Wait! Make Sure You Read This Before You Buy Your Next Investment Property Wait! Make Sure You Read This Before You Buy Your Next Investment Property

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Wait! Make Sure You Read This Before You Buy Your Next Investment Property

Buying an investment property is a great idea but also risky. If you do not do the correct amount of research and preparation then you can put yourself in a very difficult situation. Most deals look good at first glance but change once you do further research and analysis.

Take the extra precaution and go through this checklist...

 

1. Main road?

Most people do not want to live on a main road. Because of this, property value decreases. On the other hand, main roads usually have more property so that could be beneficial for a buyer. Either way, you need to weigh out the options and see if the property is worth buying on a main road. A less risky investment would be a house in a neighborhood with little traffic.

 

2. Neighborhood/Schools

Check the quality of the neighborhood the house is in. Check out if the neighbors houses look new or outdated. Check the siding, landscaping, roof, if they have a pool etc. You can check this out by driving the neighborhood or using google maps. If you are driving the neighborhood pay attention to how many people are moving within the area. Schools are also very important. People will be willing to pay more for a house that is in a good school district. 

 

3. Comps

One of the most important factors on your checklist are your comparable home sales. Recent home sales in the area will give you a strong idea of what the house your buying is going to be worth. Look at homes that are in the condition that your home will be in when it is ready to sell. Check homes that are the same style, bed/bath, school district, and sold within the last 6 months. This will give you a good estimate on what you will be able to sell your house for.

 

4. ARV

Your after repair value is exactly how is sounds. It is the value of the house after you have completed your repairs and it is ready to be put on the market. After completing steps 1-3 you can calculate this.

 

5. Estimate Repairs

Now that you know what your house can be worth, you need to know how much money that you need to put into it. Estimate the value of all demo, construction, installation, landscaping, and materials. Take detailed notes when looking at the house so you can get a more accurate number.

 

6. Additional Costs

Along with repairs and the price of the house there are additional costs. Keep in mind that there will be holding costs and closing costs that you have to pay. Some of these costs are lawyer fees, realtor commissions, taxes, insurance, and interest payments.

 

Now that you have done all of these steps, if everything looks good it is time to make your best offer. Add up all of your costs, and compare that to your after repair value to see what offer you need to make to profit on the deal. Make sure to incorporate a contingency into your calculations. It is impossible to account for everything!

Buying an investment property is a great idea but also risky. If you do not do the correct amount of research and preparation then you can put yourself in a very difficult situation. Most deals look good at first glance but change once you do further research and analysis.

Take the extra precaution and go through this checklist...

 

1. Main road?

Most people do not want to live on a main road. Because of this, property value decreases. On the other hand, main roads usually have more property so that could be beneficial for a buyer. Either way, you need to weigh out the options and see if the property is worth buying on a main road. A less risky investment would be a house in a neighborhood with little traffic.

 

2. Neighborhood/Schools

Check the quality of the neighborhood the house is in. Check out if the neighbors houses look new or outdated. Check the siding, landscaping, roof, if they have a pool etc. You can check this out by driving the neighborhood or using google maps. If you are driving the neighborhood pay attention to how many people are moving within the area. Schools are also very important. People will be willing to pay more for a house that is in a good school district. 

 

3. Comps

One of the most important factors on your checklist are your comparable home sales. Recent home sales in the area will give you a strong idea of what the house your buying is going to be worth. Look at homes that are in the condition that your home will be in when it is ready to sell. Check homes that are the same style, bed/bath, school district, and sold within the last 6 months. This will give you a good estimate on what you will be able to sell your house for.

 

4. ARV

Your after repair value is exactly how is sounds. It is the value of the house after you have completed your repairs and it is ready to be put on the market. After completing steps 1-3 you can calculate this.

 

5. Estimate Repairs

Now that you know what your house can be worth, you need to know how much money that you need to put into it. Estimate the value of all demo, construction, installation, landscaping, and materials. Take detailed notes when looking at the house so you can get a more accurate number.

 

6. Additional Costs

Along with repairs and the price of the house there are additional costs. Keep in mind that there will be holding costs and closing costs that you have to pay. Some of these costs are lawyer fees, realtor commissions, taxes, insurance, and interest payments.

 

Now that you have done all of these steps, if everything looks good it is time to make your best offer. Add up all of your costs, and compare that to your after repair value to see what offer you need to make to profit on the deal. Make sure to incorporate a contingency into your calculations. It is impossible to account for everything!

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