Every investment involves some level of risk, but along with those risks, there should be a possibility of success. What can you do to minimize the risks associated with real estate investing while increasing your chances of success? How do you prevent losing money when purchasing your first property as a real estate investor? What advice and tactics can you gather from other real estate investors who have gone before you?
This article outlines seven tried-and-true steps to ensure you choose wisely when buying your first investment property. You can avoid making the most common errors made by new investors, and you’ll have a better understanding of the investment process after completing these steps.
1. Understand the math of real estate investing
Established investors only care about the numbers, while new investors frequently approach a potential deal from the perspective of the property’s aesthetics. The most reliable way to assess the viability of an investment property is to be able to analyze the numbers.
A real estate investor must possess this ability above all others. It is possible to forecast how an investment will perform using metrics such as the property’s water bill, energy cost, rental rate, and other numbers. Being able to analyze numbers will assist you in finding excellent deals.
2. Educate yourself
Many new investors don’t receive the training they need before making their first real estate investment. Choosing the best source to acquire any education is the first step in the process. You cannot expect success by obtaining your ideas from non-investors or unsuccessful investors.
Knowing your path is essential for being a successful investor. This entails comprehending the various real estate investment options, determining which one is best for you, and selecting a real estate investing strategy. Online forums for property investors, real estate podcasts, and even some websites for property management are excellent resources for this education.
3. Practice, practice, practice
It’s not enough to know what numbers to look for in a potential deal; you also need to understand how those numbers will affect how well your investment property performs. You don’t want to wait until you buy your first home to learn this; you might be too late.
Analyzing one real estate transaction daily is a great practice exercise for learning. This has nothing to do with purchasing; rather, it is about comprehending every facet of bargain hunting. Online research for studying deals can be done in less than two hours.
4. Find a good realtor
You shouldn’t spend the majority of your day as an investor looking for deals. You want to get in touch with someone who has a system and network for finding good prices. That person is a real estate agent, and you can avoid a lot of hassle by hiring one who is knowledgeable about the neighborhood.
Ideally, you want the agent to regularly contact you about available properties that fit your investment criteria. Analyze the numbers for each property and search for the one feature that makes it a wise investment. Repeat this process until you master it and are successful in finding a great deal.
5. Get pre-approved by a lender
Obtaining lender qualification will enable you to determine whether you are eligible for a loan to purchase the property and the amount the bank or lender is willing to offer you. You will find out about lenders’ products for new investors like you when you approach them.
If your loan application is denied, you will learn what you did wrong and what you need to change to strengthen your financial position. This will also assist you in looking into non-conventional mortgage financing options. An advantage exists for preapproved buyers when negotiating with sellers.
6. Begin making offers
You are almost ready if you are familiar with the figures required to analyze an investment property, have been looking into at least one property every day, and have secured financing. Make offers on the best properties you find to take it a step further.
Making an offer is the only way to find out if a property is a good deal. This is how you can determine how low a seller is willing to go and whether they are motivated to do so in order to turn a good deal into a fantastic opportunity.
7. Stay sharp!
How do you accomplish this? By paying attention to those who are more experienced than you are and asking your mentor for a second opinion on any deals you are considering. Spend time with those who will improve you and keep performing the actions listed above until they come naturally.
These pointers ought to provide you with enough inspiration to make sure you successfully purchase your first investment property.
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