Hiring a Buyers Broker is Key When Purchasing an Investment Property
Now is a perfect time to purchase an investment property. The interest rates are still historically low, so borrowing money is cheap. Today’s real estate market takes some navigation, however. Hiring a buyer’s broker is key to a successful transaction.
Your Best Interest
An exclusive buyers broker will have your best interest at heart. That includes placing your interests above his own. If you sign an Exclusive Buyers Broker Agreement, he has duties he must fulfill. These duties are critical for a successful investment property purchase transaction.
Timing is Crucial
The inventory of available homes for sale is at its lowest point in a long time. This means there are very limited available properties that will qualify as good investment properties. When a house that meets your purchase criteria goes on the market, it’s crucial to go see it and put in an offer as soon as possible.
The market is so hot right now, that as soon as you find a property that will work as an investment property, you must put in an offer right away. As a home buyer, you’ll need negotiation assistance from your buyer’s broker. Most investors are financially solid. Sellers like this. Your buyer’s broker will be sure to inform the seller that you are financially strong and are putting down a large down payment or paying cash. Your buyer’s broker will negotiate on your behalf and explain why it’s better to choose an investor buyer than a first-time home buyer, for example. Purchasing an investment property is a business transaction. You are less emotionally involved than a buyer who is purchasing a home to live in.
The Right Property
A buyer’s broker will be able to advise you on what makes a great investment property. For example, a home that needs less work and fewer repairs and replacements should be higher on your list. You will want to ask the sellers how old the roof, siding, windows, furnace, air conditioner, and hot water heater are. Those are big-ticket items. You don’t want to have to replace those right away, as that cost will eat into your potential profits and return on investment. You should also find out how old the appliances are. Appliances aren’t as expensive, but the cost of replacing them still adds up. You should definitely have a home inspection done to be sure there are any defects or safety issues that you and your buyer’s broker cannot see with your own eyes.
Multi-Family or Single-Family Home
You will also need to consider whether to purchase a multi-family home or a single-family home. Attached, multi-family homes almost always have homeowners association fees. An exception might be a duplex community. These fees are typically monthly and sometimes they have master annual association fees. Be sure to take this into consideration, as these fees will add to your monthly payment and expenses. This will eat into your monthly profit.
Ask your buyer’s broker to prepare a comparative market analysis to see what price you are able to rent the home for on the open market. This will help you determine what your monthly profit will be. Be sure to also consider taxes in your analysis of a property and its profit potential.
Getting Your Property Rented
After you close on your investment property, hire a broker with experience in listing and renting rental properties. The commission is negotiable, but usually the commission to list and rent a home is approximately one month’s rent. The broker will list the property in the multiple listing service and put it on popular real estate and rental property websites. He will show the property and arrange for other brokers to show it. He will arrange for applications to be submitted and help you analyze potential tenants. Many brokers are able to pull credit reports and criminal background reports as well. Once you choose the most qualified tenant, the broker will arrange for a lease to be signed by all parties.
It’s a good idea to hire a property manager to take care of your rental property or properties for you. Ask your buyers’ broker if he has experience in property management. If not, ask him to recommend a property manager or a property management company. The typical cost for a property manager is somewhere between 8% to 10% of the monthly rent. A property manager acts as a middle man between the tenant and you, the owner or landlord. Many times, tenants try to take advantage of owners who don’t have the expertise in the property management field. A professional property manager will know how to respond to a tenant’s questions, requests, and so on. A property manager will collect rent, handle the tenant’s questions, handle repair issues and assist in property maintenance. For example, property managers will assist in making sure that the furnace filter is changed enough, that hoses are taken off the spigots before freezing weather and that other property maintenance items are taken care of.
Hiring a buyer’s broker definitely has its advantages when purchasing an investment property. Real estate makes a good investment nowadays. If you purchase the right property, you will have extra income coming in every month for years to come.