Investment Property Buying Guide: A Step-by-Step Approach

How to Buy Investment Property. Buying an investment property can be a very profitable decision. But don't be fooled by the success stories that are prevalent in the media. There are many factors to be aware of before taking that risk. Here is your guide to buying an investment property with confidence.

Step 1

Choose your location wisely. Lower priced homes near expressways, railroad tracks or busy intersections may seem like a great idea now, but will not appreciate as quickly as those located in desirable areas. Even if it means spending a little more, pick a location that is conveniently located near many amenities or at least part of a reputable school system.

Step 2

Work with a seasoned real estate agent, attorney and lender. To be successful at real estate investing, you will need to do business with people that are familiar with this niche industry. Check the credentials of everyone involved in your transaction and be honest about your expectations.

Step 3

Do your homework. Some investment properties could be part of a "too good to be true" real estate scam. Research the title history on the property in question and make sure that there are no outstanding liens.

Step 4

Calculate how much you can spend on your investment property. Your mortgage payment should be in line with what other properties in the area are renting for, or else you might have difficulty filling vacancies. You also need to keep enough money in the bank to cover everything for at least a couple months in case your renter defaults on their payments.

Step 5

Hire reputable contractors to handle renovations. Your investment property may need some serious remodeling before it starts turning a profit. To save money in the long run, retain licensed, bonded and insured contractors who have successfully completed projects like this before.

Step 6

Review any and all contracts with an attorney before signing them. Investment properties are subject to different laws than residential properties, particularly when it comes to reporting the income you are receiving. Ask your friends or family to recommend someone they trust.

Step 7

Make sure you have enough time in your schedule to devote to your investment property. Your tenants will need you around to handle maintenance issues, collect rent and keep up the exterior. If you can't handle this on your own, keep enough money in your monthly budget for a property manager.

Tip

Join an investment club in your area or attend some real estate seminars. Plugging into a community of other investors can provide you with invaluable advice and give you a network of refferals for agents, lenders or contractors.

Warning

Don't purchase any properties that you only see on paper or that require you to send money in advance. These are surefire signs of a scam that can wind up costing you thousands to back out of.