We are now a few months into the new year and many people have begun to put their New Year’s resolutions into action. If you had resolved to begin your career in real estate investing this year, that is actually a bold and very great decision.
Buying investment property is one of the best ways to make money and can be a decisive step towards securing your financial future. In fact, most millionaires in the country have built their massive wealth through real estate investing. The inspiring thing is that most of them began small and have built their real estate portfolio over time.
If you want to build wealth through real estate investing too, you can begin the journey by buying your first investment property. With the many opportunities in real estate right now, there’s no reason why you should put it on hold.
However, as a first-time real estate investor, the thought of buying an investment property can be intimidating. You may not even know where to start. If you are wondering how to buy your first investment property, this blog is for you. Read on to learn the steps you can take to make your first real estate investment a success.
Related: The Best Real Estate Investing Tips for Beginners
How to Buy Your First Investment Property
1. Partner with a Real Estate Agent
There’s a lot of moving parts in real estate investing. For novices, it’s recommended that you hire a knowledgeable and experienced real estate agent. A good real estate agent will make up for your lack of experience.
While anyone can still find an income property without necessarily involving an agent, an agent can help you avoid the common mistakes made by beginner real estate investors. He/she will guide you through the process of finding investment property for sale and sealing the deal. Their knowledge of the local real estate market will also be valuable in finding lucrative real estate deals.
Related: Working with a Real Estate Agent: What Investors Should Expect
Apart from their guidance and advice, a real estate agent will reduce your workload by doing most of the work involved in buying an investment property. These tasks may include negotiations and tackling paperwork. Consequently, you will be able to save a lot of your precious time.
Find a top performing real estate agent near you.
2. Organize Your Finances
Getting financing is arguably the most daunting part of buying your first investment property. With real estate being capital intensive relative to other investments, having a financial plan in place is critical when thinking of how to buy your first investment property.
The good part is that there are many options available for financing investment properties. If you are considering taking out a mortgage loan, as most beginner real estate investors do, there are a couple of things you will need to sort out.
First, you need to realize that the down payment on an investment property is usually at least 20%. Depending on your budget, you should know by now how much money you need to have saved up. If you haven’t reached your target, you should evaluate your current spending and make the necessary adjustments so that you can save more money. Don’t forget that you also need to save for closing costs, a cash reserve, and emergencies.
You should also review your credit score and debt-to-income ratio (DTI). If they are not good, you should work to make any possible improvements. Lenders normally check these metrics to know if you are creditworthy. These metrics will also determine your mortgage interest rate.
Nevertheless, even if you can’t raise the required down payment, don’t let it discourage you from buying your first rental property. It’s still possible to buy your first investment property with no down payment. You can consider options such as real estate partnerships, seller financing, house hacking, and home equity loans. Research the various options you have and see which one suits your situation best.
Related: How to Get Your Finances in Order Before Buying an Investment Property
3. Find a Profitable Real Estate Market
A crucial step in our guide on how to buy your first investment property is finding a good location for rental property investing. Location is the most important factor when buying homes to rent because it will have a huge impact on your ROI. Whether you are considering investing in your local market or investing out of state, you need to conduct a thorough real estate market analysis.
However, researching real estate markets manually is a lot of work and very time-consuming. Mashvisor is the best real estate investor software to use for your market analysis. It makes it possible for anyone to find the best-performing property markets in the US in a matter of minutes.
First, you can check for city data on Mashvisor’s blog to see how different housing markets in the US are performing. Mashvisor helps you learn about real estate and also provides data such as average listing price, rental income, cap rate, cash on cash return, and Airbnb occupancy rate.
Next, you can use Mashvisor’s heatmap analysis tool to analyze your city of choice so as to find the best-performing neighborhoods. This tool will also help you find a good neighborhood if you’re buying Airbnb property.
4. Begin Your Investment Property Search
You have several options when it comes to finding investment properties for sale. However, using Mashvisor will make your property search quicker and more efficient. With Mashvisor’s Property Finder, you do your property search within minutes. This user-friendly tool allows you to easily find the best-performing investment properties in any US housing market based on your own investment criteria. You can even select multiple cities at once to conduct your search in (an unlimited number with an Expert Plan) and customize your search using different filters.
These filters include:
- Budget
- Property type
- Rental strategy (Airbnb or traditional)
- The number of bedrooms and bathrooms.
After setting up your investment criteria, you will get a list of investment properties for sale with the highest ROI in the area that match your preferences.
5. Conduct Investment Property Analysis
When you find an investment property that captures your interest, you need to do an in-depth analysis to ascertain whether it has a good rental yield. Investment property analysis is the most important step in our guide on how to buy your first investment property.
Mashvisor’s investment property calculator provides real estate investors with readily-calculated metrics like cash flow, cap rate, and cash on cash return. You can also use this tool as an Airbnb calculator or to get rental comps for investment properties listed on the platform to run a quick comparative market analysis.
The Bottom Line
If you have been struggling financially, real estate investing could be a good way to put a stop to that and help you secure your financial future. This guide on how to buy your first investment property gives you the basics to get started. Follow these tips starting today to ensure that your dream of becoming a real estate investor does not just remain a dream.
To get access to our real estate investment tools, click here to sign up for a 7-day free trial of Mashvisor today and enjoy 15% off for life.