So you want to start investing in real estate and you’re looking to buy your first investment property? As a first-time real estate investor, many will tell you that you must work with a realtor if you want to get the best deals. However, contrary to popular belief, buying a house without a realtor is entirely possible and can actually be a good move for property investors who know what they’re doing. In fact, about 10 to 15% of home sales in the US housing market are done without a realtor each year according to Bankrate. For those of you who are just getting started in real estate investing, this guide explains how to buy a house without a realtor step-by-step. So, keep reading to learn how to successfully close your first real estate investment deal by yourself!
Step 1: Get Pre-Approved for a Mortgage
You can skip this step if you’re planning on buying an investment property with cash. However, assuming you’re like most beginner real estate investors, you’re most likely looking to finance your investment with a mortgage loan. In this case, the first thing you need to do before anything else is get a pre-approval letter from your lender. This letter will reassure the seller that you can back up your offer and that you’re a serious buyer.
Before applying for a mortgage loan, determine how much you can afford. This mainly depends on your total monthly expenses and the expected income from the investment property. Since getting a mortgage means taking on significant debt, real estate investors need to make sure the debt is manageable. Thus, when shopping around for a mortgage, compare several offers to make sure you get the best deal.
In addition, your lender will provide a list of documents you need to get the pre-approval letter. Generally, real estate investors need to verify their income and debt obligations, provide at least 3 years of tax returns and 6 months of bank statements, and statements from any other investment accounts they have. There are also other requirements that are different from one state to another. Making sure you have the finances is the first step for how to buy a house without a realtor.
Step 2: Research Your Real Estate Market
One mistake that some first-time real estate investors do is make an offer on the first investment property they find. Take a step back and do your homework! First, start by understanding your housing market to see if it’s a good location for real estate investing. You want to find a neighborhood that offers profitable investment opportunities. There are certain characteristics found in the best places to invest in real estate like strong rental demand, low vacancy rate, growing population, and more! As you learn how to buy a house without a realtor, you also need to learn where to buy a house as an investment in 2019.
One of the best ways to know how investment properties in the city or neighborhood where you intend to invest in are performing is by understanding real estate comps (or comparable sales). Comps are the prices that similar houses in the area were sold for. By analyzing comparable sales, the real estate investor gets an understanding of how the area is performing in terms of real estate value. What’s more is that by checking real estate comps, you make sure that the property you’re interested in is not over-priced!
Some will argue that it’s hard to find comparable sales on your own and that you’ll need a realtor’s help. That’s not true! There are a number of ways to find comps online. Take Mashvisor for example – you can easily pull up real estate comps in the area of your choice after finding an investment property using our platform. To learn more about how we will help you make faster and smarter real estate investment decisions, click here.
Step 3: Find Investment Properties for Sale
After completing the first 2 steps of how to buy a house without a realtor, you can move on to the next step which is looking for investment properties for sale. First, you need to have criteria of what type of property you’re looking for (single-family home, duplex, triplex, etc.). Other things to include in your criteria are the property’s size, the number of bedrooms and bathrooms and, of course, purchase price. Establishing your criteria before you start searching for homes for sale will help you narrow down your options.
As for how to find investment properties, it’s possible to start by driving through neighborhoods or reading the classifieds in your local paper. However, why stick to traditional ways when technology has made it much easier. We’re talking about real estate websites that provide real estate investors with innovative tools to find investment properties for sale faster and without leaving the comfort of their home. If you’re wondering where to find these tools, you’ve come to the right place.
Mashvisor helps experienced and first-time property investors find the best real estate opportunities with a number of tools, one of which is the Property Finder. With this tool, you can customize your criteria by using filters. These include your city/cities of choice, budget, property type, rental strategy, and the number of bedrooms and bathrooms. Mashvisor will then immediately show you a list of homes for sale that best matches your criteria. The investment properties will also be the ones with the highest cash on cash return in the market/s of your choice.
