Step #1: Type of Investment Property
Before you hit the real estate websites to track down prices and square footage, you first need to decide the type of property you wish to have. Are you looking to have tenants all year round in an everyday location, or are you looking to have tenants at specific months of the year in a vacation destination? This step will help you get a better idea of how you will need to set up your finances and what you are going to be able to afford.
Step #2: Decide Location
After you have decided on your ideal tenant schedule and your cometary capabilities, you will need to figure out where your property will be. Will your property be near you or in a different state? Are you going to manage the property yourself or hire someone? While this question doesn’t 100% help you decide on the location, knowing if you are willing to hire someone to help you with the property will allow you to understand how far away you want to be away from the property. For example, if you want to manage it yourself, you will more than likely be looking to have a property rather close to your own. If you are looking to have someone else manage the property, the property can easily be located in a different state that might have better property prices and foot traffic.
Step #3: Use an Agent
While buying a primary residence gives more flexibility of whether or not you might want to use an agent, it is highly recommended to use an agent when you are looking to buy an investment property. This is especially applicable when you are looking to buy a property in a location that is not your own. Looking for a property outside your state, a local realtor is able to give you an accurate ‘report’ of the area you are looking for as well as the statistics of that area, i.e schools, crime, property values, and the seller themselves.
Step #4: Back to the Numbers
Once you have decided where exactly you want your investment property to be, it is time to get back to the numbers, now inputting the rates of the area you are looking into. Not only are you going to need to figure out how much you will be bringing to the table, but you will also be looking at a number of things:
Monthly Payment
How much you will need to charge
How much you need for non-tenant months
Cost of regular maintenance
Figure out the best type of loan for you
These will help you truly understand if you will be able to afford the property long-term.
Step #5: Closing
Not every property you put an offer in for you will get. It is important to remember that even for an investment property, you can pull out at any time. If the seller is unable to budge on certain or any terms that you bring up, if you find out that the actual numbers are too different than the hypothetical number, or you are simply not interested in the location anymore- you still hold the power.
Contact Us for Investment Property Guidance
While attaining an investment property is quite exciting, it is important to do your due diligence and be more intentional within the process. Don’t be so eager that you jump at any property, really think about what you are aiming to accomplish via tenant status and above all, make sure you are protected all along the process- both buying and having tenants. With over 20 years of experience, Doug has an arsenal of information to help you get started in the Investment Property Market. Give us a Call with any questions or Schedule a Consultation today!
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5 Steps for Buying an Investment Property Sources:
RentPrep: How To Sell A Tenant-Occupied Property
Apartments.com: Tenants' Rights When Selling an Occupied Rental Property
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The content on this page provides general consumer information. It is not legal advice or regulatory guidance. Grimm Realty Group may update this information periodically.
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