Investing in real estate has an everlasting appeal. As opposed to investing in stocks and shares, you can actually see the fruits of your labor, instead of just the balance on your bank account. The whole process seems rather straightforward: you see something you like, do some research, apply for a loan, and later the property will pay itself off.
However, once you start digging, it’s only too easy to get overwhelmed with all the information coming your way. With the purpose of helping you and establishing some kind of order,
Here are 5 Essential Steps to Take.
Even before you decide on a particular property, it’s always advisable to get pre-approved for a loan. There are several pretty good reasons for this. First of all, it will help you stand out among the competition. If there are several people bidding for a particular house, you will definitely appear more reliable and serious if you have already prepared a document stating your financial credibility.
Secondly, when you consult with your loan specialist about the pre-approval, this will help immensely in determining your basic goals and your abilities to meet them. You have to define the exact price range, set the mortgage, define the payments, and most importantly, realize your financial boundaries.
Get a Property Report
Having established how much you can spend on the purchase, you can start looking for the perfect property to buy. There are several ways you can go about it. You can hire an agent, get a recommendation, contact an investor, but the bottom line is this. Once you have found it, order a property report for the place. The property report is simply invaluable when investing in real estate. This document provides in-depth insight into the house of flat you have set your mind to.
For instance, it gives you information about the local market statistics – the prices in the area, whether it’s a good moment for the purchase, and so on. You will know everything there is about the property history. Also, there is the neighborhood demographics, list of nearby facilities, and sometimes even parents’ reviews of the schools in the area. As you can see, a property report provides the big picture and lots of essential details a rookie investor can easily oversee. It will make you define the primary goal, too – are you going to sell the property, or are you planning on renting it? These are meant for two completely different markets.
Study the Vocabulary
Unless your current occupation already involves real estate and investments, there are plenty of phrases which may baffle you, and you’ll be hearing about from your agent, loan specialist, accountant, lawyer and others. Even if you’re not keen on studying, now would be a good time to sit down and remember the all the acronyms and big words. For instance, you must know about REI, NOI, PITI, GOI, LTV, the cap, leverage, amortization, appreciation,and so on. Of course, you are always to ask for clarification – this is no time to just nod politely, let alone sign a document without understanding every single word of it.
Hire the Professionals
Even though there are plenty of success stories out there about ordinary people who were able to fix and flip old properties, the truth is they didn’t do it by themselves. Despite the fact they stand in the spotlight alone, the truth is there is a whole team of professionals behind them.
If you feel like you have too many obligations to cover, this is because you have decided to do everything on your own, and it is simply impossible. Jack of all trades is a master of none, so feel free to hire a good financial planner, lawyer, loan specialist and an accountant besides your estate agent. This is what all successful real estate investors are doing; it’s just that they leave out mentioning them and take all the glory. If the property you are purchasing requires any renovation works, now is also a good time to source any builders, carpenters, roofing contractors, or any other tradesmen who can turn your property into the home of your dreams. You’ll also want to be careful of the ‘buy my house’ scams.
Know the Costs
The price of the desired property is just the tip of an iceberg. The above mentioned professionals are going to make you aware there is a whole plethora of other expenses to look out for. Try to determine how much it costs to operate the building, and whether you are willing to invest more. Also, don’t forget about the maintenance. It can be a long time before you find suitable tenants, or potential buyers. In the meantime, you’ll have utility costs to cover. Not to mention the insurance, too. Those looking to venture into property development should be aware of the real estate developer insurance rates available to protect themselves against any potential unforeseen eventualities.
If this is your first time with this kind of adventure, fear not. Every beginning is tough, and these suggestions involve lots of steps to be done before you can check them as completed tasks. Patience is the key, as you have heard it so many times before. Therefore, take your time, and eventually it will all pay off.
Sofia is a passionate writer from Sydney. She also enjoys decorating houses and engaging in home renovation projects. That is why she loves sharing her experience and advice with other people through her writing. Besides this, she loves technology and gadgets which can help us get through a busy workday.