Category: Real Estate

4 Tips for First-Time Home Buyers Should Follow | HomesGoFast.com

Purchasing a real estate is truly taxing and at the same time rewarding for everyone. The entire process can be overwhelming, especially if it is your first time to do it. However, there are tons of ways on how you can manage to buy one successfully and get ready for it.

When planning to buy a new home, you have to be a hundred percent sure about it. Since it will be one of your biggest investments in life, you need to think it over and over again. More so, the location matters once you are deciding where to buy your home. Apparently, one of the best places to live in is Australia. With its natural beauty, tons of career opportunities, and a great lifestyle, you will surely have a better life here.

In fact, there are available variable rate home loans which you can count on if you need some financial assistance when purchasing a home. All you need is to choose the right loan company and complete all the requirements needed. Hence, it will never be easy to buy one, but you can get through it with the help of the following tips:

 

Create a budget plan

Planning a workable budget plan is one of the most stressful tasks to do. However, this is the only way to get a clear picture of the mortgage loan you can afford. You have to make sure that you create a strategic financial plan and stick to it in order to determine how much money you are going to need when buying your dream house.

Choose the ideal mortgage

One of the most important things that you need to take into consideration when purchasing a home is the type of mortgage. There are actually two kinds of it – fixed and variable. A fixed-rate mortgage has usually a 30-year term with an interest rate that does not change throughout that time. While the variable or adjustable-rate mortgage has an initial period of one, five, or seven years with a set interest rate. However, after the introductory period, the interest rate can increase or decrease within the timeframe of your mortgage. Thus, it is essential that you choose the type of mortgage that best suits you wisely. Depending on your needs and preferences, both can work well for you. 

Do a home inspection

A thorough inspection of your potential new home is needed before purchasing it. You have to seek the help of an expert to check the property for safety, quality, and its overall condition. Of course, you want to ensure that the property is fully functional and there are no hidden problems with it. In case there are defects that need to be repaired, you can negotiate with the seller to fix all these or have a discount.

Know your limitations

Always remember that you have to buy only what you can afford. Never decide on something that is not yet happening or convince yourself that you only need to struggle for a couple years to obtain it. All you need is think of the present and don’t depend on things that are not yet in the now.

Ultimately, there are so many things that you need to consider as a first-time home buyer. Simply keep these tips mentioned above in mind and you will ace the homebuying process. It won’t be that easy, nonetheless, everything will be worth it once you follow these useful guides.

Want to be financially secure? Buy a house – AOL Finance

Taking the leap into homeownership — whether you’re considering a home for sale in Austin, TX, or Tampa, FL — can be daunting when you’re used to renting. From house hunting to making an offer to gathering pertinent paperwork, it’s a much more complex process than signing a lease agreement.

But while easier financial approval and less responsibility make renting attractive, the numbers suggest becoming a homeowner could be better for your overall financial picture. According to the latest Trulia Rent vs. Buy report, with low interest rates combating rising home prices, buying is cheaper than renting in 100 of the largest metro areas by an average of 37.7%.

“Owning a home is one of the most common ways households build long-term wealth, as it acts like a forced savings account,” says Ralph McLaughlin, Trulia’s Chief Economist. “Instead of paying your landlord, you can pay yourself in the long run through paying down a mortgage on house. That said, potential homeowners should go into homeownership with the expectation that wealth generation will be more akin to a marathon than a sprint.”

So although renting may be easier on your wallet right now, over time, it can’t stack up to the long-term financial benefits of buying a home. Here are just a few reasons homeownership — and the financial security it offers — may be right for you.

1. Mortgage payments can be fixed

Average rental prices have seen significant jumps over recent decades, increasing 22.3% in the 50 biggest housing markets (for comparison, the cumulative rate of inflation for the period between 2006 and 2014 was 17.4%). As every renter knows, renewing your lease can be a nail-biting time of year if your landlord is prone to annual increases.

