1. |
Do research on the local real estate market. Determine market value trends, employment strength and future economic trends and average rents now being paid. This information can easily be obtained from the local newspaper, Chamber of Commerce and various local business publications. |
2. |
Network throughout the community. People sell homes for many reasons and effective networking with current owners, landlords and business people will often turn up hidden gems. Keep in mind that one of the most important factors in buying real estate is "buying at the right price". Much of the gain you will realize over the life of your investment will be dependent on paying the right price going in, not overpaying. |
3. |
Determine how long you intend to own the property. Long term ownership is always preferable because over the long term you will be less affected by market price swings, etc. Long term also gives you the best opportunity for overall price appreciation. |
4. |
From your research, determine what is the realistic rent you can expect to receive. After this, factor in your anticipated expenses such as property tax, hazard insurance, general upkeep and your mortgage payments. This will give you a clear picture of anticipated cash flow. |
5. |
Determine if you will act as landlord or if you will use a professional property management company. The 7% to 10% of monthly gross rent a property management firm usually charges can make your investment ownership run much more smoothly. If you do use a management firm you will have to add that fee into your monthly overhead. |
6. |
Very important! Find the financing program that fits your particular set of circumstances best. This will mean that your loan officer takes into consideration your anticipated cash flow, intended length of ownership and how flexible you would like your payments. There is no cookie cutter approach to finding the best loan. It will take work on the part of your loan officer to locate the financing program that will make your investment a success. There is no magic about it. Following these six steps can put you on track to increase your net worth with investment real estate. |
