Buying Investment Properties in a hot sellers market is about having all your ducks in a row before you walk in the door.
Here are 10 tips for buying an investment property in a sellers market. A lot of this is common sense, but it is surprising how often new buyers don't do it.
1. Do your homework on rates before you talk to your bank, mortgage broker or lending agent. Have a look at websites like www.ratespy.com (*) to get an idea what rates are available in the market. Interest rates directly hit your bottom line.
Note: Some of the rates posted will be leading offers (for perfect clients with full financing in their principle residence,etc.) , but at least you're getting idea what's out there. Also the major banks will sometimes only compete with other major banks (HSBC vs Royal Bank), but again you've got more information.
2. Have your financing pre-approved and locked in for enough time to find a place. The fewer subjects (like financing) you have stronger your offer will be.
3. Research the market on MLS and set a budget before you see properties. If you are using an agent, they'll help you understand the market conditions. Be prepared to pay fair market value (this isn't a wheeling a dealing time unless you've got a lot of time on your hands to have many deals fall through).
4. There are good and bad agents out there. Get a referral from friends. If you don't trust your agent or feel pressured, get a new one, it's your money.
5. Treat it as a business (which it is) and be prepared to walk away if you feel the price is creep past your comfort zone. Slow down negotiations when you get close to your budget. Even if it means you lose the deal, there is always another property around the corner. Walking away from a bad deal is part of being in business. Be prepared to have multiple offers rejected before you get an accepted offer and keep your emotions out of it.
6. Understand the cash flow. You'll need a fair amount down for it to be positive cash flow in larger markets like Toronto and Vancouver.
7. If you can, pay down your principle residence first. Max out the revenue property borrowing until you've paid down your home.
8. Consider getting a line of credit and borrow for the down payment. This makes both the mortgage and the line of credit tax deductible.
9. Understand all costs. Mortgage, Property tax, insurance, condo fees, special assessments, vacancy periods, etc.
10. Be prepared to move very quickly in a sellers market. The more you know about a building, a neighborhood, etc. ahead of time the better.
Stand out side of the building you are going to buy and ask strangers walking in/out what they think of the place. They have no reason to "stretch the truth".
Remember Real Estate should be just part of a diversified portfolio.
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(*) Richer Journey does not have a business relationship with ratespy and doesn't warrant an endorsement.
About Richer Journey, Inc.
At Richer Journey's we work with you to translate your financial goals into reality. We work with you to create a structured plan, educate you on investment options and teach you practical negotiation skills. All our tips are focused on increasing your returns. We do not sell products or offer to manage your money… our focus is solid education.