There is nothing worse than buying an investment property that you thought was a good deal and then finding out that you were going to lose money when you sold it rather than make the tens of thousands that you expected. This happens to a lot of new and old real estate investors and although you cannot prevent it every time, there are certain precautions that you can take to minimize the risk of it happening to you. When you qualify a property to find out whether or not it is a good deal, use these steps to make sure you know as much about the investment property as you can before pulling the trigger and buying it.
The first thing you need to do when qualifying an investment property is to compare the price to others in the area. You can easily find this by looking through tax records or by looking through MLS listings online. You need to make sure that there is plenty of cushion between the purchase price and the selling price, especially if there is work to be done. The goal is to leave a 25% cushion after any work that needs to be done so that you can price it competitively and don’t have to make a lot of payments out of pocket.
The next thing you need to do is get an inspection from a reputable home inspector. A lot of people try to cut this cost and as a result end up with fixer upper homes that are better off being knocked down and rebuilt than being remodeled. If you pay the extra $300 to get this done, then if you have to walk away you will have only lost a few hundred rather than a few thousand when you realize you not only have to fix the plumbing, but that you also have a termite infestation and a bad roof that needs replaced. Know your costs going in so you can make the best possible decision when buying wholesale properties.
Last but not least, make sure you are buying in an area that people are moving into rather than moving out of. IF you drive through the area and see more for sale signs than sold signs, then you have an issue. Buying discount fixer uppers and undervalued properties in bad neighborhoods can be profitable if you are getting the house for 50 cents on the dollar, but if your margins are close and it looks like people are moving out of the area, then you need to pull the plug. Don’t be stuck with a house that you can’t sell.
Although you can never bee 100% sure that an investment property will sell or that you won’t lose some money, you can certainly mitigate the risk by following these steps. Make sure that when you are shopping for undervalue property that you are keeping the margins loose and flexible in the event that something goes wrong so that you aren’t stuck losing your life savings in the process.
For more information about Discounted Properties and Investment Property Listing please visit: DiscountedProperties.com. We also offer information on Hard Money Lenders and Undervalued Properties.
[tags]Real Estate Investment Property, Investment Property, Fixer Uppers, Wholesale Properties[/tags]
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