Have you thought of buying investment property? That’s great news! Unfortunately, you are not the only one trying to find a property. It will be a true challenge to get your real estate deal closed, especially if it is a seller’s market. Why is a seller’s market a nightmare for every experienced as well as beginner real estate investor? Well, the demand is higher for buying investment property than the supply in the seller’s market. Yet, we do not say that it is impossible. All you need to do is to take into consideration these tips and you will see that you have a competitive edge when buying investment property. So, do not waste your time! Here are the 4 best tips to get your offer accepted.
Buying Investment Property First Tip: Be Fully Prepared
Buying investment property is not easy. That is why it is important that you do your homework precisely. Your homework should include such things as getting the pre-approval for investment property financing as well as investment property analysis. Consequently, below you can find the reasons for doing this.
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Get the Pre-approval
When you are eager to find a property, you may notice that every investment property you are interested in is snatched up by another potential buyer. Consequently, if this worries you, maybe it is the right time to stand out from the crowd. What we mean is that you should get a pre-approval. The reason is simple: applications that have a pre-approval attached simply look more attractive to the seller. There is nothing more frustrating for a seller to find out that you cannot afford buying investment property as you were not approved for a loan. Consequently, such a situation will cost a seller a few weeks until he/she finds another buyer and prepares all the documentation.
Curious how to get approved for a mortgage when selecting the best real estate investments? Make sure to read “Rental Property Mortgage: The Ultimate Guide to Getting Approved.”
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Analyze the Property
Before making an offer or entering a bidding war, it is of high importance to research the property. By conducting investment property analysis, the real estate investor will be able to understand if the property is the right decision for him/her.
Moreover, you should analyze the competition at the moment as well as research the housing market at the particular location. Another thing the beginner real estate investor should pay attention to is the property itself. In other words, real estate investors should understand certain things. For example, if there are no similar properties for sale in the same area, the property will categorize as a “popular property.” Thus, the seller will have an advantage against the real estate agent or investor.
When your reason for buying investment property is to make money, you should consider calculating various real estate metrics. For example, the return on investment, cap rate, and occupancy rate are just some of the metrics you should focus on. Moreover, it is crucial to understand if your future investment will be a positive cash flow property. For this step, it is advised to use an investment property calculator, as all those calculations will be accomplished in seconds. Ready to learn more about the investment property calculator? Make sure to read “Investment Property Calculator – A Simple Guide on Using It.”
Buying Investment Property Second Tip: Personalize Your Offer by Negotiating
After performing an investment property analysis, you can now decide what would be your offer. However, there might be two types of scenarios.
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Almost No Competition
If the seller does not receive many offers, or he/she is trying to sell investment property faster, do not be afraid to offer less than the asking price. However, do not just state the price you are willing to pay, but use your negotiation skills to lower the price. Do not offer too little as it might insult the seller and he/she will not be willing to proceed with you. If you are not strong in negotiating, it is best to hire a real estate agent who is good at negotiating.
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There Is Competition
However, if there is strong competition, you should have a different strategy. The real estate investor should come up with a price that will be strong enough to beat the competition. In the end, you should come out as a winner from the bidding war. Once again, if you do not have the right skills in negotiating, it is the best to hire a professional.
Curious to learn more about the negotiating art? Make sure to read “Top Negotiation Tips When Buying an Investment Property.”
Buying Investment Property Third Tip: Safeguard Your Acquisition
When the real estate investor has made an offer, he/she wants to be sure that the investment property is off the market and will not be presented to someone else. This will lower the chance of being “Gazumped” (when the seller accepts your offer, but then suddenly backs out as someone else offered a higher price). Consequently, to avoid this, we will reveal a secret to you. So, if you are sure about your decision of buying investment property, offer the seller a small deposit as a gesture of goodwill. This has a double advantage for both buyers and sellers as it ensures that the sale will not drop. Therefore, both parties will have a less stressful process.
Buying Investment Property Fourth Tip: Do Not Ask the Seller to Pay Closing Costs
Asking the seller to pay the closing costs may play a bad joke on you. In most cases, the sellers are very disappointed when they see the offered price and a few pages later, they see that they need to pay some money back as closing costs. Consequently, this might be an issue closer to the end of the process. So, if you want to be competitive until the end, do not ask the seller to pay the closing costs as such costs will lower the seller’s bottom line.
Conclusion
Finding the best real estate investments is only half of the job. The struggle comes when you want to own it. However, if an experienced or beginner real estate investor takes these tips seriously, he/she will be able to close the real estate deal to his/her advantage. Simply, do not enter the bidding war without being prepared. Always make the prior analysis or hire a real estate agent who will gather the information. Moreover, according to your analysis make an offer and if it is a winning one, always ensure that you are not going to be “Gazumped” by offering a deposit. Lastly, do not ask the seller to cover the closing costs as this might seriously slow down the process of buying investment property or entirely stop it.
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