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Advice About Purchasing Your First Rental Home/Property
(Investment Properties: Part 1 of 5)

Before buying that first piece of rental property it is important that you answer a single question. This question has nothing to do with your credit score, your experience with real estate or how much money you can gather for the purchase. The question is quite simple: WHY are you buying an investment home?

The answer to this question will guide you towards the right kind of property and the right type of financing. Let’s look at some examples to get a better idea of reasons people use to start investing in homes.

Saving for College Tuition

This type of goal usually involves a term over a few years. Couples with young children will buy a home in an area that has shown signs of appreciating. A year or two before the child enters college the family will sell the home and use the profit to pay for tuition, books and other expenses.

In this particular scenario the couple is not concerned with making a large profit each month on the rent. They simply want to break even while keeping the home in tip-top shape to maximize the potential appreciation.

Using Cash Flow to Increase Monthly Income

Some individuals invest in rental homes because they want to earn a profit each month from the rent. In these cases it is extremely important to buy a home either for all cash or at a deep discount from the market price. Foreclosures and vacant homes are common for this example. Buying the home for cash or at a deep discount allows the landlord to charge a fair rent based on the current market conditions and pocket most of the money each month as profit.

Speculation about Future Values

Sometimes people simply buy a property at a slightly discounted price in hopes that the property value will escalate quickly due to a future event. For instance, a new shopping mall, new school or a new factory can greatly improve the value of homes in the immediate area. Buying a home in such a location and holding on to it for a few months to a year can yield a high profit.

Career Change

Some people want to begin their property investment as a means to escape their current full time job and start a new career. It is possible for people to invest in real estate as their main source of income. However, it is not a get rich quick scheme.

The most successful investors have clear goals and follow a proven formula. They buy homes in particular areas that exhibit desirable qualities. They only buy when the price is discounted heavily and they have favorable financing for the transaction. They also understand the rental rates for the area in comparison to the financing costs.

Buying a rental home can be lucrative and lead to good fortune. However, it must be approached with diligence and hard work, not pie-in-the-sky dreams.

Investment/Rental Properties (5 Part Series)

• Preparing to Purchase that First Rental Home (Part 1 of 5)
• Adding the Title of Landlord Behind your Name (Part 2 0f 5)
• Rental Property is Still a Safe Investment (Part 3 of 5)
• How to Pick Profitable Rental Properties (Part 4 of 5)
• Success Plan for Investing in Rental Property (Part 5 of 5)

Rock Realty Client Testimonials

"Approx 4 years ago.. I was having some financial strain. I wasn't able to keep up with a first and second mortgage alone as a single mom.

Through friends and family, I was introduced to Mike and Matt.

I didn't want to have to go through the foreclosure process, because I knew that I would be able to pull through the mess I was in within a few years and I didn't want to have that looming over me.

Matt and Mike were able to take over and help me with a short sale. They worked with me directly. They both came to my home, sat down, helped me understand this delicate process (which remains total Greek to me), and they were extremely efficient. My bank worked with me and these gentlemen, and withing approx 3 months, my home was sold in a short sale.

I remain amazed at their abilities and their continued efforts to help me.

Now, 3 years later, I'm looking to purchase... I have looked them up again... and they are helping me find a home that I'm looking for within my specifications and they also have resources to assist with lending.

Couldn't ask for more!!

Thanks so much my friends!! you do an awesome job... Keep up the great work!"

Kari B.(Cross Plains, WI)
Rock Realty Seller & Buyer Client

Thanks for the kind words Kari! We look forward to finding you the home perfect for you!

The SMART Way to Buy Your First Short Sale

Buying a short sale in Madison Wisconsin is quite common right now. The impact of the financial recession has resulted in numerous foreclosures and has left some people with no option but to sell their home for less than the mortgage balance. Buying a Madison area Wisconsin short sale will require a bit of patience and a smart plan.

Understanding the Short Sale

Obviously, the best reason to buy a short sale is for the savings. Most of these properties are discounted as much as 20% off the market price. Buyers can save a considerable amount of money by negotiating the right deal with a motivated seller. However, a good price should only be one consideration. There are other things for the buyer to be aware of such as:

* In order to get a contract on a short sale, it is best to be the first person to contact the seller or selling agent. Being first puts you in more control of the transaction.

* Just because a property is being offered as a short sale does not make it a great deal. Some properties may need extensive work before they can be deemed a safe living environment.

* Banks typically frown on ridiculous low offers. A successful short sale will require you to offer a reasonable amount. This is where an agent can really come in handy.

* Based on the current number of short sales, banks are swamped with these requests. The process for moving the offer through the chain of command does not always progress in an orderly fashion. This requires the buyer to be flexible about a closing date.

All of this means that buying a short sale requires a solid plan; a plan that will get you in front of the right seller, with the right offer.

Putting Together a Good Plan

Follow this outline to help you develop a plan for buying your first short sale.

1. First and foremost, you need to meet with a real estate agent that has experience in short sale transactions. This will save you lots of time and trouble throughout the process. The agent can have a conversation with you to determine the type of house you need and look for possible short sale targets.

2. Determine a plan for responding when a short sale becomes available. Decide with your agent how the information will be communicated to you and how soon you can look over the home.

3. Set up a meeting with a local mortgage lender. Getting the financing secured ahead of time will help get your offer approved. A lender that is familiar with short sale transactions would also be beneficial since the closing may happen at any time and the lender will need to be prepared.

Understand that a short sale which seems like a good deal will likely draw attention from several buyers. The person that responds the quickest, with the best offer and the best plan in place, will likely win the bidding war.

Bad Choices People Make When They Buy a Home