Buying your first property, whether as a home or purely an investment, is an exciting and potentially risky business. You hear or read about rapidly rising real estate prices and think 'I gotta get me some of that!' An excellent idea if you keep in mind that there are risks. Here are some suggestions about how to keep the excitement, profit from the opportunity, and minimize your risks.
Before investing in your first property do some homework. You don't have to have an advanced college degree in Real Estate, Finance, or Law, but you need to gather a good chunk of information and think about your own financial situation realistically. Buying and selling real estate is not so simple as changing cars.
Familiarize yourself with the specific real estate market you are interested in and find out what the average property is going for. It can vary considerably even within a single housing tract. That information is easily gained by talking with local Realtors or looking on the Internet.
Investigate legal restrictions and requirements about contracts, escrow, titles, insurance, closing procedure, and the roles different parties play in the process. Each has a cost so shop around.
Once you are finally prepared to take the plunge your next step is to find a potentially profitable property. The Internet does make that a lot easier these days, but you should still drive around the area too. Look for 'For Sale By Owner' signs and search the local newspapers for 'For Rent', abandoned properties, etc. Also talk with friends, family, and local Realtors. Leave no real estate stone unturned!
Look at properties near the area where you are interested in investing. Are the properties maintained in a way that will not depress the future selling value of your property? Even if you buy a 'fixer-upper', and turn it into a prestigious resort, it can still be tough to sell it profitably in a deteriorated neighborhood.
Once you've found that diamond in the rough, unless you have won the lottery or invested well in the stock market, you will need to finance the purchase. Ouch!! Mistake number one. You should have your financing in place BEFORE you find a property.
Talk to mortgage lenders — banks, mortgage lending companies, Internet home loan businesses. Discuss how much you want to invest and answer their questions about income, etc. They will examine your credit history so make sure your credit report is clean of any outstanding negative marks.
Ask them about the various options available for financing. Today there are a dozenens of different ways to fund a real estate investment, with variations in rates, up front funds required, and tax consequences. You're about to put out a chunk of money, but also to take on a substantial liability. Be prepared.
Have you now got that dream deal and you are ready to buy? Perfect! Negotiate the best price you can without expecting to get something for nothing. The seller wants to get as much as possible and we know you want to pay as little as possible.
Out of that finacial give-and-take tension can come two satisfied parties, or two individuals who both lost. Be firm, but prepare to compromise. You want the seller to repair that bad water heater prior to closing, the seller wants you to give them an extra two weeks before having to move. Give a little, get a little. The alternative is usually a lot of expensive and life-draining legal action. Strike a mutually beneficial arrangement and you'll save money and stress.
Enjoy your first time real estate purchase. It is an adventure to remember and learn from!
