First Things First For First-Time Investors
Savvy real estate investors don't wait until they acquire a property to start thinking about and preparing for what they'll need to do next. Instead, they get ready to take action as soon as the deal closes--or even earlier. Here are five things that should be done first:
1. Secure the premises. Perhaps the most important first step is to ensure the security and safety of the newly acquired property. Change the locks and make sure all the fences are in good shape. There is no sadder catastrophe than having a small child (or perhaps a beloved pet) wander into a backyard and drown in a swimming pool due to inadequate fencing. Make sure property and liability insurance are in place too.
2. Remediate any hazards. An equally important first step is the removal or repair of any conditions that could present a safety or health hazard such as dead animals or exposed electrical wiring. If the property needs a major clean-out, order a dumpster ahead of time so the contractors will be able to dispose of worn-out carpets, ruined window blinds, irreparably broken appliances and the like.
3. Switch on the utilities. Lack of water or power at a work site can cause costly delays in a rehab project. That's why utility companies should be alerted ahead of time to reconnect the water, electricity and gas. The investor (or a representative) should be present when each utility is turned on to make sure the connected appliances are off and there are no leaks. If the hoses that hook up the clothes washer to the water supply have been disconnected or removed and then the water is turned back on, for instance, a flood can occur and cause a lot of damage. A gas leak can even cause an explosion.
4. Line up contractors. Good contractors may be booked weeks or months in advance, and again, delays can be costly since they put off the day when the property can be resold or leased to a tenant. That why it's important to line up contractors as soon as possible to make necessary repairs and desirable improvements. Be sure to start with the foundation, if it's in need of repair, because foundation work can throw other repair jobs out of whack.
5. Begin marketing efforts. Some investment properties are destined for a quick rehab and resale while others are intended to be held as long-term rentals. Either way, the investor needs to attract prospective buyers or tenants to the property. At a minimum, a sign and some flyers can be placed out front, perhaps with a "Coming Soon" rider to alert neighbors and passersby that the property will be available in the near future. Take names and telephone numbers, and then contact those people as soon as the property is ready to be shown. Especially eager buyers or tenants might even be admitted earlier. A lock box is often useful as well.
Copyright 2008, HomeVestors of America, Inc. All rights reserved. No part of this article may be used or reproduced in any manner whatsoever without written permission of the author.
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