Whether you’re at the end of your lease period with a current landlord or looking for a new rental, what you pay in rent is subject to change. But with a fixed-rate mortgage, your core payments won’t change for the entire length of your loan. “Property taxes and insurance may fluctuate, but your principal and interest are locked in,” says Eric Roberge, certified financial planner (CFP) and founder of Beyond Your Hammock. “If you are living in an area where renting is more expensive than buying, this can be a huge reason to take the leap into homeownership.”

2. Equity in your home can be a financial resource later

Paying off a mortgage during your working years allows you to remove a large expense from your plate during retirement. For retirees that see a drop in income once they start taking Social Security or pulling from their retirement accounts, this can be the difference between living a comfortable life and living paycheck to paycheck.

Additionally, Jennifer Harper, CFP at Bridge Financial Planning, suggests some homeowners could increase their level of financial security in retirement through a reverse mortgage. This allows you to live off the equity in your home while remaining in the residence. “There are a lot of complexities to consider, but it would be worthwhile to review with your financial adviser if you think your retirement savings are not quite where you’d like them to be,” she says.

3. You can build wealth without paying capital gains

Depending on the housing market and where you buy, there’s always a chance your home won’t appreciate in value. However, it’s certainly not uncommon to sell a home for more than you paid for it. If you earned that same profit selling off stocks, you could be required to pay 15% of the total earned in capital gains tax. But if you made the profit selling a primary residence you lived in for at least two years, you are exempt from paying capital gains. By preserving more of what you earn, you can build wealth faster.

4. A mortgage can act as a forced savings account

For those who haven’t made a habit of putting money away, paying a mortgage can create a savings cushion that renting cannot. “For people who do not trust that they can save money in a bank or investment account, this forced savings can benefit them down the road and actually help them grow their wealth,” explains Roberge. “Owning a home does not guarantee a higher net worth, nor does it remove the need to be financially responsible, but it does provide a structure within which one can build wealth.”

Are you already flexing your saving muscles by maximizing your tax-deferred retirement contributions? Harper suggests another way you can use your home to increase your financial security. “Consider making additional principal payments to your mortgage each month. Seeing the impact of interest on an amortization schedule is powerful!”

5. Overall, homeowners can enjoy greater wealth growth than renters

Research conducted by the Joint Center for Housing Studies at Harvard University concluded that homeowners experience a larger growth in wealth than renters, regardless of socioeconomic class. There are risks, the study acknowledges, but the financial benefits are undeniable. “Homeownership is a sound investment if a household can meet two basic requirements,” says McLaughlin. “One, that they’ll stay put in the home for at least 5 years, and two, that they’re not paying an unreasonable amount of their income towards their housing payment.”

Maybe you plan on relocating in a few short years, or maybe your financial situation is rocky and your credit has seen better days. Personal circumstances don’t always warrant buying a home right now. But in the long game of establishing a solid financial foundation, buying a home can be an important piece of the puzzle.

Outlook: Home Sales Have Bright Future | Realtor Magazine

Younger buyers are likely to drive growth in residential markets in the years ahead as the economy stays on a positive track and interest rates stay relatively low, two top economists said Friday at the 2016 REALTORS® Conference & Expo in Orlando, Fla.

Look for existing-home sales to end the year at a 5.4 million level, a small increase from last year, NAR Chief Economist Lawrence Yun told REALTORS® at a residential economic forum. For 2017, he expect sales to grow modestly, to 5.5 million units and then to 5.7 million the year after that.

Long-term interest rates are expected to tick up but stay low by historical standards for the foreseeable future. He forecasted rates to end the year at 3.6 percent, then rise to 4.1 percent in 2017 and then to 4.5 percent.

Dennis Lockhart, president of the Federal Reserve Board of Atlanta, who also spoke at the forum, said mortgage rate increases are unlikely to be a roadblock to healthy home sales.  “REALTORS® shouldn’t interpret the prospect of rising rates as ominous,” he said.

In the short-term, rising home prices and difficulty obtaining credit continue to keep many households, including young households trying to become first-time buyers, out of the market, which is making it hard for the country’s homeownership rate to make sizable gains since it dipped after the downturn several years ago. The current home ownership rate of 63.5 percent remains near a 50-year low.

