Property 101: 10 Tips to Making Sure that Property is a Good Investment

So you’ve read our previous post on what to expect when you are a first time buyer buying a home, but did you know that it is the little things that can make all the difference in terms of your long-term happiness with your decision? Below are our top 10 tips for making your buying experience as profitable, stress-free, and enjoyable in the long-term as possible.

1. Research Thoroughly Before You Begin Physically Looking

As an agent, I see it all the time, a buyer–or buyers–want to jump into my car with me immediately and begin feverishly seeing dozens of condos on a Saturday afternoon.

Why is this bad? Easy–the clients and I waste 5 hours running around like chickens with our heads cut off and the entire process–after 2-3 weekends of this–quickly becomes disorganized and stressful. This is the exact opposite of how the process should go!

Instead, take time to do your homework before you even involve an agent and begin seeing homes. Start with online sites like Zillow, Trulia, or Redfin and check into different neighborhoods, price points, etc. so that by the time you do actually want to physically see properties and get more serious, you have a very well-defined idea of what you’re actually looking to buy. Also consider attending a few open houses on your own–just be sure to let them know you’re working with an agent if you’ve already chosen one.

2. Know Every Single Number Involved Up Front

The #1 reason that deals don’t close in our business? Anyone? Any guesses? Of course, it’s financing! Don’t be one of the statistics.

The bottom line is–unless something catastrophic occurs between the time your offer is accepted and you actually close, there is no reason for your loan not to go through if you, your Realtor, and your mortgage lender have done their jobs.

Before you even begin searching online–see tip #1 above–speak to a mortgage lender (you aren’t committing to using them at this point) to figure out what you actually qualify for, and more importantly, what you’re comfortable spending on a monthly basis. If you need a referral to a lender, ask your Realtor, Attorney, and/or friends who’ve recently closed and had a positive experience.

3. Location, Location, Location

This is the most famous saying in our industry when it comes to the three things that most effect buyer’s purchasing decisions.

It’s wonderful that you can buy a 3,000 sq. ft. single family home for a very low price if you go out 7 miles due west of Downtown Chicago, but if no one will come and hang out with you, what was the point?

Location is such a crucial piece of the home buying puzzle because it will have the greatest effect on your overall lifestyle.

Do you love getting up early and walking a block to your yoga class and then having a nice protein shake from the juice bar across the street on your way back? If you do, then think long and hard before you decide to give up your ideal location for a few more interior square feet or some shiny new stainless steel appliances.

4. Don’t Forget to Account for the Extra Small Costs

When buyers are setting up their budgets, they always remember to account for things like mortgage, tax, and insurance payments, as well as any association dues (for condos or communities with common amenities). They also remember to budget for utilities like gas, cable, and electric and most even remember things like landscaping maintenance and routine maintenance.

What most people forget about are the little extras which, when you add them up, can become not so little. A prime example- using the tip above about location- let’s say you decide to move 4 blocks farther from your ideal location which isn’t so far- no big deal, right? Maybe not…

Let’s say you’re not much of a walker or are always in a rush–that 2-minute walk for $0 just turned into a $6 cab ride.

Another simple example is a buyer who moves from a more affordable area to a more expensive one. Everyone accounts for the extra rent or mortgage they will pay, but few remember to account for the fact that there are no more $7/plate restaurants out your front door and that $35/plate restaurants have replaced them. Now you’re faced with spending hundreds of dollars more per month to feed yourself or spending money on cabs to get to more affordable options.

Always remember to really take the time to think about your overall budget and account for every penny that your new home will cost on a monthly basis, but also the ancillary income you will need to spend to conveniently live in that location.

5. Making Smart compromises

This is one of my favorite conversations to have with a client and it really nails home the importance of compromise when purchasing real estate. The conversation usually goes something like this:

Realtor: You were adamant about the condo having space for you to put a large dining room table. We’ve looked at a half dozen options today which you love, but which don’t have enough space for the dining table. Why this is such an important thing for you to have?

