If you’re interested in Ellicott City MD homes for sale, Columbia MD homes for sale, or properties in the surrounding areas as investment properties, following these six steps will help you make a smart investment:
Step One: Get educated. You should research the local markets and trends and learn the basics about investing in real estate through books that we can recommend.
However, spending too much time learning can rob you of the time you need to actually launch yourself into successful investing. First time investors often get bogged down by trying to learn everything before they start. It's a form of analysis paralysis. Keep in mind that the real education comes from participating in the process.
Step Two: Get financing. The first place you might think of is a mortgage broker or bank; those loans generally require a 20% down payment. You can begin with a pre-approval letter for purchasing an investment property. This letter is similar to the pre-approval letter for your primary residence.
There are other types of financing as well. For instance there is private financing, hard money loans, owner financing, and group investors or partnerships.
Step Three: Choose the right place for your investment. As a beginner, the best way to start is to select a property in your local area, an area where you are familiar with that market. This allows you to keep an eye on your investment, and it also gives you more confidence since you are familiar with the area.
Step Four: Start looking. When you begin looking for that first investment property, you will want to check out short sales, pre-foreclosures, and Bank-owned properties. Multiple Listing Services list these properties, and we can email a list of these properties to you daily. There are many other ways to find great investment properties. Feel free to contact us for more details on this.
Step Five. Get the property under contract. Before starting negotiations, make sure you have all the information you need to negotiate from a position of strength.
The number one rule in buying real estate is: never make an emotional decision. Always base your decisions on facts and figures, and be sure to include closing and holding costs in your analysis of a property's potential. Do your due diligence by arranging for inspections, too. In fact, as a rule of thumb, if you have to get estimates on repairs, add 15% to the final estimates for the unexpected things that always come into play.
Step Six: Repeat. Once you successfully buy one piece of property, you will probably want to purchase another. You can resell your original property after making renovations. You can also do a cash-out refinance, but make sure to keep your loan-to-value at 80% or less.
Use that equity from your first purchase to finance a new one, remembering to keep your expectations realistic and manageable. If you try to do too much at first, you’ll become overwhelmed. Slow and steady can pay big dividends for you and your family in the long term.
Whether you're just starting to invest in real estate, or you're an experienced investor, we can help you to find the area and properties that will help you meet your investment objectives. Call us at 443-757-3400, or use the form below to send an email!
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