How to Buy an Investment Property


If you are in the fortunate position to decide it is time to purchase an investment property, congratulations! Buying rental property is a big deal, as well as a great source of passive income. 

Rental property investments can also offer amazing returns, but sometimes you can accidentally purchase a property that’s more of a liability than a fixed asset. Before we move forward let’s define exactly what an investment property is. 

What is an investment property?

An investment property can be any type of property, whether it is a single-family home, townhouse, condominium, as well as a commercial property. 

All these properties offer the investor a passive income from rentals while watching the investment grow year-over-year. This can differ slightly if the investor is interested in reselling the property after renovating and selling it for a profit, otherwise known as flipping. 

As a rule of thumb, most real estate experts would suggest holding onto a property for as long as you can. There are rare occasions where you can reap the rewards of a quick buy and sale. Also, the most common type of property for investor purchases is detached single-family homes. 

Now that we understand what an investment property is, let’s share how to buy an investment property. 

Steps to take when buying investment property! 

If you’re ready, you can immediately put your hard earned cash to work for the long term in real estate. For those without a large lump sum of cash, there’s a need for the next step.

Secure your finances 

As we mentioned, unless you’ve been saving up your cash, you’ll need some financial help acquiring a rental property. 

Securing a pre-approved mortgage should happen before you start your search for a promising rental investment. While in many regards securing a pre-approved mortgage is similar to the process of getting one for a home purchase, which is gauged against your personal income and credit score. This time, it’ll include other factors that indicate you’re a reasonable risk. 

When getting a pre-approved mortgage, you’ll also be required to place a larger deposit down on your investment property. Normally, lenders will require at least a 20% down payment. Also, be aware that your bank won’t consider the upcoming rental as income. 

This large down payment will mean that you’ll be required to set aside enough cash to pay this deposit. The average amount of time to save up for this down payment is anywhere from three months to years. 

Some investors will use their current home mortgage to access the capital needed to finance this purchase. 

Location, location, location! 

As we mentioned, investment properties only become better with age. This means selecting the right location really matters!

The difference between a great location and a poor one can mean the difference between your investment property becoming an asset or a liability. 

If a property is situated in an area that sees little development over the years, neglect, or lack of access to stores and amenities, it has the potential to decrease in value. 

For those looking at a property, make sure you get your hands on a comparative market analysis (CMA). This will give you an idea of how the local properties’ values, and selling prices, have behaved in the last nine months. 

It’ll also list a number of positive attributes of the property such as schools, grocery stores, access to highways, and other benefits of the area. 

Real estate markets are also hyper-local with certain rumors of new developments in the area contributing to property value. This is why it’s important to team up with an insightful real estate agent, who is familiar with the area and can advise on investment properties. 

Another aspect to consider is the property type. Whether you choose a townhouse, condo, single-story house, or duplex, there are various upkeep aspects to consider. If you’re not into doing DIY or don’t want to find a qualified handyman, purchasing a property with a homeowners association (HOA) might be an added bonus as they will take care of roofs and exterior work. 

Also, the type of property you purchase will attract a certain type of renter. 

Now that we’ve mentioned mishaps, the next step is very important. 

Don’t buy a lemon

While it might seem like an unmissable opportunity, and you need to swoop in and purchase the property unseen - don’t. Always do your due diligence and inspect the property in person, and also, bring along a professional inspector! 

They should be able to inspect the condition of the foundations, roof, plumbing, electrical, HVAC, and appliances! After this is completed you should receive a report of what needs to be addressed immediately or what is bound to be a problem in the future. 

Often sellers will be unaware of major faults as they are tucked away, and out of sight. 

Speaking of repairs…  

Saving for a rainy day

It’s important that you’re able to attend to problems in your investment property. An unhappy tenant is one who could hold you liable for not attending to a broken feature in your investment property. 

That’s why you should always set aside some capital for repairs needed on the property. If you’re worried about the cost of repairs it might be time to conduct a quick calculation. 

The first calculation is compiling a list of expenses,

  • Landlord insurance
  • Property taxes
  • HOA or condo fees
  • Property maintenance (including your monthly savings)
  • And mortgage payments

As a rule of thumb, your investment should return at least 1% of your initial investment a month in gross profit - or your cash flow. If your investment was say $150,000 you need to walk away each month with around $1,500. 

And to work out your return on investment (ROI), you need to calculate your annual income by your total investment. With the above example, you will be getting around $18,000, roughly, and your ROI will be 12%. Which is good. 

This varies depending on your location and markets. But making sure that you do these calculations correctly can tell you if you’re going to purchase an asset or liability. 

If there’s one question to answer when thinking about, “How to buy rental property?” It's finding out if it is a worthwhile investment. 

When you’ve determined that you’re ready to purchase an investment, it might be time to hire an attorney to look through your contracts.

Hire a real estate lawyer

By hiring a lawyer to draft your contract you can be assured that you’re in safe hands. After all, these contracts bind both you and the tenant together. 

While state and local laws differ, in general, most of these contracts talk about:

  • The amount of the deposit for the property
  • Information that needs to be disclosed about the property
  • Rule of possession
  • Maintenance responsibilities
  • And your liability.

In short, you must be able to provide accommodation that’s safe and habitable. 

