By a virtual show of hands, how many of you are hunting and searching for your for investing deal this weekend? For those of you that raised your virtual hand as a “yes” to deal-hunting, do you feel anxiety about buying an investment property? Do you feel like you might not be able to keep up the payments, or afford the rehab necessary to get the property ready for resale, or afraid of any problems that might come up with inspection?
“Most people only buy a couple homes in their lifetime. This lack of experience leads many investor buyers to feel woefully unprepared. You’re not getting married. You don’t have to make a lifelong commitment to a property, and that you can always sell later. If you fall out of love with your long term investment, as long as you buy right.
There are a set of rules that to rely upon when buying an investment property, and that these same rules can be used by anyone buying a house. Here are some great tips:
Tip #1. Get the Facts:
The number one rule is “do not overpay for a property”, and says that he never buys on future value (and refers to that as an illusion that got many of us in trouble). Being realistic if estimating the cost of repairs the property will need. Conversely, we cautions you not to let a home inspection “scare you away from a good deal”, and here’s an example of someone who had the opportunity to purchase a $650,000 home at a short sale for just $520,000, but walked away after the inspector “found a laundry list of items that needed repairs”. Albeit a “scary” looking list, as he called it, it was about $20,000 of work, leaving the remainder as over $100,000 in equity. Remember: “Get the Facts!”
Tip #2. Don’t Fall Completely in Love:
“When remodeling a home for a resale flip and being faced with a decision to either improve the home’s insulation or make the home more beautiful, I’m almost always forced to beautify.” People who lack experience will rely on their emotions. Real Estate agents are well aware of this, and this is why they try to “decorate and stage a home so that people fall in love and forget the facts”. If you fall prey to your emotions, you can get into “bidding wars and overlook discrepancies that need more attention”. The final point to be made on this tip is that “It’s much easier to replace kitchen cabinets some time down the road than it is to reinsulate a home. But people aren’t concerned or willing to pay for what’s behind the walls. They should be.
Tip #3. Get Professional Help
Real Estate Agents, Home Inspectors, Appraisers, Lawyers, Surveyors and Contractors are all valuable resources but they’re no good if you disregard their advice., and the key here is “to trust but verify. In terms of a Real Estate Agent, speak with many different agents and ask for references, until you find one that you are comfortable with. Once you are working with an agent, ask your agent to go over comparable sales with you, and “not just spit out a value”, since this will “help you feel confident about your offer and reduce the risk of complications from a low appraisal.”
Tip #4. Don’t Be Afraid to Pull the Trigger or Walk Away:
OK, so you have all of the facts about an investing deal or property that you are incredibly fond of, and if the price is fair and affordable then don’t be afraid to seal the deal. On the flip side, if the price is above the market value or the price does not take into account the amount of work it needs, you remind yourself that there are plenty of other houses to choose from.
Certainly some great tips here, but sometimes, when in the heat of battle and bidding for a home; it’s easy to lose perspective. What your mindset should be during the process; Remember a house is just sticks and stones and there are plenty of them out there.