3 Mistakes People Make When Buying Real Estate
Original Article: http://riseforwealth.com Coaching Site: http://riseforwealth.com/ How You Can Make 10,000 per month with Real Estate: https://realtyinvestmentseminars.com/ 3 Mistakes People Make When Buying Real Estate Price I hear it all the time from people that they want the best price or want to negotiate the best price. To me, price doesn’t really matter. What you really need to be looking for when you are doing an evaluation to be able to purchase a property, is the cash flow. Do the numbers make sense? What that means is that you want to look at all the expenses: Mortgages, cost of insurance, taxes, maintenance and property management. All those costs that are associated with owning a rental. Now you want to look at the rental income. How much rental income are you getting for the properties? Let’s say you look at a property that is listed at $400,000.00 and now let’s say you have a similar property in a different neighborhood listed at $350,000.00. They are both 4-plexes and both have similar structures and the only difference is the location. I’m sure you have heard of the saying that Real Estate is location, location, location and that is definitely a factor. For the property that is $400.000.00, maybe the rents are higher and obviously, there are more costs and expenses associated with it because it is a higher-priced property and therefore the mortgage on that property would be more expensive. Or it could be that it’s a new property and that could be why it’s more expensive. Whereas the $350,000.00 property you might think you are getting a deal because it’s the same type of property. it’s a 4-plex and the rents might even be close, but if the expenses are higher than the net cash flow is going to be less. So the thing to look for when evaluating a property is cash flow. not the price. When I say cash flow I am also talking about long-term expenses. If that $400,000.00 property was 10 years old and that $350,000.00 home was 50 years old there would be a lot more costs associated with the $350,000.00 property over the long run, so don’t just look at the price. Mortgage Interest Rate People think that in order for them to buy a property they need/want the best mortgage interest rate. I hear it all the time. Let’s say I can get them a mortgage for 4%, they will say “Oh no that is too expensive I heard of a guy who can get it for 3.97.” Sure you can shop those prices around and save your 0 .03%. What is important when you are trying to get financing is you want to go to someone who you trust and knows what they are doing. Also, the cost of money is not as important as the availability of money. What that means is you may think your interest rate on that loan is so high because it’s 4% and you were really looking for 2.5% but you take that 4%. ... see article for complete text
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3 Mistakes People Make When Buying Real Estate
- 1. 3 Mistakes People Make when Buying Real Estate REAL TALKS
- 2. 3 Mistakes People Make when Buying Real Estate • Only looking at Property Price • Fixating on Mortgage Rate • Not Qualifying Tenants
- 3. Price
- 4. Investment Property Price When looking at buying an investment property, price isn’t the main concern.
- 5. Cash flow What you really need to be looking for when you are evaluating an investment property is the cash flow, not the price.
- 6. Investment Property Expenses Make sure you account for all expenses when evaluating an investment property.
- 7. What are Property Expenses? Typical investment property expenses are: • Mortgages • Insurance • Taxes • Maintenance • Property Management
- 8. Consistent Rental Income Consistent Rental income is the main component to look at when evaluating cashflow.
- 9. Age of Property Take into account the age of the property when evaluating long- term expenses.
- 11. Mortgage Interest Rate Don’t get caught up looking for the lowest mortgage interest rate when purchasing an investment property.
- 12. Access to Money Access to money is more important than the cost of money … as long as you have a positive cashflow.
- 13. Tenants
- 14. When looking for a tenant, don’t ease up on your tenant qualifying requirements.
- 15. Empty Unit vs Bad Tenant An empty unit is far better than a rented unit with a bad tenant.
- 16. Do Due Diligence Make sure you do your due diligence when evaluating your tenants.
- 17. Credit History & Rental History When evaluating prospective rental tenants, make sure you look at their credit history and their rental history.