Making your first real estate purchase, either as your main residence or as a investment, should be profitable and exciting, however it can bea bit overwhelming also. You should follow these steps when starting out in real estate investing.
1. Educate yourself. No don’t worry, I didn’t mean that you need to go back to school, however you do need to take issue for what you need to know, and learn it well. You should know and study the market you’re interested in entering. Use the internet, local public records, as well as local area real estate agents to find the sales prices of comparable properties (comps). Learn about the whole transaction process, each person’s role and responsibility, the legal requirements, and insurance. Each of these components carries fees that vary, These cost must be included for the total purchase. By researching prices you can avoid losing money.
2. Do you have your financing in place? Get your financing in order. All to often, this is common mistake made by first time investors is to find the property first, then get the financing in place. Before you go out to find that hidden gem, get pre-approved for financing. Decide on a lender by choosing a bank, mortgage company or online loan company. Line up private investors and/or equity partners to Joint Venture with. When talking with your lenders, private or conventional, tell them how much you are looking to do. If conventional funds are being sought, the lenders will gather financial information about you – your income, credit history, liabilities – and give you an idea of how much they’ll finance. This also tells you how much you need to bring to the table, whether it be yours or someone else’s. There are so many different financing choices available today, you’ll need to decide which option works best for you. Financing plans have different variables including different rates, initial cash investment, and tax implications as well as how much is needed monthly and where are these funds coming from.
3. Where do you start to look for your property. Finding real estate that you can make a profit with should not be that difficult but can be tricky. Use the internet and local newspaper’s “Real Estate” section. Look for abandoned and “For Rent” homes. For Sale By Owner (FSBO’s) online sites are also a good method. Drive around the area you’re interested in and try to find “For Sale by Owner” properties.
4. Time to negotiate. Once the perfect property has been found, you’ll need to negotiate for the best price. Don’t expect that you’re going to steal a property. Sellers are trying to get the most money for their property, and you will be trying to pay the least amount. Negotiating well involves working together with the seller to find a win-win situation, this means what does the seller really need? If you can fix a problem the seller needs fixing, then the purchase price of the house May be a secondary issue. Be aware and sensitive to the sellers needs, be assertive, but plan to make concessions. Inflexibility often causes expensive delays and added stress. Learn to be creative.
