The 10 Step Checklist For Buying an Investment Property

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The 10 Step Checklist For Buying an Investment
Property
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Investment Property Checklist
Investment properties are fast becoming the most
popular form of investment, with purchases rising
over 25 in the last 5 years. It makes sense,
since more savvy investors are looking to
diversify their holdings to ride out the
increasing financial swings. Maybe youve decided
its time for you to join this group of savvy
investors and buy an investment property of your
own, but youre not sure where to start., This 10
step checklist will help you make the right
decision.
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An investment property is a house, condo,
commercial site etc. purchased for the purpose of
generating income. Since you dont normally live
in your investment, its neither your current
primary residence nor a vacation home for tax
purposes. If youre an investment property owner,
youre potentially a landlord managing or
overseeing the rental of the property to a tenant
who pays you to live there. If its not purchased
for renting, it might be your intention to
renovate and resell for profit. Investment
properties can provide flexibility and variations
for profit potential, including
What Is an Investment Property?
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• Double The Profit Potential An investment
  property offers two main ways for you to achieve
  financial gain rent that can provide on-going
  income and appreciation in capital value that
  can result in a profit when the property is sold.
  There may also be tax advantages available,
  depending on your financial profile. (Make sure
  you consult a tax professional for advice.)
• Potentially Little Or No Money Down Depending on
  your lender, its possible to become a property
  investor with a relatively small amount of
  out-of-pocket money. Among your financing options
  you may find loans requiring little or no money
  down. There are even options that let you use the
  equity from your current home to purchase your
  investment property.
• Becoming a property investor is a big decision to
  make, and it will require diligence, commitment,
  and an understanding that, for the most part,
  its a long haul. To get you up to speed, read
  the checklist below.

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The 10 Step Checklist

• Assess Your Financial Goals
• Before you dive in and buy an investment property
  its important to assess where you want your
  financial future to head. Investing in property
  can be a powerful wealth-building tool, but it
  can also be a burden if not done right.
• The first and most critical step is to be in
  control of your finances and have an overall plan
  for your financial future. Once youve got that,
  then you can accurately assess if investing in
  property is a good strategy for you. If youre
  new to financial planning it may be worth talking
  to a real estate attorney and accountant, and
  cultivating relationships with these advisors. If
  you choose wisely theyll be a valuable resource
  throughout your investing career.
• To start off, try asking yourself
• What investments do I currently have, and what do
  I want to acquire in the future?
• Do I have retirement savings?
• Will liquidity be an issue for me? Do I need fast
  access to cash?
• Will I be able to be in this long-term, and be
  comfortable with an unpredictable cash flow?
• Do I expect my investment property to supplement
  my retirement?
• Do I expect the property to provide income, or do
  I want long-term capital gains?

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The 10 Step Checklist Contd..

• 2. Assess Your Personal Goals
• Owning and maintaining an investment property is
  a large commitment to undertake, and its a
  decision that needs to work with your personal
  goals and ideals for your future. There are many
  professionals, such as life coaches and
  counsellors, that can help you figure out what
  your ideal lifestyle might look like, but try
  asking yourself the following as a start
• Where do you want to be in 2, 5, 10 years?
• Where is your ideal location to live?
• Do you want to start a family?
• Do you want to travel? Do you want to have a
  solid base for a family?
• Are you satisfied with your career(s), or do you
  see a big change in the future?
• Are you comfortable with the idea of commitment
  and the responsibility of maintaining another
  asset?

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The 10 Step Checklist Contd..
3. Ask Yourself Are You Landlord
Material? Owning an investment property may
require you to play an active role in management
of your tenants. Consider the possibility that
you may have 3 a.m. emergency phone calls to
answer, late rent to collect, evictions to
process, paperwork to keep up with, repairs and
maintenance and additional tax paperwork to be
done come tax time. Investment property is a
major commitment and you need to be fully aware
of the responsibilities and obligations youll
need to abide by. Remember, there are always
professionals that you can hire to give you a
helping hand for a price.
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The 10 Step Checklist Contd..
4. Consider a Management Company If youre
planning to manage your investment property from
afar, or you predict that youll be too busy to
handle the extra work your investment will
inevitably involve, then a property manager may
be a good solution for you. Acting as a
third-party, a property manager will run your
investment like a business, collecting rent,
doing the bookkeeping, coordinating repairs and
dealing with the inconvenient 3 a.m. phone calls.
A good property manager will cost in the range of
5 to 10 of your gross rental income more if
additional services are required. Youll need to
weigh up the cost vs. the potential stress-free
operation of your investment which could make
the additional price a bargain.
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The 10 Step Checklist Contd..
5. Determine Your Borrowing Capacity Youve
decided to take the leap and join savvy investors
in the purchase of your first (or second, or even
third) investment property, so unless youve got
significant cash in the bank its time to head on
down and see what sort of investment youre able
to afford. Financial institutions have stringent
criteria for issuing loans, especially after the
financial crisis of 2008, so its wise to check
just what you can borrow before making a
spontaneous offer to a property agent.
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The 10 Step Checklist Contd..

