These are the 7 steps that we use at Bud Evans Consulting to ensure we have a cash-flowing asset in our portfolio and not a headache.
Step 1: Know Your Market
Before you dive into real estate investing, it’s essential to understand the characteristics of your local market and what sets it apart from other areas. You need to know the demand for rental properties in your area, as well as the average rental rates and occupancy rates. In addition, research home prices and trends in appreciation so you can estimate the potential return on your investment.
Step 2: Secure Financing
After you’ve done your research, it’s time to consider financing options. There are several mortgage products available, and you should be aware of the terms and associated fees. Also, consider any special programs such as first-time homebuyer incentives or down payment assistance programs. Hard Money and Private Lenders are a more likely option when flipping. This is not the point to start looking. Reach out, and develop relationships with both Hard Money Lenders and set yourself up for success by finding investors who are looking forward to working with you. We can use banks or FCUs to refinance when we're done with the rehab.
Step 3: Choose a Property (You should be looking already)
Once you’ve secured financing, it’s time to make that offer on the right property for your investment portfolio. Consider location, size, and price point when selecting a property. Also, thoroughly inspect the home for any structural damage or other issues that can affect its value. Your desktop analysis of the property is huge here. Estimate the potential for rehab at this stage!
Step 4: Negotiate the Deal
Once you’ve found a property that meets your investment criteria, it’s time to negotiate the deal with the seller. Make sure to review all documents and contracts carefully before signing anything. Also, be aware of any potential hidden costs or extra expenses associated with closing the deal.
Step 5: Complete the Mortgage Process
You’ll need to complete the mortgage process in order to finalize your purchase and get the keys to your new property. This includes gathering all necessary documents, submitting them with a lender application, and waiting for approval. Make sure you understand all of the loan terms before completing this step. Again, using a bank takes time. Look at the HML and PML to close within 30 days.
Step 6: Perform Due Diligence
Some sales are as-is and have no contingency. Before the mortgage process is complete, you’ll need to perform due diligence on your investment property. This includes the walkthrough, checking with your contractor, conducting a title search, and inspecting the home for any major defects that may affect its value or desirability. Don't forget that $300-$500 spent on inspecting sewer lines and the roof goes a long way to saving your contingency and budget.
Step 7: Maintain Your Property
As an investor, it’s important to keep up with regular maintenance on your property, both inside and out. Regularly repairing small problems can save you money in the long run and help ensure a good return on your investment. You should also consider hiring a professional property manager if you don’t have the time or resources to manage the property yourself. If you are self-managing, I can provide you with a process to ensure your tenants are managing the property and you're only managing the tenant.
With the right knowledge and strategy in place, you’ll be well on your way to unlocking your potential and achieving financial freedom. To learn more about real estate investing, follow @bud.evans and DM the word "Coach." Or book a call at budevans.com. Let me provide you with the right tools and confidence to achieve generational wealth through real estate!
Cinnaminson, New Jersey USA