Despite those hurdles, both Yun and Lockhart said young households will drive home ownership gains in the years ahead. That’s because the U.S. economy is showing resiliency even as other major economies, like Japan and the European Union, struggle. In the U.S., jobs and wages are growing and are expected to continue growing, which will undergird home sales. “There is pent-up demand” from younger households, said Yun.

To boost home sales, Yun said, inventories need to increase in many markets, a precondition to cooling appreciation.

Yun said the federal government could help spur new constriction by easing regulations on community banks, which are the primary lenders to home builders. Since passage of banking reform laws in the wake of the downturn, community banks have been facing the same regulatory constraints as large, systemically important financial institutions even though they don’t pose the same risk and lack the resources to meet enforcement requirements. He also said governments can help address construction labor shortages by encouraging vocational skills training and easing regulations that impose high costs on builders.

A 3-Step Checklist for Home Sellers

Unless you have an emergency or an incredible new job offer in a new city, selling a home is not often something you do on a whim. You generally have time before you put your home on the market. Maybe months. Maybe years.

If you know you’re going to sell your house in the not-so distant future, you probably should start a to-do checklist now. Why? Because your checklist is going to be full of more checklists.

 

1. Figure out what needs to be fixed before you sell. You may be too close to your house to recognize its flaws. Bob Littell and his wife Carolyn, both real estate agents based in Atlanta, recommend paying for a presale inspection.

“Find out ahead of time things that are going to need to be fixed, painted and replaced,” he says. “Not only will the house show better and therefore sell quicker, but you’ll save yourself a lot of hassle and money by being able to shop around for the best person/company to do the work instead of being time-stressed to get them done prior to closing.”

In other words, an interested buyer will essentially force you to do this anyway. You might as well do it now.

 

How much might you pay for a presale inspection? Carolyn says that, at least in her area, prices for presale inspections run between $375 to $425.

Deb Tomaro, a broker associate with Re/Max Acclaimed Properties in Bloomington, Indiana, seconds the presale home inspection idea. Of course, you’d be hard-pressed to find an agent who wouldn’t recommend taking this step.

“The most stressful time for a seller is that period of time between when the buyer had the inspection and when the seller hears if there are any issues,” Tomaro says. “Since most people don’t go in their attics, on the roof or in the crawlspace much, there are often issues that can be deal-breakers.”

What sort of issues should you be looking for? What type of improvements should you consider making?

— The roof. Leaks are the common problem. Most roofs, experts will tell you, last 20 to 50 years. Is yours older? Do you have water stains on any ceiling? Buyers will notice.

— The paint job. Unless you’ve painted recently, some of your rooms could probably use a fresh coat.

— Flooring. How old is your carpet or that kitchen tile?

— Decks. They should be stained every two to five years, according to various home-improvement sites like AngiesList.com.

— Landscaping. Need an update?

You’ll also save money in the long run if you fix anything that needs repairing, Tomaro asserts. If you make an improvement, you probably won’t go overboard. But if your buyer gets involved?

“What could be a simple roof repair can turn into a buyer wanting a whole new roof,” Tomaro says.

2. Start assembling your paperwork. “Gather together every document you’ve ever had related to this home,” says Michael Schaffer, a real estate broker associate in Denver.

This could be everything from closing documents you received when you bought the house to paperwork that came with any appliances you’ll be selling with the home, like the refrigerator.

While your real estate agent, if you work with one, can best advise you, be on the lookout for the following paperwork:

— Any documents related to the title and ownership of your house.

— Recent tax records that you may want to show the buyer.

— If you’re in a homeowners association, any receipts and documentation related to major improvements and renovations on the house.

— Documentation of your prelisting home inspection (if you had one done).

“Put [paperwork] in one easily accessible place, so that you know where to look when questions come up from your Realtor, potential buyers, inspectors, other Realtors, lenders and the buyer’s second cousin who used to be a contractor,” Schaffer says.

