The process that investors go through to find an investment property to purchase is called house hunting. This process involves a lot of considerations that should be on a real estate investor’s mind before making a final decision. House hunting is not easy when you factor in the property condition, price, location, and local competition. Buying an investment property has many short-term and long-term implications that range from rental income to renovation costs. This is why house hunting must be a logical process rather than an emotional appeal to a property.
Before you as a real estate investor are ready to jump into house hunting, you should understand well your personal situation financially, legally, and psychologically with regards to buying a rental property. The list of things that are needed to find the perfect house can be endless and may vary depending on the type of investor; however, it is important to establish a common foundation for every house hunting you will undertake.
Related: 5 Tips for Finding Real Estate Deals
Before You Start House Hunting
- Understand Your Credit Score: If you are relying on a mortgage to purchase an investment property, then it is highly advisable to sort out your credit score before getting started. Getting a pre-approval for a mortgage is incredibly important because it saves you time and gives you the chance to grab an opportunity as it comes. House hunting is a detailed process, which will make it harder to handle your credit situation simultaneously. One mistake many real estate investors make is that they go house hunting before knowing their credit score, and they apply for a mortgage for a particular property only to find out that they don’t qualify for it.
- Making a Budget: You also have to make a financial plan that specifies how much you as an investor are willing to pay for an income property depending on its specifications. Making a calculation that involves future mortgage payments that will be deducted from your monthly income is the smartest move to be prepared for the house hunting process. The budget gives you a clear indication when viewing potential investment properties to understand which one is within your budget and which one is too expensive. Budgeting your finances is considered as basic organizational skills.
- Making a List of What Is Needed: Having a list that clearly outlines your goals in real estate investing and what you need from an investment property is vital before starting house hunting. If you have a detailed checklist that clearly indicates that what is needed is X number of rooms or a certain neighborhood in order to maximize profit, then you should stick to that list. A list of the ideal features of the rental property is basically a guideline to save you time by not viewing properties that don’t have the specifications which you need.
- Choosing Your Preferred Location: As it is universally known, location is one of the most important factors to the success of investment properties. Before house hunting, an investor should have a clear idea and understanding about which locations are most profitable for an investment property. Sticking to these locations when looking for a property is the smartest strategy a real estate investor can adopt. If you are making an investment in a real estate property, then you might as well get one in a demanded location.
- Getting Rid of Emotions: House hunting for an investment property is entirely different from purchasing a home. When looking for a good investment property, it is important to understand that there can be no place for emotional attachment to properties. Removing that emotional attachment makes a real estate investor think logically and constructively about the best investment option that is best for him/her.
Following these criteria is extremely important in the house hunting process. Abiding by your own standard for each of these guidelines makes it incredibly easier when starting to look for an investment property; it saves you money, energy, and time.
Tips for House Hunting the Right Way
1. Hiring a Real Estate Agent
Getting professional help to assist the real estate investor in finding the best investment property is necessary nowadays, given the complexity in the real estate market. A real estate agent helps a real estate investor find the perfect rental property without taking much time and effort from the investor. While an investor might find many properties online and in adverts, a real estate agent has more connections in the market and therefore has more properties to show.
2. Don’t Go House Hunting Alone
It is always important to get a second opinion from someone you trust before making a decision on an investment property. A second opinion is important to help the real estate investor notice things that he/she can’t see. Since buying an income property is one of the most crucial decisions in real estate investing and there is no room for mistakes, you should always be open to asking questions and bringing in someone else to the viewing.
3. Don’t Rush into Decisions
Viewing a number of investment properties when house hunting is the norm. But just because an investor saw a huge number of properties, that does not automatically mean a decision has to be made. On the contrary, a decision must come only when you are satisfied with the income property from a financial, business, and personal point of view. Rushing into decisions will only make an investor lose money on the investment. Overpaying for properties because of competition, rushing to give an offer, and giving up on finding properties are the most common mistakes which real estate investors make when house hunting. Patience is a quality of a great real estate investor, rushing won’t help.
4. Consider Bank Foreclosed Properties
If you are looking for a great deal when house hunting for your investment property, then it is worth asking your real estate agent about bank foreclosed properties. A foreclosed property will usually have a lower price because of the situation in which it has been put on sale. Foreclosed properties become bank owned due to the inability of the owner to pay their mortgages for a long period of time. Banks or lenders put them on sale for a discounted price, which makes them an ideal investment opportunity.
To become an expert in house hunting for investment properties, a real estate investor must follow basic guidelines that will shape his/her organization and understanding of the process. There are of course other factors that have to be considered, but they are variable and depend on the situation of each investor. Making the right decisions and being prepared will surely save potential property owners much needed money, effort, and time which would otherwise be consumed in the house hunting process many go through.