Get Pre-Approved Or...
So how do you know what your budget is?
Well, if you have cash and you want to go that route, that’s pretty easy. Count your money, and decide how much of it you’re willing to part with for a property.
But if you’re like many investors, you’ll likely want to finance your purchase, which means your budget is whatever someone is willing to lend you. The best way to find that out is to contact a lender and get “pre-approved” for a mortgage.
This is important to do before you even start looking at properties. Just looking for an investment and then contacting lenders once you find one is a waste of time. While they’ll eventually need specifics on the particular property you’re eyeing, they’ll initially qualify you based upon your income, assets, and liabilities.
Then once you find a property you want to make an offer on, the owner and their representatives will want to see proof that you’re qualified to purchase the property for the amount you’re offering.
If you’re going to buy a property with cash, make sure you line up your “proof of funds” before starting to look for a property. An owner and their representatives will want to see proof that you have the funds and that they’re available.
So if you have a mattress stuffed with hundreds, you’re going to want to put that into an account. Most people aren’t going to accept a selfie of you with your money along with a copy of today’s newspaper as “proof of life” of that money.
For the most part, your proof of funds should be bank and investment statements for the money you intend on using to purchase the investment. If your cash is tied up in investment accounts, make sure it’s readily available to you and can be made liquid. (You might also want to look into whether there will be penalties or taxes for accessing any investment accounts you plan on using.)
So to sum it up…
Get pre-approved or get your proof of funds together before you even start looking for an investment property.