• 6. Choosing The Right Location
• Once youve got your finances approved, its time
  to choose a location that is both affordable and
  a smart investment choice. Although you can buy
  virtually anywhere, you need to consider whether
  youre comfortable being an absentee landlord
  managing a property thousands of miles away or
  if staying local to keep a watchful eye is more
  your style. Once youve determined that, some
  location-dependent factors to consider before
  making an offer might be
• Services What services are close by that may
  increase the desirability of your property for
  renters or future buyers? Health, shopping,
  employment etc.
• Schools Many renters and buyers look for the
  availability of schooling for their future
  family. What does your potential investment offer
  in terms of schooling?
• Transport Access to transport is becoming more
  of a consideration. Is parking available? Are
  there busses or trains close-by? How easy is it
  to get to an airport? Is the airport domestic or
  international?
• Desirability How desirable is the location? Are
  the streets lined with trees? Are the yards well
  kept? Is it a newer or older neighborhood? Is it
  busy, or peaceful?

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• 7. Choose Your Property Wisely
• If youre going into property investing remember
  that your main reason for buying is to make
  money. Keep that goal in mind at all times and
  give yourself every advantage to achieve this
  goal. You should also take the following into
  account
• Stay clear of areas where property prices are at
  their peak. Generally, these offer a lower rate
  of return. Instead try to find a property in an
  up-and-coming area. A property agent will likely
  be able to help you out.
• Focus on your main investment variables the
  purchase price, rental income, and potential
  profit. Dont make the mistake of getting
  emotionally involved in the deal. You wont be
  living in the home, so forget the room layouts or
  carpet color.
• Look into distressed properties that have been
  returned to lenders (banks and mortgage
  companies) after foreclosures. There are great
  deals to be had here.
• Determine how much you can get for rent on a
  potential property. As a start check out the U.S.
  Department of Housing and Urban Development Web
  site. They offer fair Market Rental Rate
  statistics that break down average rentals for
  metropolitan areas across the United States.
  Alternatively, look at the For Rent section of
  local newspapers and property magazines in the
  area of your proposed investment. Youll be able
  to get a general idea of market conditions there.

The 10 Step Checklist Contd..
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The 10 Step Checklist Contd..

• 8. Secure Your Finance
• Securing your finance will enable your investment
  dreams to come to fruition, and unless youre in
  the banking industry, youre best off finding an
  experienced mortgage consultant to become a
  valuable part of your team. Home mortgage
  consultants are trained to ask questions that
  uncover a clear understanding of your investment
  goals, which they can use to make recommendations
  for your wealth building potential. Here are just
  a few of the solutions that may be available to
  you
• Home Equity Financing Allows you to leverage the
  equity in your primary residence to purchase an
  investment property. You may be able to borrow up
  to 100 of your current homes unused equity.
• Renovation Financing A single loan that covers
  both the purchase price of an unrenovated
  property plus the costs of renovation. The loan
  amount is based on the estimated value of the
  property after your improvements.
• Low Down Payment/No Down Payment Allow you to
  purchase a property with little cash out of
  pocket.
• No Doc/Limited Doc Lending options for the
  self-employed.

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9. Make An Offer Once youve found a place and
received the green light from your lender, its
time to cement your commitment to an investment
property and make an offer. Its advised you
consult a property agent, and even employ their
expert services to do the negotiation on your
behalf. Negotiating a deal for investment
property is an art, and unless youve got the
background knowledge of the market, then you
could be sabotaging the value of your investment.
Sometimes its worth paying a fee to get a better.
The 10 Step Checklist Contd..
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The 10 Step Checklist Contd..
10. Get Your Investment Checked Over If your
offer gets accepted be sure to include a clause
in the contract to have the sale conditional on
the property passing a building inspection. All
too often property condition is assessed at face
value whats on the walls, and what looks good
to the naked eye. In the greater scheme of
property investing, its whats behind the walls
that counts. Are there termites? Is there rotting
of the frame? Are the foundations structurally
secure? These are all answers that need to be
answered by a qualified professional.
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Signed, Sealed, and Delivered
Making the move to property investing is a
significant decision to make, and one that will
inevitably bring changes to your personal and
financial future. Its up to you to perform the
due-diligence and ensure that this change is a
positive one, and complements the vision for your
future. Using this 10 step checklist will ensure
that youve got all your boxes ticked when buying
an investment property, and may even prevent you
from making irreversible decisions that you could
regret in future.  
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• Website http//michaelputnam.com/
• Michael Putnam
• info_at_michaelputnam.com
• 703-928-6514
• References
• http//michaelputnam.com/10-step-checklist-buying-
  investment-property/
• http//www.alpinepdx.com/pdf/Checklist-Buying-Rent
  alProp.pdf
• https//www.locationshawaii.com/pdf/InvestmentProp
  ertyGuide.pdf