Eager to find your first real estate investment? There is no question that investing in real estate property is an efficient way to build net worth. Whether you are fixing and flipping for profit or buying and holding so renters can pay your mortgage, make sure you understand how to find and purchase your first investment property in Chicago. Mistakes are costly so don’t let stress and emotions control the transaction.
There are several ways to locate potential investment properties. It takes some time to streamline the looking process so chose an area and learn to scour potential properties there before moving on to other avenues.
Probate estates often need to liquidate properties to pay debt, taxes or pay off beneficiaries. As such, they are motivated buyers. Develop relationships with probate attorneys or learn to read probate court public records cross-referencing them with obituaries.
Foreclosures are another resource of distressed properties ready to grab at wholesale prices. Tax lien auctions are held in most counties periodically with all records publicly accessible. Call the tax assessor to learn when auctions are held and the process.
Learn to look at properties in terms of time and money. This means you need to be able to review a property quickly to determine what work needs to be done to market the home, the cost of the work and how long it will take. Ideally, you are purchasing properties for a 30 percent discount or more. If you don’t have the experience to quickly estimate rehab costs, bring in a contractor to ballpark numbers so you can do your math.
Remember that time is money. Not only do you tie up your own money the longer you hold a property, but you also miss both buying and selling opportunities in the real estate market. If rehabs take too long you can miss out on higher sale prices in a declining market.
Purchasing Investment Properties
Investors have the most leverage when financing is already in place. From the seller’s perspective, the purchase looks like a cash offer with few, if any contingencies. Investors are usually willing to buy properties “as is” and forego many of the inspections expediting escrow. Cash is also king when sellers are confident that escrow will close without the risk of financing failures in traditional sales.
Work out financing as early as possible if you don’t have enough cash for the entire purchase. Make sure whatever financial backing you have includes the budget for renovations. There are specialty lenders who offer short-term loans for investors. You may pay more in interest but you’ll have the money you need to act quickly. Lenders will not act like traditional mortgage lenders for personal properties. They expect a well laid out business plan and act more like partners than banks.
Partners: Yes or No?
If you are new to real estate investments you might consider having a business partner. Real estate investment clubs are accessible in Chicago. These clubs are great resources for information, property leads and finding partners for financing or rehabs. Consider attending some meetings and get to know the group. There may be an investor willing to partner or mentor you through the process. Successful real estate investors often love to share their experience and it might help you make a newbie’s mistake on an investment. The last thing you want is to lose money on your first deal. Exhaust all resources.