Real estate is a lucrative investment due to its stable and consistent returns, tax advantages, predictable cash flow, and leveraging equity. However, buying real estate can be daunting, with numerous properties on the market and lengthy and complicated processes involved. Whether you want to acquire a home or commercial property, here are the dos and don’ts of buying real estate.
Do Your Research
Buying real estate is a monumental task, and one mistake or miscalculation can have huge repercussions. As such, you want to conduct extensive research on a property before you close. Whether you are a potential homeowner looking for a serene place to call home or an investor looking for a profitable venture, knowledge is power. Start with a list of aspects and features the real estate should have, ranging from amenities to location, size, and neighborhood.
Once you understand your needs, begin searching for properties online and offline. Consider visiting preferred neighborhoods, viewing homes that suit your needs, and examining trends in the market. When you identify a potential property, experienced title services and closings lawyer can perform a thorough title inspection to safeguard your investment and uncover any encumbrances.
Do Secure Financing
Few things are more frustrating than falling in love with a property but not having the means to buy it. Therefore, secure financing beforehand by examining your financing options, identifying a reputable lender, and getting preapproved for a mortgage or any other real estate loan. Preapproval sets the budget for your property and speeds up the property-buying process. When looking for a lender, compare interest rates, downpayment, loan term, and closing costs to get the best deal possible.
An essential part of securing financing is knowing your credit score because it significantly impacts your interest rate, downpayment, and monthly payments. Typically, a good credit score gets you a competitive interest rate and increases the likelihood of being preapproved for a mortgage. If you have issues with your credit score, resolve them promptly to save time and effort.
Do Work with a Real Estate Professional
While working with a real estate professional is an extra cost, it is a worthy course, especially for first-time property buyers. Real estate professionals know the real estate market and the home-buying process. They can help you navigate the complex and expansive industry to identify a property that meets your needs and budget and negotiate the best terms possible.
Don’t Forget a Property Inspection
In hot markets with fast-selling properties and fierce competition, it can be tempting to overlook an inspection, but don’t; it will save you money and headaches in the future. A licensed and experienced property inspector examines a property, from the roofing to the HVAC, plumbing, and exterior, to determine its condition and identify any problems. With an inspection, you can negotiate with the seller on how to address the issues or walk away.
Don’t Wait to Save 20% Downpayment
Many people mistakenly believe you need a 20% downpayment to buy a home. While this was true in the past, today, things have changed. There’re numerous loan products requiring little to no downpayment. For instance, FHA loans let potential buyers access loans with manageable down payments of as little as 3.5%. Similarly, VA loans for veterans and buyers in service do not require a downpayment. The golden rule is to explore your financing options and spend an amount you are comfortable with, both upfront and monthly.
Buying real estate is an exciting but daunting process, especially for ‘green’ investors without prior experience. The secret is to do your research and due diligence, secure appropriate financing, and work with a real estate professional. Importantly, do not rush to acquire a property, and never turn a blind eye to anything; it can work against you later.