Investing in rental properties can be very easily done with proper knowledge, guidance and a good mortgage broker. With the tips provided in this article, hopefully investing in rental property will be simplified and made easy for all concerned.
How to Invest in Rental Property
There is a vast array of opportunities available today in the rental property business. For every millionaire that gets lucky in the rental field, there will be 100 that are not so lucky. On an average 20 percent will lose money on rental properties due to lack of knowledge and hasty decisions.
Investing in rental property can be very rewarding if done with due diligence and care. It is a buyer’s market and many deals are offered daily. Learning how to proceed will save the investor hardship and possibly lots of money.
First Steps Towards Investing in Rental Property
In order to be well informed, learn to make some smart decisions. Knowledge is the key in learning how to invest in rental property. There are a few ways to obtain knowledge in real estate:
- Hire a mentor or guru
- Join a real estate investment club
- Search for information on the internet
Where Are There Guru’s for Hire?
In order to learn proper procedures in buying rental properties, a mentor is needed or a guru. Someone who will show the investor the “ropes of the trade” so to speak. Guru’s are for hire and may be quite expensive. Many investors will opt to get around this problem by working side by side with a trained Realtor who specializes in selling and listing investment properties.
A mentor will guide the investor in looking for the best deals, how to shop comparables and the art of negotiating. A smart Realtor will not teach everything, because then the service of the Realtor is no longer needed. The term due diligence is used much and this simply means to research a property thoroughly including the title report to look for all liens involved in the property.
A complete and thorough net sheet is needed to show all cost involved in ownership of this particular property also. Do not just look at the mortgage payment minus the rents. Look at the full cost of ownership including maintenance, water, utilities and repairs.
How Does an Investor Join a Real Estate Investment Club?
There are many Real Estate Investment Clubs available all over the world and joining is not the problem at all. The problem is picking the right one to join. Having enough knowledge to choose the correct one is the key.
Social Media Sites or Real Estate Online Websites?
Besides hiring a mentor and joining a Real Estate Investment Club, try searching the internet for thousands and thousands of sites offering free advice. From Twitter to the top real estate web sites, the amount of free information will be staggering. This is why in many cases it is important to be involved in the other two choices stated above.
Twitter has evolved in the last few years as the top place to get free information. Social Media is so popular that it would be literally impossible to read all the free information available in 20 years. Deciding who is legit and who is not would be the main problem.
First time investors should never take out a loan on the Internet as there are too many loopholes and problems dealing with a “supposed” good guy or mortgage broker. Bankrate.com is a good website to search and compare mortgage rates and get the latest news on interest rates.
Use Twitter or other social media sites for what they are meant to be used for. Use them for immediate information for research and guidance and then compare that information with a local mortgage broker or Realtor.
There are many websites offering excellent real estate advice also. The top site is Realtor.com and they have every property currently listed on the MLS and a list of every agent or Broker throughout the US. It is a one stop place for everything the investor could need or want. Many Realtors will be glad to refer the investor to a local Realtor to help in purchasing a rental property.
What is a Seller Financed Mortgage?
Now that the investor has all the knowledge available everywhere, they are prepared to purchase, obtain a mortgage and close the deal. Never ever deal with investment property without a trained individual until thoroughly trained in all aspects.
One piece of creative financing needed by any new investor or seasoned one is how to buy a property with seller financing. So in other words where the seller is the bank. This type of financing avoids most closing cost and that is a huge savings. Traditional closing cost can amount to 3-6% of the cost of the home or rental property.
What is a Lease Option?
The next thing a new investor should learn is how to do a lease option. A lease option is an option to buy a property at a later date for a specified amount of money. It is used by many investors in buying rental properties. The difference between seller financing and a lease option is that in seller financing there is no requirement to refinance the property prior to the end of the term of the loan.
Now with this huge amount of information, anyone can purchase rental property and be a success and hopefully rich in the process.