Investing your money in the real estate business is probably one of the best financial decisions you could make in 2021. When done using the right real estate tips, buying investment property yields many important benefits such as passive income, positive cash flow, asset appreciation, tax deductions, building equity, and investment portfolio diversification. On the other hand, venturing into the real estate business without doing your research could result in significant losses.
Whether you are planning to buy condos, single family homes, apartments, or multifamily homes for sale, this post will provide you with real estate tips and tricks that will enhance your chances of success in this endeavor in 2021.
To learn the best 10 real estate investing tips for 2021, you can also watch our video belowopen:
Top 10 home buying tips in 2021
Buying a home can be a very nerve-wracking experience, especially for first-time real estate investors. The following real estate tips will come in handy when buying income property:
1. Count the cost
Besides the down payment and the monthly mortgage payments, there are other costs associated with buying and owning rental homes. These include closing costs, renovation costs, HOA fees, insurance, and property taxes, to name a few. Before buying rental property, do the math to find out how much house you can afford. You can use one of the home affordability calculators available online to crunch these numbers. Ideally, your monthly housing costs should not exceed 25% of your monthly take-home income.
2. Check and build your credit
With a good credit score, you will qualify for a mortgage and pay a lower interest rate. To build your credit score, you should first get a free credit report from TransUnion, Equifax, or Experian. Meanwhile, make sure to check for any errors that could be having a negative effect on your score. Keep your credit card balances low and pay all your bills on time. Monitor your credit score consistently to see if there is any progress.
3. Explore mortgage options
A wide range of loans are available with varying eligibility requirements and down payment sizes. You can choose between a conventional mortgage, a USDA loan, an FHA loan, a private money loan, a hard money loan, and a home equity loan. You can also choose a mortgage term that suits you. Most property buyers opt for a 15-year or 30-year fixed rate mortgage. But choosing the real estate investment loans that fit your particular financial situation is one of the best real estate tips you can get in 2021.
Related: 6 Types of Investment Property Loans for 2021
4. Get pre-qualified for a loan
Many home sellers will want to see a loan pre-approval letter before they start negotiating with a buyer. Therefore, getting pre-approved for a loan will give you an edge when bidding for property. A mortgage pre-approval basically shows how much money a potential buyer can borrow. To get pre-approved for a loan, you will require proof of income, proof of assets, a good credit score, and employment verification. Identification documents like your US passport, driver’s license, or social security number might also be required. Pre-approval letters usually expire within 60-90 days.
5. Hire a real estate agent
This is one of the most important real estate tips when buying a home. Though it is possible to buy an income property for sale on your own, it would be safer to hire a licensed real estate agent. An agent can give you access to listings directly from the multiple listing service (MLS) that fit your criteria. Agents are also usually aware of off market properties for sale that have not hit the market. Finally, your agent will come in handy during the negotiation and closing stages of the transaction. You can find the top real estate agents in your area by attending open houses, checking neighborhood signs, asking real estate professionals for recommendations, or searching online for agent listings.
Related: 10 Benefits of Hiring a Real Estate Agent
6. Research neighborhoods
Neighborhood research will show you whether buying investment property in a specific area is viable or not. The first thing you need to do is to check the return on investment data of the neighborhood using real estate investment tools. In 2021 the best tool for this is Mashvisor’s real estate heatmap which helps you analyze real estate markets based on listing price, rental income, cash on cash return, and Airbnb occupancy rate.
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Neighborhood analysis should also involve checking other factors like the crime rate, walkability, access to amenities, local taxes, and future developments in the area. All these factors will help you make a wise real estate investing decision.
7. Find a home for sale
Once you’ve spotted a potentially profitable neighborhood, start looking for the best real estate for sale. Real estate tips for finding property include checking newspapers, attending real estate auctions, working with agents, consulting wholesalers, checking real estate websites, or even driving for dollars around the neighborhood. Alternatively, you can find a wide array of off market properties on the Mashvisor Property Marketplace. On this platform, you will find short sales, foreclosures, bank owned homes, and tenant occupied rentals. Using the inbuilt cash on cash return calculator, you can analyze the properties based on cap rate, cash on cash return, and cash flow. If you find something you like, you can contact homeowners directly on the platform and start negotiating.
To learn more about how Mashvisor can help you find profitable investment properties, schedule a demo.
8. Take advantage of open houses
Due to the Coronavirus pandemic, online house tours have become increasingly popular. Such tours allow potential buyers to virtually walk through a property at any time and observe every aspect. However, since virtual tours don’t provide all the information you need, an in-person tour is advisable. When at the house, pay attention to any smells, listen for noise, and check the overall condition of the home.
9. Make a competitive offer
Deciding how much to offer for a home can be difficult, especially for a first-time home buyer. This is where you need to leverage the experience of your real estate agent. The agent will help you make an offer that is not only competitive, but also within the home’s fair market value and your budget. Make an emotional connection with the seller by writing a letter explaining why you love the property. Be willing to waive some contingencies to make your offer appealing. Show your seriousness by putting down a large earnest money deposit.
10. Get ready for closing
The closing process starts the moment a seller accepts your offer. At this stage, you might need to hire a real estate attorney to help with the complex legal paperwork. In addition, you should conduct a thorough home inspection to check things like the plumbing, electrical features, heating and cooling systems, and structural elements. If the inspection reveals any serious problems, renegotiate the offer with the seller. The home owner can either pay for the required repairs or lower the selling price. Before the closing date, it would be wise to conduct one final walkthrough of the home. On the day of closing, you will sign the paperwork, make final payments, and become the official owner of the rental property.
Related: What Happens at a Real Estate Closing?
The 10 real estate tips in you need in 2021: Conclusion
Anyone can learn how to buy real estate. With these real estate tips for buying a house in 2021, you will avoid the common pitfalls and boost the chances of getting a good deal. Don’t forget to stay abreast of real estate trends by watching the news and reading real estate blogs. Finally, be sure to use the best real estate investment software tools of this year to conduct diligent real estate market analysis and rental property analysis.
Meanwhile, if you’re thinking of selling your investment property this year, find out the best real estate tips for sellers in 2021.
To get access to our real estate investment tools, click here to sign up for Mashvisor today and enjoy 15% off.