Are you thinking of purchasing an investment property, but not sure if you can handle the financial strain? Buying real estate is a huge commitment, but there are many useful ways you can reduce your risk and feel confident in your investment. Let’s explore 5 ways you can prepare yourself for a financially sound investment when looking for your first property.
Partner With A Trusted Lender
When you’re planning for new investment, it’s important to thoroughly comb through all of your finances, both business and personal. Chances are you aren’t buying your investment property in cash, so you must first explore what kind of lender you’d like to partner with.
When you choose an alternative lender, rather than a bank or agency, you’re giving yourself the flexibility to create a personalized plan to finance your investment property over 30 years. You’ll also have lower document requirements with an alternative lender, meaning there’s no need to haul out years of pay stubs and tax returns.
Whether you choose an alternative lender, a local bank, or an agency, make sure your first step is consulting an expert to get approved for a loan.
Know Your Options
Next, you need to be sure you have considered all your options. Are you going to partner with a real estate agent or search for the property on your own? Are you going to buy a fixer-upper and finance the repairs or choose a turnkey property that is move-in ready? Are you going to scope out the auctions for the best deal or buy a home online?
Taking on projects in your investment home is often worth the time and energy. 74% of homeowners have a greater desire to be in their home after it’s been remodeled, but most are not willing to take the risk. Have a clear picture of the remodels you are willing to do, how you will be using your money, and explore all your options so you’re ready to make a financially sound decision that is right for you.
Negotiate Like A Pro
Don’t settle for a home you don’t want or a price that isn’t right. Sharpen your negotiating skills and fight for what you want. If you don’t want to take an unnecessary financial hit, be sure you have the confidence to negotiate like a pro for the right house at the right price.
So you don’t end up with a bad deal, educate yourself on what the market is like in the area. If you understand the market prices as well as supply and demand, you will be more equipped to negotiate the best deal possible and get the most out of your money.
Financially prepare yourself for the money you are about to invest by creating a comprehensive budget. Dreaming is fun, but it doesn’t matter how much you love a property if it’s not in your price range. Know what you can afford, and stick to your budget.
A budget can help you realistically prepare for a downpayment, handle mortgage costs, and finance day-to-day wear and tear on your property. Before you invest, it is essential to create a realistic view of your finances by making a useful budget.
Well-Rounded Business Planning
Don’t get so caught up in financially preparing for your real estate investment that you neglect other areas in your life. Make a clear business plan and account for any other investments you may have before purchasing real estate.
Budget for your household expenses, and consider creating an LLC if you want to keep your personal finances and your investments separate. If you have a real estate business, be sure any costs associated with your investment are going through the LLC for tax and liability purposes.
Purchasing real estate is a high-risk, high-reward investment option. When you take inventory of your finances, partner with a trusted lender, advocate for yourself, and have a clear picture of your needs and your budget, you will be able to begin a successful and financially sound career in property investment. With these tips, you will be able to take the risk with confidence and reap the rewards for years to come.