While you’re better prepared to buy your own investment property, it might be an idea to talk to some experts, like House Buyers of America. We’ve been the go-to place for a number of years for investors to buy their investment properties. 

There are a number of real estate investors out there, so why choose us?

Why trust House Buyers of America to buy your home? 

Since 2001, House Buyers of America has bought and sold homes in Maryland, Virginia, and Washington, DC. During this time we’ve innovated the real estate game, as well as impressed thousands of customers. 

It’s this longevity and success that sets us apart. And if you don’t trust us, you can trust our hundreds of references. Not many companies in our industry are as well respected as House Buyers of America. 

Currently, we have over 100 reviews with 5 stars, with testimonies from a select few! Most of these reviews highlight that House Buyers of America will: 

  • Sell houses fast
  • Pay cash for homes
  • Treat you with the utmost respect

House Buyers of America has also earned an A+ rating with the Better Business Bureau (BBB), which is an organization that helps United States consumers find businesses they can trust. 

If you’re looking at purchasing an investment property you can sign up for our buyer's list and stay up to date with our most recent listings of amazing real estate deals!

Because of our reputation in the real estate investment industry, we’ve been asked to contribute thought leader comments to America’s most trusted media outlets, like: 

  • USA Today
  • The Wall Street Journal  
  • CBS News
  • ABC
  • NBC
  • And Fox

But how does House Buyers of America work? 

How House Buyers of America works

For nearly two decades we have partnered with real estate investors who are interested in gaining access to our profitable wholesale deals. Many of our investors buy our wholesale deals to renovate and resell or to rent them out. 

Why sign up for our list? Let’s face it, it’s challenging to find good deals in this current market. There’s simply not a lot of inventory. With House Buyers of America, that problem is solved! You will receive our latest wholesale deals and have a chance to be the first to put an offer on one of our hot properties. We’ve purchased 1000's of houses and have worked across the East Coast; our reputation is solid.

Join our buyers list today! 

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Sell your home directly to House Buyers of America and can skip all the hassle and months of uncertainty. Simply enter your address – and get our offer with a few simple steps.

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Our commitment to a speedy sale is a hallmark of House Buyers of America. Any Condition, AS IS This is not a gimmick. We buy houses AS IS in Maryland, in any condition—from a tear-down to relatively new houses. Whether it needs tons of repairs or no repairs at all, our purchases are not made based on the condition of the home. Our offers are made in cash for any condition and on an AS IS basis. When Should You Use House Buyers of America? Clients of House Buyers of America range across demographics, ages, and financial situations. We help make it possible for Maryland homeowners to achieve their financial dreams. As a result, there are certain reasons why our customers tell us why they sell their houses to us. Job Transfer Did you just get a promotion that requires you to relocate? Or maybe your local office is closing down and you have to relocate to another city quickly in order to keep your job. Whatever your job transfer needs are, we offer cash for your home and we can close quickly. Buying a New House Perhaps the thought of juggling the sale of your current home and purchasing a new one at the same time in the same local market might be creating a lot of stress. Have you considered having to have your home staged and then factor in coordinating where to live after you sell? What should you do? Put a home sale contingency in an offer to purchase a new house and risk making your offer much less competitive. Or should you buy a house first and then risk not being able to sell your current house, leaving you stuck with two mortgages? This is the age-old real estate dilemma. If you’re in this situation, you’ve come to the right place! With House Buyers of America, you get a guaranteed sale of your house and we’re flexible on the closing date (and no closing costs). After the purchase agreement is signed, your home sale is covered and you can start looking for a new home without worrying about selling your existing home. Divorce Divorce can be a huge disruptor, emotionally and financially. In most cases, the divorced couple needs to sell their house fast so they can divvy up the assets and make a clean break. Many in a divorce situation look for a “sell my house fast Maryland” company so they can sell their house without having to go through the arduous process of a traditional sale. Finding a real estate agent, renovating, cleaning, and staging the house, agreeing on a list price, negotiating the terms of the contract, etc. This is normally a stressful enough task, but if you add divorce into the mix, it feels impossible. Why not pick up the phone and get an offer in 10 minutes? Or simply fill out our online form and get an offer quickly. 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Others simply want a hassle-free solution for downsizing into a smaller home and want equity in their legacy home. Estate Sales House Buyers of America have also helped thousands of people who have suddenly inherited an unwanted or unneeded property. When dealing with an estate, many heirs can’t decide or agree on when to sell the house or who will take care of the paperwork, so the house is left sitting vacant and deteriorating for months or years. Estate sales can bring out the worst in people and families often get torn apart in the process. The traditional real estate process can be complicated and often doesn’t work well for estate sales. The unique estate laws that apply in Maryland can also create some additional complications. So why not try a simple, fast, and hassle-free solution that all of your family members can agree on? Get an all-cash offer in as little as 10 minutes by contacting House Buyers of America. A Fresh Start We’ve talked about several reasons you might want to sell your Maryland house to a cash buyer. Then there are those unfortunate circumstances in life that require a complete and total liquidation of your assets when you need a speedy exit from your current home and town. By getting an all-cash, guaranteed offer from House Buyers of America and getting your house sold in as little as 7 days, you get that fresh start without waiting. That’s why we continue to be the choice of people looking to “sell house fast in Maryland,” as well as other nearby states.