How to Buy Investment Property: Beginner's Guide

Investing in property is a serious business because its related costs are often an ongoing financial commitment. Buying your first property can be a daunting venture, considering all the details that require your attention, the financial language you need to learn and the usual beginner's fear of failure. A mortgage broker can minimize the confusion and anxiety of entering the property market by teaching you how to buy an investment property and by finding you the best deals for financing.

Investment plan: Buying investment property is an effective strategy for building wealth in the long-term. The market will occasionally rise and fall and experience steady periods for which you should be prepared with a long-term investment plan. Your first step should also include a consultation with a financial planner or accountant who can evaluate your readiness to invest in property.

Costs and tax consequences: Costs for maintenance, interest, depreciation and other property-related expenses are generally tax-deductible which is why investors adopt a strategy known as negative gearing. Negative gearing is a situation where loan repayments, interest costs and other mortgage fees exceed rental income. The difference is an allowed deduction that can lower your tax due on other income.

How to Buy Investment Property: Beginner's Guide

Research before buying: News articles, business updates, and reports of reputable property research organizations can provide essential information about prospective investments.

Home equity: Existing property or other investment property may have built up a value or equity that you can use to invest in other investment properties. This can reduce the initial cash outlay or down payment ordinarily required in mortgages.

Loans: Various loan types are available and bear different features that are best suited for specific investors. A mortgage broker often knows where to get the best loans for your situation and can show you how to buy investment property.

Investment pool: Prime properties possess great income potential but they may be priced beyond the budgets of most new investors. Buying property together with family or friends is another option for building an investment property portfolio. Consider a family guarantee which allows a parent or any family member to use equity in a home as security for a related investor's mortgage.

Getting started in property investment can seem overwhelming. All you need is an investment plan and a mortgage broker to teach you how to buy investment property, and you'll soon experience the financial rewards that are driving many investors into this type of business.

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How to Buy Tax Lien Property

In order to buy a tax lien property you must first determine which states or counties are conducive to producing conditions that will allow you to end up in ownership. Additionally you may want to consider purchasing tax deeds instead as the process is set up in away that gives you a better chance at property ownership.

Before you buy a tax lien property you are first going to have to purchase the tax lien certificate. In order to purchase a certificate you will have to bid on the sale in many cases. This process can vary from state to state, and county to county in any particular state. In Orange county Florida, for example the bidding process starts at 18 % and they actually begin to bid down from there. In other words, whoever is willing to except the lowest amount of interest will end up winning the certificate.

In general, assuming that you win the bid for the tax lien property certificate that you are interested in the next step is to foreclose on the property. This process varies from state to state but typically you will have to wait until the redemption period is over, in order to start the foreclosure process. The redemption period can vary anywhere from six months to a few years.

How to Buy Tax Lien Property

So it is definitely true to buy properties for pennies on the dollar. However, before you buy any tax lien properties you must do your research. If you end up with ownership of a property that is not worth a dime you could lose your investment.

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How to Buy Investment Property Under an LLC

This is a common question in Robert Kiyosaki's RichDad forum. In Robert Kiyosaki's book Rich Dad Poor Dad Kiyosaki recommends building wealth by investing in rental properties under a limited liability corporation. The confusing thing about this to newbie investors is that a bank typically will not grant a mortgage to a buyer under an LLC.

The way around this is to do what is called a Quit Claim deed after you by the property. By doing this, an investor deeds the property purchased into their corporation while the mortgage loan remains in their personal name. Beginner investors get confused because the bank usually has a clause in the mortgage where they can call the mortgage if title is transferred. A good real estate attorney will explain that although this clause exists, the mortgagor is unlikely to find out about the transfer if the payments are made, and real estate investors do this all the time with their investment property.

The important thing to remember is that when you buy investment property and deed it into an LLC, you are transfer your rights to the property over to the corporation to limit your liability to lawsuits, but you will remain responsible for the mortgage as a personal guarantor. It may feel uncomfortable at first, but the truth is that it is a standard business procedure. On one hand, if you don't deed the property into a corporation, everything you have is on the line. On the other hand, if you follow through with the quit claim deed, the bank may find out and call the loan.

How to Buy Investment Property Under an LLC

Consult an attorney who specializes in investment property for all possible outcomes. Also, consider joining a real estate investment club and interview seasoned investors about this topic.

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Want to Buy Property For Back Taxes? Here's How to Get Them Without Attending the Tax Sale

If you want to buy property for back taxes, you're a smartie. Of all the types of property you can buy, back taxes property is the most profitable. The problem is, the tax sale is getting too crowded these days, as more people find out about this investing method. The competition's too fierce to get good deals anymore. Here's how to buy property for back taxes, without competing against other bidders at the tax sale auction... and why you must invest this way, if you want to be successful.

Besides the competition, there's one main, glowing reason why you must not buy property for back taxes at tax sale: you can't inspect it first. Would you buy a house to live in you couldn't inspect? Doubtful. If you bid at tax sale, you're committing to buy, in cash, a property that may have extensive problems you don't know about... or that may become extensively damaged in the period of time after you've bought it, but before you can foreclose (1-5 years, depending on what state you're in). If that's not enough to convince you, what is?

There's really no reason to take this risk. There's a little-used loophole in the tax sale investing business, and you should start using it exclusively. It's simple: buy directly from the owners... but only after the property has already been sold at tax sale. It's the only surefire way to buy property for back taxes, and know what you're getting before you buy.

Want to Buy Property For Back Taxes? Here's How to Get Them Without Attending the Tax Sale

During that redemption period where owners can pay off their taxes, you can legally (in most places) buy their property and pay the taxes off yourself. After tax sale - if they can't bail the property out - in their mind, their property's already been "sold," even though they still own it for a while. You approach them during this time, and offer to buy what is, in their minds, their now-worthless deed. You can often get these deeds for only a few hundred dollars, and flip the property before you ever even pay the taxes off.

And all's well that ends well: these folks are usually glad to get at least something for their property, and would much rather see a person like you get it and do something with it than watch a greedy, evil tax sale investor foreclose. It's an important psychological difference, and it will allow you to buy property for back taxes without dealing with the headaches of buying from the auction, and make a lot more money while you're doing it.

Here's another secret: in about half the states in the U.S., when someone bids more for a property than is owed for taxes, that overage amount is held for the owner to come in and collect. Most owners don't realize this, since in many states, the money just goes right to the government. The owners rarely figure it out, since they don't live at the property anymore and, thus, don't receive notice from the government that they have the money waiting for them. After a year or so, legally, the money becomes property of the government, and the owner loses it forever - even if it's ,000.

Since this money isn't held at the state level, you're not subject to the state "unclaimed funds" money finder laws, in most places. So you can find these owners and charge up to a 50% finder's fee for your information and collection service. Since these overbids regularly run into the tens of thousands of dollars, you can easily make in the six figures yearly making a full time business out of it.

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