Buy Investment Property

If you are currently an investment property owner, or are considering the purchase of an investment property, it’s not a bad idea to review the basic “do’s and don’ts” of putting your money in investment property.

Basically, here are eight things that the investor may want to consider before buying, and some of these items can even be applied to the current investor.

Roof, Foundation and Contractor’s Bid

1.   Roof.   A good investment property purchase would have a roof that doesn’t need any current repair and certainly doesn’t need to be replaced.   The expense of a new roof and the damage to the home that may already have been done is just not worth the risk.   In many cases, if the roof needs repair there may be damage in the property that you simply cannot see.    Water damage is tricky and hides in places that are difficult to see.

2.   Foundation.   The foundation of a good investment property should be sound and solid.   If it needs work, you would probably want to pass on the investment.   If you are already a property owner and discover that there is foundation damage, the best advice is to get it fixed as quickly as possible.   Foundation problems quickly magnify and create difficulties that are costly in other areas of the home.

3.   Contractor’s Bid for Repairs.    Most investment properties that are the best deals these days may be short sales or foreclosures.   If the property you are considering is in either category, having a local contractor inspect the property and provide a detailed and binding bid for repairs would be essential.   Prior to purchasing the home there is always an inspection time available for you to send you contractor in to evaluate what is needed to make the place rent ready.

Market Analysis for Your Investment Property Purchase

4.   Market Analysis.   No matter what, contact a local Realtor and get a thorough market analysis on the property.   Make sure the analysis includes comparable properties that are within a mile of the subject, includes only sold properties and also includes short sales and foreclosure sales.    Failure to include all these type of properties will give you a market value that is not credible or reliable.

Realtors and Property Management for Investment Property

5.   While we are talking about Realtors, it is advisable to create a relationship with a reputable Realtor who does business in the area where your investment property is located.   Having this relationship will help keep you abreast of market conditions and changes in the homes value.   When it’s time to sell, having a reliable Realtor who knows your needs is important.

6.   HVAC.    As part of your inspection of the home to be purchased you want to be sure you know the condition of the HVAC system.   It may need repair, which is okay, but you need to know what is included in that repair and what it will cost to fix it.   This can and should be part of the contractor’s bid you get to bring the home into rent ready condition.

7.   Find a good property manager.   It is also a good idea to know a good property manager or property management firm located in the area where your investment property is located.   In case your property becomes vacant, you want to trust the property management group to quickly find new renters, qualify them, and check their background.   Resources to perform this renter vetting is not always available to the average citizen, but is doable by a property management team.   Be sure you a placing and keeping good, reliable renters in your property.

Confirm Your Investment Property Financing

8.   Acceptable Financing.   Lastly, prior to purchasing an investment property it would be good to be sure you can get financing for that property.    Check with your local banker or broker, give them the property specs, your own financial information and do what you can to be sure financing will be available.   Often, in today’s market, the sales price may be greater than the appraised value.   If this is true in your case, you may have less financing available to you and be required to produce additional down payment funds.   Lenders have tightened their guidelines for all loan types, but especially investment loans, and you should be sure your property qualifies prior to moving forward.