Buying a home for the first time can be one of the most exhilarating parts of many people’s lives. Many people only buy a home once or twice in their life, making it an incredible experience, if not slightly nerve wracking.
Unfortunately, the downside of only buying a few homes in one’s life is that many people know very little about purchasing a home and miss out on a lot of incredible opportunities that are available.
Here are a few tricks that real estate investors and professional buyers know and utilize to get good deals, analyze homes, and minimize risk.
Renovations can be both challenging and fun for new homeowners. However, they can also offer incredible opportunities if you know what to look for. Oftentimes a home that is in need of repairs will sell for significantly less than its ARV, or after repair value. People simply don’t want to deal with repairs, and sellers just want to get the property off their hands.
This means that you can buy a nicely modeled, newer home for say, $200,000. However, you could also buy a beaten up, older home for $140,000, put in $25,000 of repairs, making it equal in both value and modeling to the newer home, and save $35,0000 in the process. This also gives you complete control over what the home will look like, what kind of floors you like, paint colors, countertops, cabinets, etc.
This is also a form of appreciation. If you don’t know what appreciation is, appreciation is when your home’s value increases over time, meaning you can sell the home down the road, pay off your mortgage, and pocket the difference. This can be hundreds of thousands of dollars over long periods of time.
Doing significant repairs, like those mentioned earlier, can force appreciation on your home. This appreciation can be much higher than the amount of repairs put into the home. For example, you could put in $35,000 of repairs, and if the you made the right repairs the home would be worth $50,000 more. This means you just forced $15,000 in appreciation right off the bat. You now have a little cushion in case the value of your home drops.
Many people do not realize how much interest plays into their loan. When you first get a loan on a property, you will be paying more than half of your monthly payment straight to interest. This means that any drops that can be had in interest rates should be taken advantage of. Most people will not shop around for interest rates, believing that 1/2 a percent can’t make that much of a difference. In reality, that 1/2 percent can make a huge difference.
There are many brokers that can help you shop around without pulling your credit a dozen times. Find one that you like and stick with it.
Don’t just use one place to look for properties. Let’s use someone living in Atlanta Georgia for an example. They could use the Georgia MLS, they could try a site like Fizber that offers FSBO sales, they could drive around neighborhoods they like, or they could likely find some kind of local listings in their local paper etc. The point of this is that when you are buying something as important as your first home, it is important to do your research and know exactly what the market looks like and what a good deal is. If you spend time looking on multiple platforms you will better be able to recognize a good deal, and have a better idea of what you are looking for.