Is real estate investment one of your dreams? If it seems daunting to get started, don’t let it be. Whether you want to be the next Chip and Joanna Gaines or want a vacation home that you can rent out the rest of the year, get started is easy. In this blog, we’ll cover how to buy your first investment property and give you everything you need to know.
Make a Plan
As Benjamin Franklin said, “If you fail to plan, you are planning to fail!” In real estate, this statement is certainly true. Without a plan, you could end up either not knowing where to start or jumping into a poor decision without realizing it. A plan will act as your guiding light through your real estate property search and purchase.
The first part of your plan should cover your budget. Ask yourself:
- How much am I willing to spend out of pocket? – This would include the down payment and renovations.
- How much should I allocate to down payment versus renovations?
- How much will I be able to cover in unforeseen expenses?
- Financially, if things don’t turn out as planned, will I be alright?
Identify Your Dealbreakers
There are some things you simply don’t want to deal with. Whether that is location, size, price, renovations needed, or some odd circumstance, write down what your dealbreakers are and stick to them. A dealbreaker should be exactly that: something that breaks this deal for you. Unfortunately, people find themselves in messy situations when they become too eager and don’t stick to their dealbreakers. They bend their own rules “just this one time,” but it can end up costing them time, energy, and tons of extra money.
Plan Your Exit Strategy
Buy and hold or fix and flip? Either way, map out how you’ll eventually exit the investment and reap the returns. If you’re not sure how you would exit a property, don’t go for it. The point of an investment is to see a return. You should have a clear vision of what that will look like before purchasing your first real estate investment property.
Research is more than scrolling on the Zillow app. Think like an investor (because that’s what you are) rather than a home-buyer. Identify neighborhoods, areas, or cities that meet your criteria and budget. Make a spreadsheet of the zip codes or neighborhoods you’re interested in and track:
- What homes are selling for
- What condition they’re in
- How fast they sell
- What features they have
- Square footage
- Price per square foot
- Anything else you think may influence the price or renovations needed
Analyze these findings and try to identify a pattern. Maybe you see homes for sale in one neighborhood going back on the market after nine months. You compare pictures from the first sale to the second and identify the renovations made. This can give you an idea of what home buyers are expecting and what price you can command.
Keep in mind that this research can be done online and in person. It can be beneficial to drive around neighborhoods to see what properties are for sale or coming soon and haven’t been listed online yet. Additionally, visiting open houses can show you what condition properties are in that are selling.
Lastly, have some patience and know that it may take time to find your perfect opportunity. You don’t want your first investment property purchase to leave a sour taste in your mouth. Too many investors get over their skis by jumping into an opportunity they didn’t correctly assess first. Instead, know that there will always be many opportunities down the road, and pick the ones that will yield the best returns for your time, effort, and money.
Ready to Buy Your First Investment Property?
Are you ready to buy your first investment property? At Park Place Finance, we help real estate investors fund their deals and close fast. Get started today and put your perfect real estate investment plan to work by contacting us at Park Place Finance.