When searching for a home as an investor, you have to ask yourself if you are investing for an immediate profit or to build financial security for the long run. It is my advice to purchase investment properties for the long run. In today's market it is not as easy to flip a home as it was a couple of years ago. Even if you are in a hot area, houses are sitting on the market a little longer than normal which eats away at your profits.
What ever your goal is with investing, here are some things to consider:
- Location-Location can make a difference in picking your investment property. If the area is already popping with investment activity, you might not get a good deal when purchasing the home. Even the worst home will not be a good price. If the home is on the outskirts of the popular area, you may get a good deal on the purchase, but also have a hard time flipping because the crowd has made it that far yet.
- Inspect the property-For a first time investor, be careful not to take on too much renovating on your first property. If you are purchasing a foreclosed/bank owned property, you are buying that home "AS IS". For your first property, may I suggest, find a property where one or two things needs to be updated/renovated and everything else could use a good cleaning and painting. If you start off with too much too soon, you can run the risk of being overwhelmed or underestimating the costs causing you to run out of money before the job is complete. It's good to pay an inspector during this process. He can see things you may can not.
- Price-As mentioned above, location has to do with price, but also the condition of the home plays a huge part in what you want to offer for the home. Before you begin to negotiate you would want to do your due diligence to have a realistic figure of the renovations needed. You want analyze the price of the home, the price for renovating, and what it could sell for after renovation. This is your first sign if this home will make a profit or not. You would need to figure out this before you make your offer.
- Know your area-As much as I love Granite counter tops, they are not suitable in every home. You want to pick materials that fit the neighborhood and the buyers/renters in that neighborhood. Where as Granite is suitable in some areas, Laminate works in others. Preview homes in the area you want to invest, so you can get an idea of what renovations will be beneficial to your bottom line.
- Don't get emotional-When you are investing, you are running a business. You are cleaning, fixing, replacing, and upgrading your investment to profit from it. If you let your emotions get out of control, you risks making bad decisions that can cost you lost of money.
- Get help-When you strike out to find your first deal, take an experience real estate agent with you. Since you are a buyer, his/her service is free anyway. They can negotiate the deal and give you advice about the area to help with your decision.
Investing in real estate can still be very rewarding adventure. Like with all investments you have to be careful. With all the T.V. shows talking about flipping, it leads people to believe that flipping a property is easy. It's not easy. It's risky. While the rewards are sometime worth the risks, you can lose your shirt if you don't do your homework first.
The best form of investing is long term investing. Finding investment properties to produce income over a period of time will add up to just at much as if you were to flip the property. You just have to be patient.
Until we meet again...