 

3. Calculate how much your house will likely sell for. This is important because you may realize that it really isn’t prudent to sell your home — or that there are some serious obstacles in the way.

For instance, you really should make sure your property taxes are paid up, especially if you’ve been living in your home a long time, says James Dodge, a professor of law who specializes in real estate and teaches at Concord Law School in Los Angeles.

 

“If they aren’t paid up, the government can file claims against your property called liens that can interfere with your ability to sell your home,” Dodge says.

To get an idea of how much your home is worth, without paying for a formal appraisal (which typically ranges from $300 to $400, according to Realtor.com), try:

— Discerning the fair-market value by using calculations from your property tax bill.

— Visiting a real estate information website like Trulia and Zillow and use a home value estimation calculator — just know that they aren’t always accurate.

— Talking to local real estate agents. They’ll be able to give you an idea of how much your home is worth.

Of course, there are plenty of other things you’ll want to do before getting too deep into the home-selling process, like tossing and donating things you don’t want to haul to your next abode. But if you do all of these things, you’ll be off to a good start. And once you get closer to actually selling your home, you can begin thinking about where you’d like to move to. A bigger home? Do you want to downsize? There are pros and cons to either. In fact, to really figure this out, you’ll need to make a checklist.

Why you should check your credit FICO score before buying a house – Business Insider

You picked out your dream neighborhood, you’ve started saving up, and you feel ready to take on the responsibilities of home ownership.

As soon as you reach this point and know you’re ready to take the leap and buy a house, the smartest thing you can do is get your credit in order, Sophia Bera, CFP and founder of Gen Y Planning, told Business Insider during a Facebook LIVE.

“A big thing when it comes to your mortgage is being able to qualify for the best interest rate you can,” she says. “Think about it: If you’re going to have this loan for the next 15 to 30 years, you’re going to be paying a ton of interest, tens of thousands if not hundreds of thousands of dollars on that loan. So a difference in interest of a quarter of a percent or half a percent or one percent makes a huge difference over the life of the mortgage.”

Start by checking your credit score and ordering a full credit report. Bera recommends going to AnnualCreditReport.com, where you can order one free credit report from each of the three federal credit bureaus annually. To keep tabs on your credit score throughout the year, she recommends monitoring free sites such as Credit Karma and Credit Sesame.

Bera also says that it’s worth paying a small fee to get your FICO score when you’re preparing to buy a house. FICO scores are additional credit reports widely used by lenders to determine interest rates, and a high FICO score can help you secure the most reasonable ones. 

Once you know where you stand in terms of credit, you can get an idea of how good of an interest rate you’d be able to qualify for on a mortgage. If your credit score sits at 700 or higher, you’re probably in good shape to get the best interest rates out there, Bera says. But if it hangs below that, work on paying down debt and taking care of any old debts that might have ended up in collections.

“Really pay attention to credit, especially in the six months leading up to getting ready to buy a home,” Bera says. “This is not just a month before, scrambling and then realizing, ‘Oh my gosh, I have something old in collections!’ Once you take care of that it usually takes a couple of months to be reflected on your credit score.”

At the end of the day, your credit score can play a huge role in your housing budget. If you’re planning to buy a house in the near future, start getting that in order right away.

Rates Move to Highest Averages in Months | Realtor Magazine

Fixed-rate mortgages headed up this week, reaching their highest averages since early summer.

“A jump last week in the PCE — the price index tracked most closely by the Fed — raised the prospect that inflation might not be completely dead after all,” says Sean Becketti, Freddie Mac’s chief economist. “Investors reacted by driving the yield on the 10-year Treasury to its highest point since June. The 30-year mortgage rate jumped 7 basis points to 3.54 percent, the largest one-week increase in over six months.”

Freddie Mac reports the following national averages with mortgage rates for the week ending Nov. 3:

• 30-year fixed-rate mortgages: averaged 3.54 percent, with an average 0.5 point, rising from last week’s 3.47 percent average. Last year at this time, 30-year rates averaged 3.87 percent.
• 15-year fixed-rate mortgages: averaged 2.84 percent, with an average 0.5 point, rising from last week’s 2.78 percent average. A year ago, 15-year rates averaged 3.09 percent.
• 5-year hybrid adjustable-rate mortgages: averaged 2.87 percent, with an average 0.4 point, increasing from last week’s 2.84 percent average. A year ago, 5-year ARMs averaged 2.96 percent.

