If you’ve never purchased an income property, it can seem overwhelming. You’re ready to take that next big step to improve your wealth, but maybe you’re feeling hesitant. Jason Hartman’s Ten Commandments of Successful Investing will begin to put your mind at ease and are a great place to start, but we’ve got a little something extra to help you as you build your wealth through investment.
The best time to buy a house is when you find a great house and when you’ve got the money—don’t try and guess what the market is going to do. Find an area with a good market, but remember that real estate goes up and down. Buy when you’re ready, and keep these things in mind:
First, don’t move your money around before you’re planning on buying. You might damage your credit profile or send that message to lenders that you aren’t reliable. Keeping your money in one place establishes a paper trail that lets a lender where you’ve been, making them more likely to loan to you. Similarly, you’ll want to get preapproved for a home loan, not to be confused with prequalified. Preapproved will mean that a lender has reviewed your finances and given you a figure representative of the amount you can afford. You’ll save time and heartache by being prepared.
Next, make sure you know what you’re buying. Survey the potential property to make sure that everything is in order. Know exactly where property lines fall, which will help solve neighbor disputes and ensure you’re paying the correct property taxes. Hire a home inspector, which will likely save you money in the long run. Remember that the biggest house isn’t necessarily the best one, either. A smaller, recently remodeled home might rent for a lot more that an old, large house, so keep these values in mind. Remember to check out the neighborhood before you buy the property. Look at proximity to schools and amenities, rate of crime, etc. These factors all influence how much you can rent the property for, so make sure you’re buying in the best area for you.
Finally, don’t just think about mortgage payment, but investigate property taxes, utilities (if you’ll be paying them) and homeowner association dues. Budget for maintenance and tax increases, and figure these things into what you might make in rent. When you’re ready to make an offer, base it not only on what you can afford, but what you believe to be the true value of the property. Compare the cost per square foot to the average for that area—you might make a bid that is lower, but you might stick with asking price. (photo credit: seier+seier via photopin cc)