- There are at least three universal questions I would advise every new investor to consider before they buy their first property.
- The more you know about not only the property you intend to buy, but also what you intend to do with it, the better your chances of realizing success are.
- Answering these three questions will give you a better idea of whether or not to pursue an investment deal.
There’s no doubt about it: buying your first investment property will be a lot easier if you have a good grasp of what to expect. Remember, fortune favors the prepared in every industry, and real estate investing is certainly no exception. If for nothing else, it is those that put in the work ahead of time that will be most likely to realize the results they desire.
As a new investor, buying your first investment property is a big deal. The impending transaction represents not only one of the biggest purchases of your life, but also the catalyst of your entire career. That said, you must make absolutely certain that the subject property in question will be worth your time. In doing just that, I recommend putting yourself on the spot by asking very specific questions.
There are, of course, countless questions investors would love to have the answers to before they purchase a respective property, but I digress. Nobody will ever have all the answers to all their questions before diving into an investment deal. There will almost certainly be unknown variables associated with every deal. It’s worth noting, however, that there are three very important questions investors can answer themselves — questions that will unequivocally make their decision a lot easier. And while they may not be the only questions new investors have, they definitely warrant their consideration.
Below you will find three questions I believe you must know the answers to before buying your first investment property.
What You Need To Know About Buying Your First Investment Property
Again, there are countless questions to ask when buying your first investment property, but not all of them carry the same weight. While I am a huge proponent of asking questions, not all of them are created equal; some are much more valuable to the asker than others. That said, here are three questions you must ask before buying your first investment property:
1. Have I aligned myself with the right people to make my job as easy as possible?
Real estate is a people business; it always has been and always will be. At the very least, the people you have chosen to align yourself with are unequivocally one of your greatest assets. To think otherwise is a practice in ignorance, as few things have the ability to catapult one’s career farther and higher than the very people they are working with. It stands to reason that your own network will be primarily responsible for literally everything you are presented with: opportunities, deals, funding, and so much more. What’s more, the better your network is, the greater your expectations can be. Today’s most prolific investors already know it, and it’s about time new ones did, too: nobody should go into a real estate deal without the right people on their side.
If you are interested in buying your first investment property, the single greatest step you can take is to ensure that you are working with the right people. It’s worth noting, however, that the right people aren’t solely relegated to your own team. The right people should include your team — yes — but also private money lenders, contractors, lawyers, consultants, and a myriad of other like-minded individuals. Only once everyone is on the same page can you even consider buying an investment property, especially as a new investor. In aligning everyone’s priorities, you are much more likely to realize success in a timely and profitable manner.
Consider the alternative: a segmented team with different goals will ultimately work against the very thing you are trying to achieve. It’s only through a shared vision that things will fall into place, so make sure everyone is on board before you even think about buying your first investment property.
2. Will this property bring me one step closer to my ultimate goal?
I maintain that anyone who has drive, determination and vision can flip a single property. However, most real estate investing entrepreneurs are in it for the long-haul, and for good reason: real estate investing is as lucrative an industry as they come. After all, why flip just one home when there are plenty more waiting to receive the same treatment? That said, most real estate investors enter into the housing market with the intentions of flipping as many homes as they can over the course of their career.
And therein lies one of the most important steps a new investor must take: setting goals. What is it you hope to accomplish? What exactly do you want to work towards? Perhaps even more importantly, why are you investing in the first place? Is it to retire at a young age? Is it to collect passive income well into your golden years? Whatever the case may be, your “why,” as I like to call it, should represent the carrot at the end of the stick — the goal you hope to achieve using real estate as your vehicle.
When you think about buying your first investment property, you must set your goals first. Then, and only then, can I recommend moving forward. Before you even buy the house, you need to make absolutely certain that it will get you one step to your ultimate goal. If for nothing else, there is no sense in buying a home if it won’t get you closer to what you hope to accomplish.
In other words, I don’t want you buying properties for the sake of buying properties. Jumping headfirst into a deal without analyzing where it will take you can have disastrous ramifications. Instead, ask yourself whether or not the numbers make sense and, even more importantly, whether or not the deal will represent progress for your new company.
3. Do I have an exit strategy and a backup plan for this particular property?
Only once you have an endgame in mind — a goal, if you will — can I recommend formulating a plan. Otherwise known as an exit strategy, your plan should represent what you intend to do with the property. Of course, it should go without saying, but you must know what you are going to do with the property before you buy it. More specifically, are you going to wholesale it, flip it, or hold on to it as a rental property?
It’s worth noting that the answer isn’t as simple as saying whatever comes to mind; it’s a bit more complicated than that. Simply because you want to flip a home doesn’t make the property a good candidate for a flip — the numbers must dictate what you do. If for nothing else, not every exit strategy makes sense for every property. It is, therefore, up to you to know what to do with each property you are confronted with — before you buy it, nonetheless.
It’s also worth mentioning that a single exit strategy is never enough. In addition to your primary exit strategy, I recommend having a backup plan, as real estate has a tendency to throw investors a few curveballs. While a sound strategy will come through more often than not, it can’t hurt to have a backup plan in the event things don’t transpire the way you intended.
There’s No Such Thing As A Bad Question
I would argue that there is no such thing as a bad question, as long as the answer provides clarification for something that is both relevant and important to a particular scenario. That said, not all questions are created equal; there are those there get you ahead, and there are those that can take you anywhere. If you are partial to the latter, I recommend asking yourself the three questions I proposed above before buying your first investment property. You may be surprised at the sheer volume of insight these inquires can offer savvy individuals.
Did you ask yourself these questions before buying your first investment property? If so, how did the answers help you through the process? Please feel free to share your first home buying experience in the comments below, and let others know a few more questions that may help their efforts.