 

Tips From a First-Time Homeowner | POPSUGAR Home

Before buying your first home, there are plenty of people who will be feeding you advice — your parents, your friends, your real estate agent, your accountant, your psychologist — and although a lot of the advice may be repetitive, there are still so many important things that slip your mind. After one year of owning their first home, Reddit user tuttifrutty shared their advice and experience of home ownership. Not only does this list run through the basics, but it’s also opening our eyes to many things we completely oversaw before buying a home. Below, we’ve shared the entire all-encompassing list of tips from a homeowner in Reddit user tuttifrutty’s own words. Check it out, and make sure to keep this handy when buying a home!

1. “Be clear about why you’re buying a home. Every large decision you have to make about home ownership should somewhat tie in to this. I can’t stress this enough. Make sure the reason makes sense to you after you and your SO (if applicable) sleep over it a few times. Don’t get in to home ownership because your friends or colleagues are telling you how much they love owning their home. It might not be the same for you. Again, be clear. I’d say literally write it down.”
2. “If you’re buying a home together with your SO (I’d imagine most might), sit separately with different pieces of paper and write down what each of you wants in your home. Be realistic. Indicate what you’re OK with compromising on and what is absolutely a must have (or must not have). Don’t talk to each other while doing this. Once you’re satisfied with the list, tally what you have and combine what you want, don’t want, what’s a must have and what you can compromise on. Be realistic.”
3. “Use one of the online tools to calculate ‘how much house can I afford’. Don’t spend more than 30-40 percent of your annual income on home ownership — this includes your mortgage, insurance, property tax etc. I’d say stick to 30 percent or less. Edit: 30 percent of take home pay is what my max was. I ended up buying lower than that. Your scenario may be different. The COL in your area will probably affect this number.”
4. “Look at houses based on the lifestyle you have not the lifestyle you aspire to have. For example we looked at houses with smaller yards or yards without large lawns. Reason: Our lifestyle and gardening aren’t compatible. We’d have loved a large green lawn but realistically we’d never maintain it and probably wouldn’t spend on a gardener. That’s just one example. Don’t dream of building a home theater in the basement if you’re the outgoing type.”
5. “‘Buy the biggest house you can afford’ is horrible horrible advice. This was given to me by most people around me. It sounded bad then and after a year in, it sounds just horrible. Buy the house that you need today with some consideration for tomorrow’s needs. Tomorrow’s needs is something along the lines of growing family NOT anticipating profits from business or promotions. The advice given on this sub holds true here too — buy below your means.”
6. “Avoid borrowing money from friends or family in order to afford a bigger home. This is kind of an off shoot of the point above. Both points will just lead to additional stress that you don’t need. This is true even if they’re willingly offering you money without you asking.”
7. “REALLY look in to total cost of home ownership. If you’re looking in to a fixer upper things can get very tricky. I’d recommend not going for a fixer upper for a first time home owner. I bought a relatively new home but the cost of minor fixes baffled me. I’m very very happy to not have bought a home that needed repairs. I’d have underestimated the cost even if someone would have given me quotes for the repairs. Things like regulations change. A minor change might end up with large expenses to keep up with code. I learned this the hard way when I wanted to get an additional power outlet.”
8. “Drive around the neighborhoods that you’re interested in. Get a feel of the place. Chat with people who’re out for walks or something and see what they think. This might lead to interesting results. When I did this, people thought I was selling something so their immediate reaction to my ‘Hi’ was ‘I’m good. thanks.'”
9. “A home purchase is often a process of elimination. Start with all homes that match your criteria. Filter based on cost, then filter based on neighborhood, then filter based on square footage, school districts etc. Keep going until you’re left with a few homes that you’ll go look at.”
10. “Your agent facilitates the transaction. If you don’t know what you want and haven’t communicated with them very clearly, they may influence your decision. If you feel your agent is pressing you into making decisions — RUN. Better than having buyers remorse after having gotten in large debt.”
11. “Feel free to use your agent to do the ground work. I gave my agent a list of questions to go figure out for the houses/neighborhood/HOAs etc that I was interested in. You’re paying your agent a good sum of money. Get your money’s worth. Don’t shy away from asking questions. (Your agent might tell you that you won’t pay him. That’s partly true. You won’t pay them directly — the seller usually accounts for this and prices the home accordingly. So in a way, you are paying him.)”
12. “It’s in your best interest to not have the same agent as the seller.”
13. “Don’t skimp out on the essentials — for example home inspection. It may be expensive to do but it’s better than being stuck with a flawed house. Edit: consider getting a radon inspection (Quick google tells me there are DIY kits that are available).”
14. “Protect your investment — get good insurance. Make sure you’re aware of what’s covered and what’s not. Change the locks before you move in. Change the lock on the mailbox. Invest in a home security system if your neighborhood warrants it. Consider cameras at the very least.”
15. “Find out how the HOA is if it exists. I’ve heard horror stories from colleagues. A couple of them have sold their condos because of the stress it caused them.”
16. “Consider your mortgage options. Depending on how long you plan to live in your home, ARM might be a good option.”
17. “After you buy your home, don’t feel compelled to set it up immediately. That means it’s OK to use the current furniture you have. It’s OK to not have a proper bed. (We’re still using a box + mattress combo — no frame or headboard). It’s OK if one or more of your rooms look spartan for a year or two.”

