As an investor of Chicago 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 tips for saving money when buying investment property in the Chicago area.
Investment real estate is one of the best ways an individual can amass wealth. Anyone can get started, it doesn’t require special schooling or an inherent talent. Great investors know the tools and tricks to save money when buying investment properties. Don’t just buy any property. Utilize our tips to save money when buying an investment property in Chicago.
#1 – Know Your Numbers
You don’t want to spend too much for the purchase of your investment property in Chicago. 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. 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.
#2 – Have Tenants In Place
Finding and screening tenants can be expensive. Not only do you have to factor in the cost of background checks, and other services from 3rd party sources, but you also have to factor in the time you spend showing the property, interviewing prospective tenants, and answering phone calls from interested renters. In addition, you are losing out on income by having a vacant unit. By having the tenants in place when you buy will help ensure immediate income, as well as the likelihood of having good tenants in place with a signed lease agreement.
#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 can make smart and economical decisions while still making the home attractive to potential tenants and buyers.
#4 – Consider Being An Owner-Occupant
Many investors, when they are just getting started, will opt to purchase an owner-occupied rental. Using an FHA loan, with only a small percentage down, you can purchase a property with up to four units. The catch is that you need to live in the property for a couple of years following the purchase. 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 choose to live in one of the units yourself. While this makes managing the property much easier, it also makes you much more accessible to the tenants. You will want to make sure that you can 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 cover the closing costs in exchange for a fast and straightforward transaction. Many sellers will have no problem coving these costs when they know they have a buyer lined up. Since the closing costs can be deducted from their proceeds, it is harder for them to miss the money they never had.
#6 – Buy Directly
Working with a professional buyer and seller such as Chicago Home Buyers can potentially save you thousands. Like you, we are looking for the highest quality properties at the lowest prices. Using our unique acquisition methods, we are able to source the best properties in the Chicago 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.
#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 is someone who compliments your investment style. If you are great 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.