The most attractive form of real estate investing is buying, holding, and receiving monthly cash flow. The beauty of the buy and hold strategy is not only the fact that you receive a check each month, but you receive tax benefits, and you can borrow from the equity of one property in order to purchase another.
So, here are some quick tips on how to purchase your first investment property:
– First be sure you have enough cash on hand. Most lenders require that you put at least 20% down. I recommend that you have not only your down payment ready but also an extra cushion in case the water heater or some other unplanned item goes within the first month. Trust me, it can happen.
– Look at a lot of real estate. I mean a lot! Three houses “ain’t gone” cut it. You need to understand the inventory and the prices associated with it. The only way to truly know you’re getting a good deal on a property is to look at a whole lot of homes that way you fully understand the market.
– Buy into equity. Occasionally, paying market value could still make for a smart deal if it’s in a great location and the property is already producing income. But generally speaking your goal should be to negotiate for at least a 20% reduction in price. This almost guarantees the success of your investment when it’s time to exit.
Building wealth and creating a passive stream of income takes time. But remaining disciplined and becoming a smart investor will certainly help you get to where you want to go faster.