Buying Your First Investment Property (Part 1 of a Series)

 

So you want to buy your first investment property. You’ve looked at the market as best you can. You may have gone to real estate seminars. You’ve even likely bought expensive books and / or CDs trying to “strike it rich in real estate”. Now you are looking to find and complete your first deal. According to the National Association of REALTORS, investment and / or vacation homes accounted for 4 out of 10 homes sold in 2005.

 

Now where do you go? What do you do? How can you KNOW that you are getting a “killer” deal on the real estate that you invest in? The most dangerous deals for real estate investors are their first few. They don’t have the experience to avoid the little things that can really take a deal from “killer” for you to “killer” to you! Here are some suggestions to make that first deal easier and to avoid the pitfalls that cost you money. Great real estate investors develop systems to pick up numerous “good deals” over time and get only an occasional “great” deal. By working this way they also avoid the REALLY bad deals that some people run into trying to pursue a “great” deal.

 

Suggestion #1: Work with a REALTOR who specializes in investments and bank owned properties. He or she will have a MUCH better idea of the local investment market and will have a NUMBER of properties listed at any given time. Many of these folks have been in the business for years and have “seen it all”. For at least your first few deals, it is VERY IMPORTANT to get some profitable transactions under your belt so that you can build up enough reserves to handle the occasional bad deal. (They happen to everyone!)

 

Suggestion #2: Information is king. Before making that first investment, find out (in your area) how the “pro’s” get their information. With more and more courthouses having information available to the public online this is getting easier every day. The REALTOR from suggestion #1 will know HOW to find the information. Ask them about what sites to visit. In many areas HUD homes, tax rolls, courthouse records, mortgage information, Notices of Default, and many other records are available right online.

 

Suggestion #3: Get proof of funds from your banker. Most of the bank owned properties out there will have a requirement that you not only are “pre-qualified”, but you are “pre-approved” and that they will loan you the money for a property promptly once you find it. This is easier than it sounds – and think about it. If you go to your local bank to get it, why not ask them if they have any real estate that they are looking to off load while you are there? When you have this step taken care of, you can negotiate more effectively since you can close quickly and easily when you find the right deal.

 

Final thought: Many times real estate investors are anxious to make money by cutting out the “middle men”. I have watched this play out many times at my real estate office. It is a natural thing to try and make money at every corner. In the real estate market, often times the better deals are done with and through the real estate brokers. There is a common myth that they grab all the good deals.