Choosing the best property investment company in San Diego to assist in your purchase is a financial commitment that is worth considering. The process requires adequate planning, timing, and monetary expense of course. The cash outlay is necessary to purchase a property, however we offer tips and assist by telling you how save money during the transaction. The following steps will show you how to save money when apartment investing.
Costs of Buying an Investment Property
It’s no secret that as a real estate buyer San Diego can be pricey. After all, there are many costs of buying a multi-family property or any other investment property. Here are the most basic aspects of these fees:
- 1031 Exchange Entity Fees
- Mortgage Payments
- Down Payment
- Interest Rates
- Closing Costs
- Property Taxes
- Real Estate Agent Fees
- Maintenance and Utilities
Luckily, many costs, such as closing costs and down payment for an investment property, can be reduced in various ways and is why many buyers work with a real estate investment company. Here are seven tips for saving money when buying investment rentals.
1.) Start Saving Money Early
As a real estate buyer agent I don’t suggest getting caught up attempting to meticulously plan and save money when wanting to buy investment property. Start saving money little by little and eventually work your way up so you can approach an apartment investment advisor who can realistically work with you. Planning the purchase of investment rentals takes time, so once you have the idea of investing in real estate, start saving money, particularly for the down payment for an investment property. The most fundamental of the real estate tips for buyers is to save money through a dedicated savings or money market account.
2.) Plan and Budget with you Real Estate Agent
Once you have accumulated a sum of money, found ways to increase your credit score, and eliminated debt, you can begin planning a budget with an apartment investment advisor. This step is not a one-and-done deal. You will constantly have to reassess your budget and plan as you proceed with the purchasing process when properties are shown to you by your San Diego real estate agency.
The first step in planning and budgeting is figuring out how much you are willing to spend on investment rentals based on market rental rates. You can conduct a property search using our online search tools to get an idea of the market in the Central San Diego area. This tool can show you the range of prices of different San Diego neighborhoods to help you plan your budget realistically.
3.) Learn About Different Mortgage Lenders and Get Pre-Approved
Before you actively search for multi-family, apartment or investment properties to buy, you need to get pre-approved by a mortgage lender. The pre-approval letter more-or- less sets buyer’s budget, so your real estate buyer agent knows which real estate listing agents to engage with. But of course, before you decide to get pre-approved, look for various mortgage lenders. Lenders may differ in mortgage rates and underwriting requirements, such as a 6-months’ worth of savings in the bank account.
4.) Search for Affordable Investment Properties
Now that your investment property financing is set, you may begin searching for investment rentals with shown to you by a real estate investment company. To save money on the purchase, be on the lookout for fixer or value add properties which may require extra capital for renovations, which will yield high cash flow when rented out quickly and to a highly qualified tenant. High qualifying standards are the hidden secret to generating a lot of money over time.
As a real estate buyer in San Diego, the hunt for cheap real estate can be aided by real estate investment search tools and/or a real estate agent. Sunset Realty investment search is free for instance and provides a plethora of options to a San Diego real estate buyer looking for investment properties for sale. The investment property mortgage calculator and CAP Rate Calculator are two of the best tools you can use when valuing properties and their potential cash flow.
5.) Multi-family Investment Advisors Network with Real Estate Investors
Investment property financing most often utilizes traditional mortgage loans, but it doesn’t have to necessarily. Instead, a real estate investor could partner up with different investors and come to an agreement on investment property financing, some of whom may be using 1031 Exchange Services. Networking with other investors is an excellent way to potentially save money, mainly in the short-term, but requires a degree of trust and structuring of the group. The investors themselves formulate the terms of the investment property financing. A second option is creative financing such as asking the investment property seller to carry seller financing.
6.) Consider an Owner-Occupied Mortgage
For multi-family investing, a common property financing alternative is to use an owner-occupied loan. Owner-occupied investment rentals only qualify for building that have 1-4 units. As the name suggests, these are properties in which the owner is present and they must occupy at least one residence. The owner must live in such a property for a year, and then it can be converted from a residence to a rental with no change to the original terms or mortgage interest rate.
What is the advantage of using an owner-occupied mortgage as opposed to a traditional investment property loan? The answer is simple, owner-occupied loans come with better terms. Credit standards, interest rates, and down payments, for instance, are lower with owner-occupied mortgages. Naturally, investors end up saving a lot of money on the property purchase and interest paid over time.
7.) Negotiate Whenever Possible
Arguably the most important aspect is asking your real estate company to negotiate whenever appropriate. No one should be spared from possible negotiations, whether they are the mortgage lenders, property sellers, or your real estate agent. Property prices of investment rentals, for example, can be negotiated with property sellers. Closing costs and interest rates can also be substantially reduced by negotiating with the banks.