10 Things to Know Before Buying Investment Property
1. Understand what you are doing! You are purchasing this as in investment generally to make money. Do your research – make sure the property meets all of your expectations.
2. Can you afford to purchase? Do you have enough money for the down payment, property insurance, future repairs and the closing attorney? If not, you probably should not be looking any further.
3. Know your new tenants! Before the closing, review the leases, the rent rolls and the tenant ledgers. Make sure you have contact information and also the applications that have their social security number and important emergency information (in case you need to trace them down the road for collections). Once you purchase the former owner will often be of little help to you.
4. Can you handle the property when one or more units become vacant? Often times, owners can handle occupied property, but what happens when there is a vacancy? Do you know what to do?
5. Do you have enough in cash reserves to handle property repairs? Every repair costs money. Are you skilled enough to work on your property? Do you have the desire and the time? If not, you must have the capital to afford repairs and even more money to afford modernization.
6. Property Insurance. Make sure before you put money down as an offer on the investment that you can obtain property insurance. Some foreclosed property or older properties may be insurable without significant repairs. Don’t wait until the last minute to find out about insurance coverage.
7. Do you know the housing law for your state and local community? Are you familiar enough with the law to represent yourself? If not you need to find an Attorney who does. They should specialize in landlord tenant law.
8. What time is it and who is calling? If you hate to answer your phone and think that their problem can wait, it’s not likely to go away. As an owner you have a legal responsibility to your tenants for routine and emergency repairs. As an investor you want to stop a small problem before it develops into a larger one.
9. Accounting and Recording Keeping. You must maintain an accounting of your deposits, checks paid and receipts and keep them orderly. There are a number of small business computer programs that can assist you in financial record keeping. As with legal questions, anything of a business nature should be best addressed by a tax professional or an accountant.
10. Know who best manages property – a Property Manager of course! Who better than a Certified Property Manager® from the Institute of Real Estate Management® (http://www.irem.org).