Your First Time In Buying Real Estate
Buying a property for the first time, whether as a home or purely an investment, is exciting and risky ?and one because of the other. You read or hear about rapidly rising prices and think 'I gotta get me some of that!' Excellent idea ?if you keep in mind, too, that there are risks. Here are some suggestions about how to keep the excitement, profit from the opportunity, and minimize the risks.
Before investing in your first property, do some homework. You don't have to get a PhD in Real Estate, Finance, or Law, but you need to get a good chunk of information and think about your own situation realistically. Buying and selling real estate is not so simple as changing cars.
Familiarize yourself with the market you're interested in and find out what the average property is going for. It can vary considerably even within a single housing tract. That information is easily gained by talking with local Realtors or looking on the Internet.
Study a little bit about legal restrictions and requirements, about contracts, escrow, titles, insurance, closing procedure, and the roles different individuals play in the process. Each has a cost. Shop around.
Once you're ready to take the plunge the next step is to find a potentially profitable property. The Internet makes that a lot easier these days, but you need to drive around the area, too. Look for 'For Sale By Owner' signs and scour the local newspapers for 'For Rent', abandoned properties, etc. And talk with friends, family, and local Realtors.
Look at properties nearby. Are they maintained in a way that will not depress the selling value of your property? Even if you buy a 'fixer-upper', and turn it into a castle, it can be tough to sell profitably in a deteriorated neighborhood.
Once you've found that diamond in the rough, unless you've won the lottery or invested well in the stock market, you'll need to finance the purchase. Bzzz! Mistake number one. You should have your financing in place BEFORE you find a property.
Talk to mortgage lenders ?banks, mortgage lending companies, Internet home loan businesses. Discuss how much you want to invest and answer their questions about income, etc. They'll examine your credit history, so make sure your report is clean of any outstanding negative marks.
Ask them about financing options. Today there are a dozen different ways to fund a real estate investment, with variations in rates, up front funds required, and tax consequences. You're about to put out a chunk of money, but also to take on a substantial liability. Be prepared.
Got that dream deal and ready to buy? Perfect. Negotiate the best price you can, without expecting to get something for nothing. The seller wants to get as much as possible, and you want to pay as little as possible.
Out of that tension can come two satisfied parties, or two individuals who both lost. Be firm, but prepare to compromise. You want the seller to repair that bad water heater prior to closing, the seller wants you to give them an extra two weeks before having to move. Give a little, get a little. The alternative is usually a lot of expensive and life-draining legal action. Strike a mutually beneficial arrangement and you'll save money and stress.
Enjoy your first time. It's an adventure!