As an investor of Kansas City real estate, you know that every penny counts. Saving money when buying an investment property has a huge impact on your bottom line. In our latest post, we will provide 7 fabulous tips for saving money when buying an investment property in the Kansas City area.
Investment real estate is one of the best ways an individual can grow wealth. Buying an investment property doesn’t require a special degree or a fancy license and anyone can invest. Great investors don’t just buy any property, and they know these tools and tricks below to save money and find that perfect investment. Utilize our tips to save money when buying an investment property in Kansas City.
#1 – Know Your Numbers
You don’t want to spend too much on the purchase of your investment properties. One rule often abided by is the 70% rule. This rule states that you should never pay more than the properties after repair value. If you are paying more than that, you should consider moving on to the next opportunity. If something were to happen, you want to at least be able to get your investment back. Another rule often used by investors is the 1% rule which states that you should be able to charge at least 1% of the home’s value in rent each month. If you aren’t able to get that amount, the property may not be as great of a value as you had hoped. There are many great and free resources out there to help you determine what a house will rent for on average in any particular area.
#2 – Have Tenants In Place
You may save money by buying an investment property turn-key or already with paying tenants in place. Finding and screening tenants costs you money and more importantly, it costs valuable time. You need to factor in the cost of background checks, the time you spend showing the property, interviewing prospective tenants, and answering phone calls from interested renters, not to mention the amount of time to initially prepare and market the property. The longer a property sits vacant, the longer you have to wait to start seeing that income. There are always several properties in MLS that have long term tenants in place that come with the property and are happy to not have to move when a new owner takes over. Something to consider when doing your property search.
#3 – Remember, It’s Not Your Home
It might be your house, but it is not where you are going to be living. Don’t spend money making expensive upgrades or unnecessary cosmetic touches. Sure, you want the property to be inviting, but you can’t decorate and renovate as if it were your own. You must make smart and economical decisions while still making the home attractive to potential tenants and buyers. You want to make the countertops, wall colors, fixtures, etc to be more neutral where the majority of people will like it just fine.
#4 – Consider Being An Owner-Occupant
Many investors, when they are just getting started, will opt to purchase an owner-occupied rental. By using an FHA loan, with only a small percentage down and even sometimes getting down payment assistance, you can purchase a property with up to four units. The catch is that you need to live in the property for a while following the purchase (this will usually be around 5 years). You could either opt to purchase a large house and have some roommates move-in, or you could purchase a duplex, triplex or quad, and live in one of the units yourself. While this makes managing the property a whole lot easier, it also makes you much more accessible to the tenants at all times of day and night. You’ll want to make sure that you get along with the people you have living on your property. This adds an additional element to your tenant screening process.
#5 – Ask The Seller To Pay The Closing Costs
Be blunt. Ask the seller to pay the closing costs in exchange for a fast and straightforward transaction. This is not an uncommon request by any means. Many sellers will have no problem covering these costs when they know they have a buyer lined up as it really won’t make that much difference on their end but can make all the difference in the world on yours. Since the closing costs can be deducted from their proceeds, it’s harder for them to miss the money they never had.
#6 – Buy Directly
Working with a professional buyer and seller, such as Mastiff Home Buyers, can potentially save you thousands. Like you, we are always looking for the highest quality properties at the lowest prices. Using our unique acquisition methods as well as our connections in the city, we are able to source the best properties in the Kansas City area, offering them to other investors and buyers at a tremendous discount. We have done the research and the leg-work so you can be assured that you aren’t getting a lemon. Buying a property directly will help you avoid any additional costs or red-tape and can generally speed up the process quite a bit.
#7 – Find A Partner
Working with a partner you know and trust can help you find and purchase a house you wouldn’t have been able to on your own. It can open the doors to larger, more valuable investments while requiring less out of your pocket. When choosing a partner, make sure it’s someone who compliments your investment style. If you are great at dealing with people on the phone, maybe they are the behind the scenes person, who runs all the data, or vice versa. You don’t want to work with someone too similar. It can cause you to bump heads, creating tension in your professional relationship. Each partner needs to add their own strengths and values to the team to make it a success!