Real estate investment isn’t simply buying and selling homes and hoping to make a profit! Investing in either residential or commercial real estate can provide opportunities to generate short term profits, long-term wealth or growth into a long term business. Especially when property values gradually increase over time, the right investments may produce a substantial profit.
There are many important factors to consider when investing in Real Estate. The decisions pertaining to purchase, contract negotiations, financing, due diligence, and leasing can also have a significant impact on the success of your investments. Follow these tips to help you optimize your future real estate investments.
1 | Finding the Right Property
Prime location and initial costs are only the most basic elements of an investment decision. Your experience and the level of commitment you’re willing to contribute as a property owner will also affect your purchase. The skill set needed to manage a condominium or to flip a residential home remodel project may be very different from those required to oversee a commercial building such as a shopping center or warehouse. First decide what investing goals and objectives are important to you, then start looking for a property. A licensed Realtor should also be utilized in your search.
2 | Due Diligence
Once you’ve found your investment property, then you must perform your due diligence to make sure that the investment property will work for your particular objective. This includes negotiating and executing a purchase contract, performing a title search to check for title defects, zoning approvals to ensure the property can be utilized for your intended use, and conducting surveys to expose any issues that could depreciate the value of your property.
3 | Loans & Financing
You may take the traditional route of financing with a bank, but there are also alternative options such as private money lending and seller-held financing that may help with the acquisition of an investment Property. Private money lending is similar to a traditional loan because the lender will require the Property to be collateral for the loan; however, you will likely have much less hurdles to jump through to get the loan than with traditional bank financing. The downside to private money lending is that they usually charge more in loan interest and loan points. Seller Financing is when the Seller of the investment property finances your purchase and acts like the bank. The benefit of Seller financing is that you do not have to jump through hoops as with a traditional Lender; however the loan terms for are usually for shorter periods of time such as 3 to 5 years to pay off the loan.
4 | Tenant Leases
Once you have successfully closed on your investment property you will need a lease agreement for your tenants. Lease agreements should clearly define the obligations of both Tenants and Landlords. Not only should leases be legally valid under the laws of the State in which the Proerty is located, but they should also be written to protect your investment. Terms of rent and options for renewal as well as maintenance responsibilities for both parties must be included. A licensed attorney should assist in the preparation of the lease to minimize risks related to the ownership of the investment property
Using an attorney who is experienced in both real estate and business matters can assist you when buying an investment Property by helping ensure that Purchase contracts, title searches and title insurance, financing, zoning and leasing are handled according to your investment objectives. This will minimize the risk that your investment Property fails and becomes a burden to you. For more information about how Cona Law might be the right fit for your next real estate investment, call our office by clicking the button below.