If you are considering investing in real estate, then your first challenge is buying your first investment property. Keep reading to learn the process of purchasing an investment property.
Though it is an easy procedure, many real estate investors make dreadful mistakes which lead to their failure. Therefore, Mashvisor will make sure to teach you about buying your first investment property step by step. In this blog, we will be talking about the procedure that you should follow as well as the mistakes that you should avoid making.
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Buying your first investment property: Do you have what it takes?
Before taking the first physical steps toward buying your first investment property, you have to decide whether you have what it takes. You cannot expect to start an investment business in any field without sacrificing some things in return. Understand that investing in real estate requires time, effort, commitment, and management. You also need to have some patience since it takes time to get to your goals.
Another thing to consider is getting the right education. You should at least learn the basics since you are going to need them while going through the process of buying your first investment property. Now, if you think that you have what it takes, continue reading the article.
Buying your first investment property: Take a look at your finances
When it comes to buying your first investment property, no doubt you need money. However, this does not mean that if you do not have the money to pay in cash, you can’t invest. Surely, there are plenty of ways to go about financing an investment property. You can choose to apply for a mortgage, or you can even borrow the money from a relative or a friend. Whatever you do, make sure to have a plan for repayment.
Buying your first investment property: Choose the right investment property type
Now that you have decided on your finances, choose the property type you want to invest in. There are quite a few types of investment properties you can choose from. First of all, decide whether you want to go with commercial or residential real estate investments. Then decide on the type that suits your time and goals.
Choosing the right property for real estate investments depends on many factors. Ask yourself how big you want to start. Are you willing to manage multiple housing units at once? Or do you prefer to start with a single housing unit and grow gradually from there?
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Buying your first investment property: Put your investment plan together
After looking at your finances and choosing the right property type for you, create a business plan. Your business plan should have the above in full detail. It will be your guide throughout the procedure. Make sure to stick to the plan as much as possible. Your plan should also have an exit strategy for you in case something occurs unexpectedly.
Buying your first investment property: Look for investment properties for sale
You can look for investment properties for sale in newspapers, internet ads, or property listing websites. You can use Mashvisor for this purpose as well. We have listings for great investment properties for sale which you can look at. Just remember, you will have to look at dozens of investment properties until you find the one. So, be patient.
Buying your first investment property: Choose the right location
We cannot stress enough how important the location is when buying your first investment property. As a beginner real estate investor, we recommend that you look for investment properties within your local area. It will be easier for you to manage and learn the local housing market, at least in the very beginning.
Buying your first investment property: Do proper calculations
There are certain formulas you need to learn in order to buy the best investment property. Learn to perform real estate market analysis as well as investment property analysis. You must know that they both come with important real estate metrics such as cap rate, cash flow, cash on cash return, and so on. Do the math properly, and it will save you a whole lot further in your real estate investments.
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Buying your first investment property: Hire a real estate agent
A real estate agent is a professional with experience in buying and selling investment properties. Make sure to hire one for he/she will help you with the process. Real estate professionals know exactly what to look for in an investment property, therefore, you won’t need to stress over it. You can even hire a realtor who is a member of the NAR (National Association of Realtors). The only difference is that realtors are committed to a code of ethics. Either way, an agent or a realtor is a must, so do not skip this one.
Buying your first investment property: Avoid making the following mistakes
When buying your first investment property, you must avoid expensive properties. The last thing you want is getting stuck with an investment property that no one can afford, even you! As a beginner real estate investor, it wouldn’t be wise to start an investment business with a luxurious property. You want to look for something that is affordable for you and for others to purchase or rent. You can go to more expensive properties when you have the right experience. But for the time being, you want to start small.
Another mistake you want to avoid is buying an investment property out of your area. For new real estate investors, it is recommended that they start locally. Only when you are confident enough, you can buy investment properties out of your local area.
After all that we mentioned, what we are really saying is that you should play it safe when buying your first investment property. Use Mashvisor as a guide and learn what it takes to become a successful real estate investor.