Buying investment rentals is a major financial commitment. The process requires efficient planning, timing, and monetary spending. Sure, the purchase can initially be hefty on finances, but that doesn’t mean you can’t save money during the transaction. Today, we’re here to tell you how you can do just that: how to save money when buying investment rentals.
Costs of Buying an Investment Property
It’s no secret that buying an investment property is pricey. After all, there are many costs of buying a home or an investment property. Here are the most pertinent of these fees:
- Mortgage Payments
- Down Payment
- Interest Rates
- Closing Costs
- Property Taxes
- Real Estate Agent Fees
- Maintenance and Utilities
Fortunately, many of these costs, such as closing costs and down payment for investment property, can be reduced in various ways. Here are seven real estate tips for buyers on saving money when buying investment rentals.
1.) Start Saving Money Early
It’s easy to get caught up attempting to meticulously plan and save money when wanting to buy property. Before you do anything of that sort, just slow down. Start saving money little by little and eventually work your way up. Planning the purchase of investment rentals takes time, so once you have the idea of investing in real estate, start saving money, especially for the down payment for investment property. The most fundamental of the real estate tips for buyers is to save money through a savings account.
Note: As you start to save, it’s smart to also find ways to increase credit score and ways to eliminate any existing debt. This needs to be done in the early stages to ensure you can save money on mortgage costs later on.
Related: How Can You Improve Your Credit Score for Financing Investment Properties?
2.) Plan and Budget for Rental Property
Once you have saved up a considerable sum of money, found ways to increase credit score, and eliminated debt, you can begin planning a budget for rental property. This step is not a one-and-done deal. You’ll constantly have to reassess your budget and plan as you proceed with the purchasing process.
A good first step with planning and budgeting is figuring out how much you are willing to spend on investment rentals. You can conduct a property search using a heatmap analysis to get an idea of the market in the area of your choice. This tool can show you the range of prices of different neighborhoods to help you plan your budget realistically.
3.) Learn About Different Mortgage Lenders and Get Pre-Approved
Before you actively search for properties to buy real estate, you need to get pre-approved by mortgage lenders. The pre-approval letter will set the buyer’s budget. But of course, before you decide to get pre-approved, look for different mortgage lenders. Lenders may differ in mortgage rates and other requirements, such as a 6-months’ worth of savings in the bank account. Small community banks, in particular, are very helpful when wanting to buy real estate.
4.) Search for Affordable Investment Properties
Now that your investment property financing is set, you may begin searching for investment rentals. To save money on the purchase, be on the lookout for cheap houses for sale. Affordable investment properties will yield high cash flow when rented out properly. This will save and generate a lot of money.
The hunt for cheap real estate can be aided by real estate investment tools and/or a real estate agent. Mashvisor, for instance, provides a plethora of real estate investment tools to find cheap houses for sale. Mashvisor’s heatmap analysis allows you to scour for cheap real estate in any US market. The investment property calculator and Airbnb profit calculator compute costs of investment rentals. To learn more about Mashvisor’s tools and how they can enhance the search for affordable investment properties, click here!
Related: Here Are the 10 Most Affordable Real Estate Markets for 2019
The four previously mentioned real estate tips for buyers were sequential. The next three can be implemented at various steps, or as a replacement to some of the steps.
5.) Network and Partner with Real Estate Investors
Investment property financing tends to manifest as traditional mortgage loans, but it doesn’t have to necessarily. Instead, a real estate investor could partner up with different investors and come to an agreement on investment property financing. Networking with other investors is an excellent way to potentially save money, mainly in the short-term. The investors themselves formulate the terms of the investment property financing. This could result in some investors paying little-to-nothing initially but repaying more once they are able to.
6.) Consider an Owner-Occupied Mortgage
Another investment property financing alternative is to use an owner-occupied loan. Owner-occupied investment rentals, as the name suggests, are properties in which the owner is present. The owner must live in such a property for a year, and then it can be converted from a residence to a rental with no change to the original terms.
Why bother using an owner-occupied mortgage as opposed to a traditional investment property loan? The reason is that owner-occupied loans come with better terms. Credit standards, interest rates, and down payments, for instance, are lower with owner-occupied mortgages. As a result, investors could end up saving a lot of money on the property purchase.
7.) Negotiate Whenever Possible
The last tip, and arguably the most important, is negotiating whenever appropriate. No one should be spared from possible negotiations, whether they are the mortgage lenders, property sellers, or your real estate agent. Property prices of investment rentals, for example, can be negotiated with property sellers. Closing costs and interest rates can also be considerably reduced by negotiating with lenders. For more detail on how to negotiate to lower closing costs, check out the link below.
Related: How to Save Money: Negotiating and Reducing Real Estate Closing Costs
All in all, investors should do their best to save money when buying investment rentals. It is true that the properties will pay off and fatten an investor’s wallet, but it’s still smart to save money every step of the way. With the seven tips mentioned in this blog, you’ll be able to save big time.
For more real estate tips for buyers, click here to read the Mashvisor blog! Want to start your investment rentals search? Click here to start your 14-day free trial with Mashvisor’s investment property calculator!