Buying a home can be a “hair-raising” experience. It can be a roller coaster of emotions... finding the right place... securing the loan.., moving in. And, if you’re like most of us, your home will be your largest investment. The emotions over such a large and personal purchase can often cloud good business judgment.
Many homebuyers do very little research before “diving in” and investing their hard-earned money. Before doing that, doesn’t it make sense to be as informed as possible? That’s what this report is all about. It’s designed to help you avoid 10 common, critical mistakes many homebuyers make. If you follow these 10 suggestions, with the help of the right real estate professional, you’ll make a good sound business decision that you’ll be happy and proud of for years to come.
1. Inspect, Inspect and Inspect- Go over the inspection report with a fine toothcomb. Make sure the report was done by a professional organization. For condo purchases, go over the by-laws, and association fees. Don’t take anything for granted... inspect everything!
2. Imagine the Property Vacant- Your furnishings and decorations will be the ones filling this new residence. Don’t be swayed by beautiful furniture ... it leaves with the owner.
3. Income Plus Lifestyle Equals Mortgage Payment- Sit down with a competent real estate professional and honestly discuss your income level and living expenses. Take into account future considerations like: children, add-ons, amenities or fix-ups. Your dream home is certainly worth a sacrifice but don’t mortgage your entire future.
4. View Several Homes- See at least 3-5 properties. Don’t move on the first property you see but... don’t move too slowly either. With your agent’s help, you’ll be able to view enough properties to get a good overall perspective of your market. And when you find the right property, all the legwork will be worth it.
5. Utilize Your Team- By aligning yourself with the right real estate professional; you’ll have an entire team working for you. Top real estate professionals have lenders, title reps, and inspection teams - an entire group of trained professionals to make the whole buying experience simple and easy for you.
6. Failing to Have Adequate Insurance- Investment property brings liability. Tenants, cars, parking lots, and property liability — the list is quite extensive. Adequate insurance coverage is an absolute must! Be sure to consult with an insurance professional and protect your hard earned assets.
7. Inspect, Approve, and Confirm All Documents- The list of documents that need to be proofed can be overwhelming to the first time investor. Building permits, zoning laws, rental and lease applications, health licenses, laundry leases, underlying loan documents, by-laws, title policies, mineral leases, inspection reports, purchase contracts, insurance., don’t attempt to do it alone. The right professional can remove most of the stress and bring the transaction to a conclusion smoothly.
8. Get a Bill of Sale For All Property Involved- Many types of personal property (appliances, furniture, fixtures, etc.) can be involved in an investment sale. Be very detailed... know who owns what!
9. Charge Fair Rents- Vacancies, turnovers and lease terminators are your biggest expense. Charge fair rents, treat your tenants with respect and respond as quickly as possible to their needs. It’s a lot less costly in the long run to take care of the little problems before they become big problems. Vacant property is your Achilles heel.
10. Select Qualified, Good Tenants From the Start- Take the time to check references. Previous landlords, employers, financial references, credit, judgments are all vitally important. If there are any questions, investigate fully. Drive by their previous residence. A little work up-front can save tremendous problems later on down the line.
11. Make Sure You get Estoppels Letters- Get letters from tenants confirming the status of tenancy. Make sure their version of the rental or lease agreement corresponds with the seller’s interpretation.
12. Don’t Spend Positive Cash Flow- Most of successful investors have free and clear properties. Be sure to re-invest your cash flow back into the property payment and speed up the amortization schedule. This decreases your debt load and increases your equity..., which builds your net worth.
Investment property can be one of the most rewarding aspects of your financial portfolio. Be certain to have all your “ducks in a row” before you invest. Do your homework! Consult with a professional real estate agent and relieve yourself of the hidden troubles that can plague first time investors.
I hope this brief report has been of value to you. It is my ultimate desire to help you achieve your real estate investment goals and provide you with the most professional, efficient and effective service possible! If you have any questions or there is any way I can help, please give me a call.
Jutta “Utah” Burden
www.TheWoodlandsRealEstateBlog.com