Buyer: Well, sometime in the future I would like to, maybe, host Thanksgiving or have a dinner party.

In this example, the buyer is going to give up great opportunities to look for something that doesn’t exist for a reason, which should be at the absolute bottom of their wish list. More importantly, is the location convenient? Is the property affordable on a monthly basis? Does the long-term appreciation potential of the property look good? Those are the things that should be focused on the most.

The best tip I can give for this is to make a list before you even start the process and adjust it as you become more comfortable with what’s out there. List out your top 5-10 “wants” in order of importance. Keep dialogue going with your agent to stay realistic on your list and be prepared to compromise a few small things for one of the bigger ones on your list. I think giving up formal dining space in exchange for a convenient location is a no-brainer, but that’s for each individual buyer to decide.

6. Scope Out the Area on Your Own for a Different Perspective

Going out with your Realtor on the weekend and seeing homes is a great start once you become more serious about your search, but if you really want to get a feel for the area you’re considering buying in, you need to do more.

Start by visiting the property and general area at 9am and 5pm so you can judge traffic volume, noise levels, and the general feel for the area. Then come back during the weekend and walk around during the middle of the day. Stop in a local restaurant and have a bite and talk to a couple small business owners in the area to get a feel for their thoughts on the neighborhood.

The trick here is to figure out the lifestyle afforded by the area you’re considering and taking the time to make sure that lifestyle will be a good fit once you’re moved in.

7. Use Technology to Get Your Head Wrapped Around All the Information

There are so many amazing apps and other pieces of technology out there for you to use when you’re buying. Here are a few must-haves:

Redfin – I think this is the best home search site out there and their app follows suit. The information is well over 90% accurate and there are some great bells and whistles to play with that will help keep you organized.

Zillow Mortgage App – this app allows you to quickly and easily calculate the monthly cost of places you’re finding online and get your head wrapped around all the numbers.

Walk Score – this app allows you to see how walkable a property is by plugging in the address. They will assign a score of 1-100 and give you a list by category of all the places nearby.

8. Stay Organized

Apps like Evernote will be a major help for this, as you can make a home search folder and put pictures, media, and all your other documents and thoughts into one place that you can share with other people.

Beyond this, utilizing simple techniques like making spreadsheets and taking detailed notes as you walk through properties will help you to keep your home buying process systematic and enjoyable.

Don’t just rely on your Realtor- even thought it’s their job to make the process efficient and organized, it’s important you take responsibility for managing your end of the process.

9. Do Not Compromise on The Quality of the Professionals You Hire

We’ve all heard the saying “You get what you pay for” and this couldn’t be more true than in real estate.

I get it–your girlfriend’s sister’s mom is a Realtor and she’s going to be so so so upset if she doesn’t get the business. Unfortunately, if you let people pressure you into hiring people who aren’t capable of fully representing you, then you can run into problems.

All hiring decisions- attorney, lender, Realtor, home inspector–should be based on merit and made without regard to personal relationships. If you know just so happen to be friends with a phenomenal agent with a stellar reputation who works in the area you’re buying in, then that’s one thing, but to blindly give out business when your hard earned money and happiness at stake is foolhardy to say the least!

10. Always Know Your Exit Strategies

A good businessperson always knows their exit strategy up front and you should be no exception when it comes time to buying property.

Do you have enough for a down payment so that if you needed to sell quicker than expected you could without writing a check? Can you rent the home for enough to cover your total monthly expenses as an alternative strategy if you can’t sell?

The bottom line is, you need to make a plan as if you’re going to be moving half way across the world 6-12 months after you buy. If your exit strategy is sound enough to account for that critical of a life change, you know you’ve done your job in this respect.

Buying a home doesn’t need to be intimidating, scary, or complicated- in fact it should be just the opposite- approachable, fun, and simple. Organization, planning, and careful consideration are the dominant themes for all the tips listed above and by utilizing these simple strategies you will exponentially increase the odds that your purchase will end up a success in every way.

 

For more help, visit State Farm Nation.

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