Home Owners Should Feel Twice as Rich | Realtor Magazine

Thanks to rising home prices, home owners are getting richer, a new study says. The amount of homeowner equity has doubled in the last five years, according to CoreLogic’s latest Home Price Index and HPI Forecast for September 2016.

“Home equity wealth has doubled during the last five years to $13 trillion, largely because of the recovery in home prices,” says Frank Nothaft, chief economist for CoreLogic. “Nationwide during the past year, the average gain in housing wealth was about $11,000 per home owner, but with wide geographic variation.”

Home owners in several markets across California, Washington, Oregon, Colorado, and Utah are seeing some of the most growth, with double-digit home price gains.

Home owners nationwide likely are to see even more equity in the coming months, too.

“Home-price growth creates wealth for owners with home equity,” says Anand Nallathambi, president and CEO of CoreLogic. “A 5 percent rise in home values over the next year would create another $1 trillion in home equity wealth for home owners.”

4 Myth-Busting Facts About Real Estate Appraisals

Real estate valuation might appear complicated and arbitrary to some consumers. They might wonder why an “exactly the same” house next door is listed at a higher price or why new marble countertops didn’t add more to their home’s value.

Below are four myths that clients might express about the valuation process and the facts real estate agents can share with them:

Myth 1: ‘I don’t need an appraisal because I’ve had a home inspection.’

Fact: A major difference is that inspections are not required, but appraisals often are required if the consumer is getting financing.

Although there might be some similarities, a home inspection determines the condition of the property and an appraisal indicates the value.

 

According to an Appraisal Institute handout, an appraisal is a credible and reliable opinion of value derived from factors that include research into appropriate market areas, the assembly and analysis of information pertinent to a property and the knowledge, experience and professional judgment of the appraiser.

Myth 2: ‘All appraisers are the same.’

Fact: At a minimum, all states require appraisers to be state licensed or certified to provide appraisals to federally regulated lenders.

But, as in other professions, appraisers’ experience, expertise and certifications might vary.

Real estate agents can recommend that clients ask their lenders to hire an appraiser experienced in valuing similar properties and one who has gone beyond meeting minimal professional requirements.

Myth 3: ‘Every improvement has added to my home’s value.’

Fact: Home improvement projects are not necessarily investments in which a homeowner should expect a dollar-for-dollar return.

