Warren Buffet Says
In an interview on CNBC, Warren Buffet said that if he were handier at fixing up homes he might just buy up a couple hundred thousand homes for investment properties. The problem of managing them is prohibitive for him. But, he also stated that for the young investor who is handy, buying distressed homes as investment property to rent out is one of the best investments one can have. He says that buying investment property at the low fixed rates of today is an excellent move. When asked which was the better investment, a new home or the stock market for the young investor, he said that if you found a place where you will want to live for five to ten years; investing in the home with a low fixed rate mortgage was the better option. Buying a couple hundred thousand rental properties, might not be your dream, but investment property in much smaller doses could help you achieve your investment goals.
How to get Started
You will need to sit down and figure out what your goals are. Buying investment property can help you achieve your goals, but you need a plan. You will also have to do a lot of research on locations (the best neighborhoods, schools and proximity to amenities), what you need to do to get your finances in order, will you manage the rental properties yourself or hire a management company (will the cost of a management company cut too deep into your income?), how much the taxes will be, how much money can you afford to set aside for home makeover and repairs (have a budget and stick to it), costs of insurance and will the home you invest in produce enough rent to cover all your costs. You will also need to study the local and state rental laws and renter’s right laws. And most importantly hire an experience home inspector, ask questions and voice your concerns. And don’t let him leave without satisfactory answers. Make sure that you go into your property investment with your eyes wide open, so there will be no costly surprises later on.
Get your Financial House in Order
Getting your finances in order will include: checking your credit rating and fixing any problems that may be on your credit report. Make sure that you have at least 20% to 30% cash for the down payment. And depending on your loan; you may need a six month cash reserve. All loans now are full document, so you will need to have two years of tax returns and at least two months of bank statements. And when filling out your loan application; don’t leave and box empty. Make sure you have your appraisal and all your information sent in at the same time. Any mistakes could delay or deny the loan. Buying investment property takes a lot of preparation; but can also, greatly increase your bottom-line.