How to Research and Purchase a Good Investment Property

How much do you really know about investment property? Accurate research and professional expertise applied to the purchase of an investment property builds a solid foundation for financial success. You may want to work with a REALTOR who can help to identify the great opportunities in investment properties in the area of your choice. Or, you may choose to do the work on your own. A REALTOR can provide the inside line on properties with potential in the geographic area where you are looking for property. If you do choose to work with a REALTOR, you will save time, and you may have more choices and opportunities.

Research the Property's Past and Present

Some essential information must be obtained about the property's past. For example, do you know the history of property, or even how old it is? What sort of upgrades have been made to the home? Is the roof waterproof, and is the plumbing and electrical in working order?

What's the Neighborhood Like?

Once the overall condition of the property has been assessed, tax assessment records must be examined to determine property value trends. A good realtor will be familiar with the neighborhood where the property is located and if he or she is not, the REALTOR should check the neighborhood at different times of the day and night and speak to some neighbors. If there is a homeowners association, check the guidelines, assess fees, and be certain they allow rental of properties.

Assess the Bottom Line

For what purposes are you, the investor, going to use the property? To rent? To house your business? Or, to rehabilitate the property and sell it at a profit? Once this is determined, you can assess the bottom line.

Are you paying cash for your investment property? If not a mortgage will have to be paid. Have your REALTOR determine if rent and applicable fees will cover the mortgage, property management and maintenance. Consider property management if you do invest in property. Research fees and services provided by different property management companies, or ask your REALTOR if they provide this service, because many do. If you do not want to collect rents and contract repairs, find a property manager with the skills to negotiate, be your intermediary, and facilitate business in your absence.

For investors who rehab and sell buildings at a profit, a decent turnaround is 60-90 days from the time of purchase to the time the property is put back on the market. Three to four contractors should be researched and they should provide written bids with time estimates on their projects.

Document Fund Availability with Your Offer

Once you find that dream investment property, don't forget that offers need to be accompanied by your financial institution's statement of fund availability or a lender's approval letter. This will help make certain your offer will be accepted over other offers that may not come with appropriate paperwork.

There are still plenty of great deals on investment properties in this real estate market, and there are some less than desirable properties as well. Do your research. Or, hire a professional who will do it correctly for you. With proper planning and decision making, your real estate investment should be a profitable and worthwhile endeavor.

Visit VonCannonRealEstate.com for more information on investing in commercial or residential properties.

10 Tips on Investing in Distressed or Foreclosed Properties

1. Search on the world wide web for distressed or foreclosed properties as a starting point. Use a professional REALTOR to identify great foreclosure deals for you. You may be successful at searching the web on your own, but keep in mind some of the information is outdated, some may be incorrect, and some of the available properties are not even listed. A REALTOR subscribes to updated MLS listings and can offer you the most current information available.

2. If you search yourself for distressed properties and purchase from the selling agent, you are paying a commission to someone with a vested interest. Obtain objectivity in the sale by working with your own REALTOR. You won't pay any more. Technically, everyone works for the seller, since they pay the commission.

3. With distressed or foreclosed properties, time is of the essence. Purchasers must close on the date specified by the agency, and cannot close after this without penalties of $25-200 per day.

4. It takes 1-3 weeks to qualify a loan. If you are approved for a loan, make sure you are qualified by your lender as soon as possible. If you are paying by cash, make certain funds are available. If finances are in order, the REALTOR will then submit an offer. When the offer is accepted by both seller and buyer, the REALTOR will submit the ratified contract to the lender and closing agent. These steps will begin the process of a successful real estate transaction.

5. When purchasing a distressed property, always obtain 3-4 bids from different contractors to estimate costs of repairs, if you do not plan on doing the work yourself.

6. If you are going to sell the property after rehabilitating it, ask your REALTOR to research similar properties in the neighborhood to ascertain market price.

7. Keep copious records for tax deductions. Any expenses related to the purchase, repair, or maintenance of the property may qualify. Meticulous records are key to a profitable real estate venture.

8. The title you receive after purchasing a distressed or foreclosed property is a special warranty deed rather than a general warranty deed. Some buyers are alarmed by this, but there is no need to worry. The purchase of title insurance protects the buyer. Each lender purchases insurance to protect the loan as well. Titling insurance should be obtained by the property purchaser. It is always offered by the closing agent. Consider using an attorney instead of a titling company as your closing agent. An attorney is only $50-75 more than a titling company. A real estate attorney can remedy any situation that may arise. Therefore, they are more efficient representatives on time sensitive foreclosure properties.

9. Foreclosure properties require special addendums and special contracts by the individual bank and HUD office (where applicable).

10. Foreclosure properties are potentially the most profitable, but require the most attention to detail. A REALTOR experienced in foreclosure deals is highly desirable because the paperwork must be in order to submit a proper bid, and timeliness is critical.

Visit VonCAnnnonRealEstate.com for more information on foreclosures for sale in VA.