10 Things To Look For When Making an Investment Property Purchase
I had dinner with a real estate investor friend of mine last night who we’ve done a lot of hard money loans for in the past. We talked about some important things to look out for when buying your first investment property. Please add to this list and contribute to this discussion:
- Always get a full inspection report.
- Make sure all structures on the property are legal structures.
- Get an appraisal report if there’s any question on comps.
- If buying a rental, even if the price of the property is next to nothing, make sure your holding costs on the property don’t cause you to have a negative cash flow.
- Never buy a house on the top of a hill or with a steep driveway. Harder to sell.
- Talk to the neighbors about the history of the property to uncover anything that is unknown to the realtor.
- Find out how much the HOA dues are and make sure you figure in that number.
- Make sure you have sufficient cash or hard money financing lined up to complete the purchase and the repairs. In other words, don’t stretch yourself too thin on money.
- Make sure the property is not vastly different from the others in the neighborhood. Examples include: not having a basement/garage/2nd bath when most other houses offer these amenities. This could make it harder to rent or to sell down the road.
- Make sure the HOA delinquency rate is well below 15% and that the complex is not in litigation because you will have a hard time obtaining financing. Also, make sure the HOA has an adequate reserve, or that a special assessment is not on the horizon. And check HOA covenants for restrictions on renting or resale.
What else would you add to this list? Thanks for sharing.
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