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7 Steps to Acquiring Income Property


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If you are new to the world of rental property investing, the prospect of purchasing an investment property can seem daunting.  It is in this spirit that I present to you the following 7-step acquisition action plan:

Step 1: Find Your Target Market

You will want to invest no farther than a 30 minute drive from your home because commuting more than this is a real time-waster.  Drive through each town within a reasonable commuting distance, and go to realtor.com and check out the income property listings within each town.  Find the nicest area with the most active listings.

Step 2: Practice Analyzing Properties

Once you’ve identified your target area, call whichever real estate office has the most listings and ask to speak to that office’s rental property agent.  Ask if you could be his/her client (the answer is always yes), peruse the active listings, practice running the numbers, and do drive-bys.  

Step 3: Make the Seller an Offer

Once you find a rental property that you like, make an offer.  Usually 20% below the list price is a good starting point.  Engage in the back-and-forth real estate negotiations via your agent.

Step 4: Craft the Contract

If you can agree with the seller on the price, have your agent (or real estate attorney) craft the contract.  Note all the deadlines and contingencies, and begin conducting due diligence, contact a title company, and start shopping for landord insurance.

Step 5: Inspect the Property

Next, schedule the property inspection and physically attend.  Determine next steps based on the results (i.e., is it so bad that you want to void the deal, or do you want to ask the seller to make the repairs?), and communicate these next steps to the seller.

Step 6: Obtain Financing

Shop around for a lender, and get quotes and Good Faith Estimates from at least 3 of them.  Compare the quotes and select the best one, and then work on securing the down payment and fulfilling any and all lender requirements. 

Step 7: Close the Deal

Contact the title company to schedule the closing.  Once scheduled, request a copy of the HUD-1 and study it to make sure there are no errors.  Do a final walk-through the day before closing, and get ready to sign your life away!



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