Whether you are buying an investment property or a private residence, it can be really challenging when you are a first time home buyer. Seems like there are a lot of things to consider and a lot of things that can go wrong. Plus, you’ve probably heard a bunch of horror stories and know how fast the market moves. You may wonder if you can even compete.
Drown out all that noise and adopt an abundance mindset. There are so many deals to go around! There are also some great incentives for first time buyers, so educate yourself and be ready to take action when the right opportunity arises.
Like anything else in real estate, creating a system and following a process can make things streamlined and simple, giving you far less fear and worry. So if you’re considering buying for the first time, here’s my advice and some steps you can take.
1. Set Your Goals
Are you buying a private residence? Is this a home hack you’ll completely rent out in a year? Are you buying this property to live in it for a few years and then keep it as a rental later? It’s important that you know the answers to these questions beforehand—as well as what your long-term goals and plans are. This will largely define your budget.
For example, if you are house hacking but are not initially covering the entire mortgage with your tenants’ rent, will this property cash flow after you move out? Or if you’re buying a private residence and it’s your forever home, you probably have more room for upgrades and extras.
I really encourage you to get the things you want (if you can afford them and they will bring you joy) because it’s important that you love your home and appreciate the investment. If this isn’t your forever home or a home you see yourself in for a long time, it’s important not to get overly sentimental.
2. Talk to the lender
Ideally, your lender will be someone who understands investing – not someone who only cares about sales. You want to find someone who is willing to listen to you, understand your goals, and give you a product that will work best for you.
You might not find this person right away, and that’s okay. Not all lenders are created equal. Keep looking until you find what you want. Don’t be afraid to shop around.
3. Finalize Your Budget
Once you find a great lender, figure out what your budget is. And I don’t mean how much you can afford—I mean what’s within the range of your goals. If you know the market rent in an area is only $1,000, you don’t want your mortgage payment to be $1,100 because you’ll have negative cash flow each month.
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4. Find a Great Agent
It’s similar to finding a great lender. You need to find someone who will listen to you and who is willing to work for you. Make sure they understand your goals and market. Make sure they help you understand the process and have at least a general knowledge of the rental side of real estate.
This is also a good time to speak with the property manager, especially if you are considering renting out the property in the future. Before you make an offer, make sure you know exactly what the market rent range is.
5. Crunch the numbers
Start looking at the properties and run the numbers on each one individually. Don’t let it get too emotional. Once you’ve found a property that meets the numbers you’re looking for, move on to step six.
6. Offer
Make an offer as soon as you find something that meets your criteria. And even if it doesn’t meet your criteria, provide value that does. The worst the seller can say is no.
Making an offer is the only way you are going to acquire properties. It’s the only way you’re going to achieve your goals. This is the only way you can build a portfolio or move towards financial freedom or your dream home.
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Bottom-line
That’s it! Simple, basic, straightforward. Don’t think too much about it and don’t get too emotional about it.
And remember that you can still protect yourself when making an offer. Create a funding contingency, an inspection contingency, and anything else you can think of. And sleep peacefully knowing that you have complete control and that you have the time to do your due diligence.
What do you wish you knew when making your first purchase?
Share your experiences in the comments.
Note by BiggerPockets: These are the views expressed by the author and do not necessarily represent the views of BigPockets.
