Considering to enter the world of real estate investing through buying property for investment purposes? Well, that is a clever way of thinking! However, you should know how to buy investment property in order to make money in the real estate investing business. In an ideal world, you do not need real estate education. You simply know how to invest in real estate and how to buy income property that will generate huge profits. Well, in real life everything is different.
The process of success begins with buying property for investment purposes. At this stage, many investors struggle with financing options and many have questions, such as: “How to borrow money for investment property?”, “How to buy investment property with little money?” or maybe they simply ask: “How to buy investment property in order not to end up with a bad investment?”
Luckily, you are in the right place! We will explain how to buy investment property and how to get an investment loan. We will also talk about a mortgage loan for investment property. Keep on reading in order to know how to buy investment property.
PS: Skipping any of the steps is the example of how not to buy investment property.
#1 How to Buy Investment Property Step One: Having an Appropriate Real Estate Education
In order to know how to buy investment property, a real estate investor should have certain skills and knowledge about the real estate market. All the regulations, as well as investment tools, are changing constantly. Thus, in order to become the best house investor, you should work hard to have an appropriate real estate education. Below are mentioned some of the important aspects of a real estate education which you should keep in mind:
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Real Estate Investment Network
One of the advantages of a real estate investment network is that you can learn about smart real estate investments from other real estate professionals. The general idea of a real estate investment network is to share knowledge as well as experience. When having a wide network you can easily find out “how to invest in real estate” and “where to invest in real estate” by just consulting with experts in the field of smart real estate investments. Moreover, you can get better insights about the best real estate investments, optimal rental strategy, etc. Besides, you can find out how to buy investment property in the best possible way. Want to learn more about the advantages of a real estate investing network? Make sure to read “The 4 Most Important Uses of Real Estate Network.”
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The Must-Have Real Estate Investment Tools
In order to invest in only the best real estate investments, you need to be aware of the most common real estate investment tools that are used by successful investors. Knowing which the must-have real estate investments tools are is not enough. You should understand how to use them as well. If you take certain real estate classes, you will not only find out which investment tools to use when and how, but you might also have the opportunity to access them freely. As some of the tools might be pricey, this is a great benefit.
#2 How to Buy Investment Property Step Two: Financing an Investment Property
When you have selected the best places to invest in real estate, it all comes down to the question: “How to get an investment loan?” Well, a house investor should check his/her budget as well as credit history first. This has a direct influence on the type of mortgage loan for investment property he/she may apply for.
There is a difference when you wonder: “How to borrow money for investment property” and “How to buy investment property with little money.” Let’s explore both situations.
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How to Borrow Money for Investment Property
Once a house investor has found where to buy income property, the next step is to find the money. In many cases, the investor goes to the bank to apply for a mortgage loan for investment property. However, you should know in advance that your credit history will be checked and you will need to pay a 20% down payment. Finally, be prepared as the whole procedure will take several months. However, in order to speed up the procedures, you may hire a real estate agent, as he/she knows how to get an investment loan the most efficient way. Curious to learn more about the role of a real estate agent? Make sure to read “Do You Need to Find a Real Estate Agent to Sell Investment Property?”
Another one of the most common ways to borrow money is to find a private lender. Private lenders might be your friends and/or relatives. The main advantage is that you will not be charged with a high interest rate. Nevertheless, make sure to return their money on the agreed date.
Another type of mortgage loan for investment property is a hard money loan. This type of loan better fits the fix-and-flip approach as interest rates are high and it is better to return the money as soon as possible.
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How to Buy Investment Property with Little Money
You have all the chances to purchase a property when you have just a little money. All you need to do is to find how to invest in real estate in such a case. A great idea is to buy a property together with another real estate investor. This is called a real estate partnership. This way you need less money as the costs for the property are shared. Additionally, by sharing, you also decrease the personal risk associated with the investment. It is advisable, however, that you find somebody who has your business vision and is reliable and hard-working.
#3 How to Buy Investment Property Step Three: Performing Real Estate Market Analysis
Before financing a real estate property, a house investor should perform a real estate market analysis. Real estate market analysis explores the current condition of the local housing market – buyer’s market or seller’s market. Moreover, real estate market analysis takes into consideration the supply and demand of investment properties in the particular neighborhood. Furthermore, this analysis assesses the value of the property from the market value of recently sold real estate comps. Performing this analysis is crucial when buying property for investment purposes in order not to overpay for it. Curious to learn more about the buyer’s market and seller’s market? Make sure to read “Is It a Buyer’s Market or Seller’s Market?”
#4 How to Buy Investment Property Step Four: Conducting Investment Property Analysis
The next step a real estate investor should take after analyzing the local market and determining if it’s a seller’s market or a buyer’s market is to perform an investment property analysis. In the real estate investing business, you cannot succeed without performing investment property analysis. This type of analysis helps the real estate investor in finding the best real estate investments. Moreover, it answers one of the main questions: “Where to buy income property?”
However, doing the investment property analysis might be challenging as there is a chance of making a mistake in one of the numerous necessary calculations. Therefore, you may end up with an investment that has no potential to succeed. Make sure to use a rental property calculator. In particular, Mashvisor’s rental property calculator may help you a lot! This tool falls into the category of must-have real estate investment tools, but why? Well, this tool calculates various real estate metrics and provides quick and accurate results that help you to invest only in smart real estate investments. Small secret: working with Mashvisor’s rental property calculator is much cheaper than paying a real estate agent for his/her service.
#5 How to Buy Investment Property Step Five: Choosing the Optimal Rental Strategy
In the real estate investing business, one factor that determines the profitability of the property is the real estate investment strategy. When dealing with rental properties, a real estate investor has a choice between a short term real estate investment strategy or a long term real estate investment strategy. How to choose the optimal rental strategy? With Mashvisor’s rental property calculator, it is easy! All the data provided by Mashvisor’s rental property calculator is divided into two categories: traditional and Airbnb data. According to the house investor’s selected neighborhood and investment property, Mashvisor’s tool will present you with the optimal rental strategy.
#6 How to Buy Investment Property Step Six: How to Buy Investment Property Under LLC?
What is an LLC and how to buy investment property under LLC? Well, LLC stands for Limited Liability Company. This is a type of entity that can protect the owner’s personal assets from business assets, like when you are running a rental property business. All you need to do is to register your business as an LLC in order for your personal assets to become untouchable.
To learn more about the best places to invest in real estate, continue reading our blog.