Buying Investment Property 101

Would you classify the process of buying investment property to be as frightening as going over Niagara Falls in a barrel?

Well, maybe that’s pushing it a little, but the fact is that buying real estate, especially investment property, is a big financial event that can present considerable risk if not done properly.

So, to avoid costly mistakes and lower your risks, learning the basics of how to correctly buy investment property will pay off handsomely for you.

The following provides an outline of the basic steps that form the framework for buying residential investment property.

Steps for Buying Investment Property

Once you make the decision to enter the market to purchase investment property, your first step is to do some market research of the local real estate market. This will provide a good indication of the local market condition along with the prices that investment properties are selling for.

At this point, it's a good idea to organize your personal finances . This includes paying any overdue bills and reducing credit card debt. These actions will improve your credit report and credit rating. This will be favorable from the mortgage lender's standpoint. Also, you can update your personal balance sheet to reflect your current financial condition - you'll have a clear indication of all your financial assets and liabilities.

After completing the above, familiarize yourself with the various mortgage types and programs that are available for buying investment property. Investigate the pros and cons of each and decide which type best suits your needs and situation. At this point you'll really be getting your ducks in order like a pro!

After you've determined the prices that investment properties are selling for in the locations you're interested in, visit a bank for mortgage pre-approval . This will let you know how large a mortgage the lender will give you based on your credit and financial strength. Also, having been pre-approved for a mortgage will give you more clout and negotiating power with sellers - you'll be a qualified buyer with financing, not just a "window shopper".

For legal representation and advice on buying investment property, hire a real estate attorney to act on your behalf for the transaction. It is money well spent to have an attorney looking out for your best interests as a buyer, making sure everything is legal.

Now the real fun begins - it's time to go out and

Your initial market research has provided you with the selling prices of different size investment properties, such as two and three units. This information, in combination with the mortgage amount you qualify for will give you an idea of how large an investment property you can buy. You can now perform a comparable market analysis of similar investment properties in your price range.

When you've narrowed down your list of choices and found the single property that best meets your criteria, you'll have to take several steps before making a purchase offer on that property. Take your time here because these steps are very important - the time and effort you take at this point will be very well spent indeed!

With all of your homework and investigations done on the property, it's time to make a purchase offer on the property. This is where the "rubber hits the road" for buying investment property. It's exciting because this is the event where the process of purchasing investment property really becomes serious.

Once the seller of the investment property receives your purchase offer, the normal course of events that follow will be to negotiate the purchase offer's price and terms . This, of course, depends entirely on your offer and the situation of the seller. The seller could immediately accept your offer, totally disregard it, or be somewhere in the middle for negotiating your offer.

After both you and the seller have come to an agreement on the price and terms of the property sale, it's time to sign the purchase and sales agreement with the seller. This is where your attorney comes in handy to review its specifics to make sure you're not getting shortchanged.

With the purchase and sales agreement signed, the next phase of buying investment property is to satisfy the sales contingencies of the purchase and sales agreement. This is normally the most time consuming part of the whole sales transaction.

Once all the sales contingencies have been satisfied, it's time for the "last hurrah" which is to conduct the closing transaction . When the closing is completed, your journey of buying the investment property is finished! You'll be the proud owner of a nice investment property that, if run properly, will be a big asset to your future financial well being.

For more great information on buying investment property, please visit The Landlord's Library book collection. This collection provides all the practical information you'll need to make your journey of being a landlord pleasurable and very profitable.

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