How to purchase my first real estate investment?
There are a number of ways this can be achieved.
Financing: You would need some solid credit or collateral.
Building Up Cash: You essentially need to save money for a cash purchase.
Now if you want specifics steps on how to achieve these things that becomes a more complex conversation. Especially when it comes to the specific numbers and strategy.
Andrew recommends the following next steps:
Investment properties are always good to have in your portfolio. Here are some items/steps to consider:
-Is this a good time to buy? Do you mind buying at high or low times?
-What area do you want to buy? Have you studied the area (i.e. crime rates, school ratings etc) and that will help you understand the marketability of it.
-What type of property do you want to buy? Multifamily, single family etc. I suggest ones without HOA fees because they keep going up.
-What is the age range you want to buy? Older homes have more maintenance and younger homes don't but maybe more costly. Do you prefer or mind already having a tenant at the place you buy?
-Get a preapproved loan so you know what price range you can buy. Remember that is based on gross income so be sure after you factor in taxes and insurance etc that you can still afford it. Be conservative and assume some months if there is no tenant rent that you can still afford to pay the place.
- Do you have at least 25-30% down payment funds you can use to pay the down payment?
-Will you property manage the place on your own or hire one? If so there are fees/charges to consider. Century 21 is a big firm and they provide that service but there are many others too
-Get a real estate agent
These are some things to get started.
A good place to begin is with a duplex, triplex or quadplex. Even though these are multi-unit properties, they are still considered single family (up to 5 units). If you don’t already own a primary home you could obtain an FHA loan to finance the asset but you must live in the property for a specified period of time. Usually 6 months to 1 year. In essence you live for free while the additional units pay the mortgage on the property. After you meet the length of time required to satisfy the loan, you can rent your unit out for additional income. If there was any appreciation you can then refinance the loan, pull cash-out and use it to purchase another property. Technically, you can only use this method one time through FHA. The beauty is the down payment on this “owner occupied” unit is only 3% compared to purchasing it as an investment property or second home where the down payment is 20%. Good luck.
** I would reiterate the importance of getting your financials in order and finding a specific target area to focus. Being prepared financially and having an understanding of value/deals will allow you to move quickly when an opportunity surfaces.
**There are also many great books and podcasts on this topic. Dive into these resources, read/listen to what other investors are doing and looking for. This is a great opportunity to learn from some of their mistakes!
**Finally- a primary residence can be a great first investment. Start small, add sweat equity, and there can be advantages with capital gains..
Further, do your research! Once you know what area/kind of home you're looking for keep an eye on the market. Get a sense for what's a 'good deal'/ what comparable units sell so you're able to act quickly and confidently if the time and opportunity is right for you. This also means you can be an informed negotiator and avoid overpaying!