Buying your first investment property can feel daunting and thrilling. But just like anything else new, venturing into the investment property industry has a learning curve. With some research and time, you will eventually start to enjoy rewarding results.
Here are important steps for buying an investment property:
Step 1: Do Some Homework
Before you place a deposit, spend some time conducting research. Read educational books, property blogs, websites, and real estate forums. Also talk to experienced property investors to know what you are getting into. Essentially, educate yourself about the industry and what you are interested in.
Step 2: Choose Your Investment Criteria
Once you have done extensive research on investment property, focus on the type of the property that you want to invest in. Also consider your budget while deciding how to venture into the investment property industry. Do you need a freestanding family residence, a countryside property, duplex, flat, or a sectional townhouse? At this step, write down details of the exact property that you want to invest in.
Step 3: Know Your Budget and Available Finances
When buying an investment property or even a house, there are two major finance options to consider. One option entails giving a cash offer. This involves investing a full amount into a property. With this option, you save on finance costs and interests. The second option entails getting a mortgage or bond. This is also called leverage and it entails borrowing money from a lending institution like a bank and paying the money back with interest. If you opt for a bond, decide on the amount that you want to raise as a deposit and the transfer fees.
It’s also possible to partner with another investor that has cash if you can’t raise enough money alone. This can be a friend or a relative.
Step 4: Search for an Investment Property
Once you have done all the necessary homework and decided on your investment criteria, start searching for an investment property. Bear in mind your budget when searching for a property. Essentially, stick to the budge and investment criteria that you set in step 2. Avoid the temptation to invest in a property that is outside your budget just because you find it attractive. Instead, stick to your criteria and price range.
Step 5: Make an Offer
Remember that most sellers will not be ready to compromise on their price just to give you the deal that you desire. Nevertheless, stick to your budget and investment criteria. Ideally, submit offers for numerous properties and avoid getting attached to specific properties emotionally. Additionally, do your due diligence and include a ‘subject to’ clause in your offers for different properties. Such a clause can read like ‘subject to complete inspection’. And before you invest in a property, have it inspected thoroughly. This will enable you to invest in a property that doesn’t have patent or latent defects.
Once you have done all this, make sure that you sign the sale documents with the help of a realtor at the office of an appointed attorney.