This is a very important first step that should not be over looked when you decided to buy a rental property. It’s easy to just call a realtor and go looking at homes.
Doing Research beforehand is critical so you have the knowledge needed to make an educated decision:
• First: Speak with a lender to get qualified so you know how much you can afford.
• Second: research the area, Schools, Neighborhoods, market trends, rental rates ect:
• Third: What kind or return are you looking for? monthly cash flow or long term equity gains.
• Forth: Property Management & Real Estate agents. Who can help you meet your goals.
Gathering the Knowledge needed beforehand can be hard since you don’t know all the questions. Picking the right property management company and real estate agent is critical to helping you answer those questions and ask the questions you don’t know to ask.
You have done your research. You need to write down what you are looking for and wanting out of your investment. By writing it down to have a guide to go back to and review so you don’t lose sight of your goals.
Picking a lender and getting qualify first if one of the biggest steps to buying a home. A mistake a lot of people make is they start shopping for a home before talking to a lender. Speak with a lender first so they can tell you how much you can qualify for. They can also help you with any potential pit falls to overcome. There are many different types of loan programs and they can help you with choosing the right one to fit your need and goals.
Finding your first Property
Now it’s time to find a property. Finding an agent who has the knowledge and back ground in rental properties and working with investors is a big advantage to have. They can guild you in making the right choice. Be sure to talk with them and let them know up front what you are looking for out of your investment.
When find the property that fits your needs and what to make an offer, your real estate agent can write up the contract and structure the offer to fit your criteria’s. Once it is signed your agent can present it to the selling agent. The selling agent will present your offer to the seller and begin negotiations.
Things to consider when making an offer.
Spend only the amount of money you can qualify for or have the cash for. Be sure it fits your needs and don’t settle on a property. During the negotiations if the numbers change and the property no longs fits your criteria you need to be willing to walk away. Buying a rental property is about the numbers so don’t let your emotions get the best of you. Here are some of the things you should go over with your agent when writing an offer.
• Title Policy
• Option period
• Home warranty
• And more
These are thing you should talk over with your agent so that the offer you present is one that fits your needs and budget. Once you and the seller have agreed to the terms of the contract it will be executed and you will have it under contract.
Once you have a home under contract you have 3 days to get the option period and Ernest money to the title company. You will need to choose an inspector to do the inspection of the property if you chose to do one. (We highly recommend you have an inspection done.) An inspector goes through the home looking for any problems that may wrong with the home. The inspector with give you a report with details of what he found. If something is found you can go back to the seller and re-negotiate. (this has to be done during the option period time line.)
During the re-negotiating the seller has the choice to say yes, he will fix certain items or no he will not. If the seller is willing to fix certain items but not others you will need to consider the cost of repairs and weather it will be cost effective for you now and in the future to meet your needs. If you find that the property will not fit, your needs during the option period or the cost of repairs are to great you will need to terminate the contract.
When the contract is Executed you will need to work with your lender to get the information needed to get final approval. The contract will be sent to the title company and they will do the title work, order a survey & home warranty if needed. The title company will work with the lender to get the closing docs ready for you to sign at closing. When the closing date arrives, you will go to the title company to sign the documents. Once the documents are signed the title company will work with the lender to get the property funded. Once the property is funded you can get the keys and the home is yours.
Once it has closed the property management company will go to the property and do a budget for you to approve. Once the budget is approved they will work with local companies to do the necessary repairs and make ready items to get the home ready for lease.