According to Remodeling magazine’s most recent Cost vs. Value Report, the projects with the highest expected return on investment are attic insulation, manufactured stone veneer and garage door replacement.

Other projects with potential payoffs, according to the report, are entry door replacement (steel and fiberglass) and minor kitchen remodels.

Projects that take a home significantly beyond community norms are often not worth the cost when the owner sells the home. If the improvements don’t match what’s standard in a community, they’ll be considered excessive.

Myth 4: ‘The appraisal is below the list price of my house, and there’s nothing I can do about it.’

Fact: Appraisers strive to generate credible and reliable opinions of value, but mistakes can happen.

Homeowners can review a copy of the appraisal report, which lenders should provide to them free of charge no later than three days before the loan’s closing.

Agents should urge clients or their lenders to review it carefully and confirm the accuracy of data on square footage, number of bedrooms and baths and similar features.

If the homeowner finds errors, he or she should contact the lender and potentially request another appraisal.

Real estate agents can help their clients understand the valuation process by telling them that appraisals are intended not to confirm a home’s sales price, but to assist lenders in lending decisions.

Appraisers are independent third-party experts and highly trained and experienced valuation professionals.

By alleviating anxiety about the valuation process, agents can help make their clients’ real estate transactions more productive and efficient.

A Beginner’s Guide to Buying Rental Property | Realtor.com®

If you’re lucky enough to own one home and have cash to spare, you may consider buying rental property. After all, collecting rent from tenants every month can be a nice way to pad your pocketbook and dip a toe into the world of real estate investment. But as the saying goes, with great reward comes great risk. Here’s everything you need to know about the process before starting your search.

Research the rental property market

Before purchasing a rental, do a deep dive of research into the market where you’d like to buy (realtor.com® can help point you to all kinds of properties). First-timers should probably start with their own area of residence, suggests real estate trainer Dean Graziosi.

You should know the major employers, what drives people to move there, and the economic outlook for at least the foreseeable future, he notes.

You should also watch out for your own financial future. Maybe you can justify stretching your budget for your primary home, but when you’re looking at investment property, every cent matters. Don’t dig into your savings just because you like the backyard—now is not the time to let flights of fancy take hold. Remember, this is a money-making venture, not a place you will live yourself, so your own personal preferences should take a back seat to what makes good ol’ dollars and cents.

Figure out your cash flow and costs

Working out the cash flow of a rental property isn’t just a simple equation of rent > mortgage. You also need to consider the other operating expenses, like HOA fees, taxes, repairs, and property management fees. Will you be paying for utilities, or will that be the tenant’s responsibility? Keep in mind your new rental property may not be occupied 100% of the time—and that needs to be factored into your business plan, too.

This is called determining the capitalization rate (or “cap rate” for short), which “estimates the net stabilized return on an investment, in comparison to projected income from alternative investments,” says Alex Cohen, a commercial specialist with CORE in New York City. Translation: This can help you decide between good, great, and terrible deals.

Find financing for your rental property

Most banks require at least 20% down for an investment property, especially if you own multiple rentals. Even if you’re able to buy with a lower down payment, think long and hard before purchasing a rental property without much money down. With so many variables in play, from potentially unreliable tenants to a broken dishwasher needing immediate repair, you need a strong financial base before investing. (You can find out how much house you can afford with the realtor.com mortgage calculator.)

However, there is a mortgage bonus when purchasing a rental: Your bank may consider the potential income stream from this property when determining how much you can borrow. This can allow you to purchase a larger or nicer home, since the odds are good that your rental revenue will help you foot the bill.

Managing the rental property

Once you’ve purchased your rental property, you’re ready for tenants! Next, do you want to be a landlord or hire someone to manage your investment? Newbie investment owners should consider a property manager, who will handle all the annoying nitty-gritty details of owning a rental property. For a fee, a third party will draw up leases, collect rent, deal with maintenance issues, and take over the nasty parts—like evictions.

Before choosing a property management company, be sure to do your research. Get (and contact) references. An excellent manager makes owning rental property a breeze, but with a bad egg, it could be a nightmare, turning your rental property into a terrible investment.