The Property Finder is one tool for all real estate investors looking for an answer to how to buy a house without a realtor. Click here to test it out for yourself and find properties in a matter of minutes!
Step 4: Analyze the Profitability of Investment Properties
One thing that beginner property investors must know before buying a house without a realtor is that the success of a real estate investment depends on the numbers behind a deal. Doing the proper math is one thing you have to do before making an offer – whether or not you’re working with a realtor. In any housing market, investment properties have different profitability. So, once you find a number of houses for sale, the next step is to do some calculations to identify the best one that is worth investing in.
The main metrics involved in the investment property analysis are cash flow, cap rate, cash on cash return, and occupancy rate. Basically, you need to calculate these real estate metrics to analyze potential profits and return on investment from buying the property. If you’re not familiar with these calculations, go to our real estate investment blog to learn all about them and further understand how to buy a house without a realtor.
Worried about not getting correct estimations or simply looking for an easier way to analyze properties while buying a house without a realtor? Luckily for you, the Investment Property Calculator is here to help. This tool provides readily calculated data and analytics for investment properties that are currently listed for sale in any city of the US housing market. Moreover, you can plug in your financing details and expenses related to buying the property and the calculator will crunch the numbers to give you the aforementioned metrics and more!
Real estate investors can easily analyze and compare a number of properties using this tool to find the one with the highest profitability! Start out your 14-day free trial with Mashvisor now to give it a try.
Step 5: Make an Offer and Negotiate
If you find a house that will make for a profitable real estate investment, now it’s time to make an offer. In this step of how to buy a house without a realtor, you need to remember that this is a business decision. So, the number you offer has to work for you but also be reasonable. If you followed the above steps and analyzed comparable sales, you should have a good idea of what offer to make that makes sense. Also, the seller pays commissions to both the seller’s and buyer’s agent. So make sure to state in your offer that you’re offering less than the listing price as the seller won’t need to pay the buyer’s agent’s share of the commission.
The seller may accept your offer, but typically they’ll have a counteroffer especially if your offer was below the asking price. Here, you’ve reached the point where you need to negotiate. This is why every real estate investor buying property without a realtor needs to have negotiation skills. Without it, you may end up getting less than you want or giving up on a good deal. So, prepare yourself to justify your offer by providing comps, but also be willing to compromise.
Here are our top 8 Negotiation Tips for Buying an Investment Property to help you with this step!
Step 6: Hire a Home Inspector
After negotiating and finalizing the offer, the next step of how to buy a house without a realtor is to get the property inspected. Usually, the realtor will choose an inspector for you. But since you’re buying a property without a realtor, you’ll need to hire one on your own. The inspector will carefully examine the interior and exterior of the house to identify any problems that you need to be aware of before closing. You can ask the listing agent if they have any recommendations – some will be happy to go the extra mile to close the deal, while others may demand compensation.
Step 7: Close the Deal With an Attorney
You’ve finally made it to the last step of how to buy a house without a realtor. When closing the deal, it’s important that you work with a real estate attorney. This is because closing home purchases involves plenty of paperwork and because this is a big financial transaction, you want to ensure you’ve got all the details down. So, while you can forgo a realtor for buying an investment property, you should still hire an attorney to handle this step of the process.
A real estate attorney will review all contracts, forms, and other necessary legal documents. Moreover, by hiring an attorney, you’ll be represented by somebody who truly has your best interest in mind. This is because attorneys are not paid based on the sale price of the house, meaning they don’t have a reason to get you to agree to a higher sales price. A real estate investor may have to spend a few hundred dollars to retain a good attorney, but it makes all the sense in the world. Finally, you and your attorney will meet with the seller and their attorney to sign all paperwork and close on the house.
The Bottom Line
The answer to how to buy a house without a realtor is exactly what you’d expect: you’re responsible for everything from researching the housing market, to finding properties and negotiating deals. As you can see, buying an investment property is a lengthy process. However, with the help of Mashvisor’s real estate investment tools, you can move through the process much faster with the assurance that you’re buying a profitable property.