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7 Ways to Save Money When Buying Your Next Home

31 March, 2020

7 Ways to Save Money When Buying Your Next Home

Investing in real estate remains one of the best ways to preserve your wealth and protect your assets from stock market volatility, but buying another home can be expensive and many people just aren’t even sure where to begin.

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“A second home can act as both a vacation home and an investment, as homeowners can easily rent them out when they’re not staying there”, wrote SmartAsset.com. “When you’re going through the purchase process, there are a number of factors you’ll need to account for [before you buy]”.

  • Overall Affordability
  • Purpose(s) for the Home
  • Tax Considerations
  • Payment Terms
  • Long-Term Financial Plans

Here are seven ways to save money when buying your next home, so your financial portfolio can reap the many benefits of real estate investing!

 

7 Ways to Save Money When Buying Your Next Home - Buy Income Producing Property

1. Buy Income Producing Property

Before you even start looking at specific investment properties, be sure to think about the possibility of purchasing an income-producing property. Raw land and some other types of real estate investments may provide the benefit of appreciation and give your portfolio a hedge against inflation, but it’s the ongoing income that will ultimately have the greatest positive impact on your long-term financial security. Popular income-producing real estate investments include commercial buildings and apartment complexes, as well as private vacation homes and condos. Innovative hotel-condo developments also offer ongoing ROI and appreciation in a maintenance-free format that is ideal for those who want a stress-free vacation home or want to buy using money in an IRA account (more on this below!).

 

2. Use an Experienced Local Real Estate Agent

We simply cannot stress enough the importance of working with a local real estate agent who also understands his or her role as an investment advisor, since you are looking for more than just a primary residence. Your realtor should have deep knowledge of the area where you are looking to buy, with an extensive network in place of local investment properties and plenty of happy client testimonials to share! The importance of working with a knowledgeable real estate agent simply cannot be overstated, especially if you are buying a vacation home in a foreign country. In that case, a local realtor should also be able to help you navigate any language or travel barriers and ensure the entire process is seamless, in addition to performing all the usual duties that come with closing real estate transactions.

 

7 Ways to Save Money When Buying Your Next Home - Location, Location, Location

3. Location, Location, Location!

The location where you buy your next home is just as important as any other item on this list when it comes to saving (and making) money! Instead of solely focusing on investment properties located in your hometown, consider branching out to look at the real estate for sale in your favorite vacation destination or other hotspots - even if they are overseas. Since making money is the real name of the game here, it just makes sense to go where the demand is high. Thankfully, buying property in a foreign country or town that is far away from where you live is easier today than ever before, thanks in large part to streamlined property management services and innovative hotel-condo developments, designed to provide ongoing appreciation and ROI, in addition to giving owners a luxurious place to vacation.

 

 

4. Assess the Property

Once you have decided on a place and you know how the property will be used, it’s time to narrow down your choices to a few investment properties in the area that appear to meet your general needs and requirements. Think about ongoing maintenance, as well as how the home will be rented if you have decided to go with some type of income-producing real estate. Are there any major repairs that have to be completed before you (or someone else) can actually use the home?

“Many people start out thinking they are going to do it all themselves - until they realize how much time they have to put into finding tenants and dealing with paperwork”, wrote Forbes. “It also helps if your vacation spot is a condo - where some of the maintenance is done for you as part of your association fees - or it’s a newer home, which may have fewer issues”.

 

7 Ways to Save Money When Buying Your Next Home - Prepare to Negotiate

5. Prepare to Negotiate

Once you’ve set your sites on the perfect property, your real estate agent should help you negotiate the best price, which is where having some experience as a real estate investment advisor will definitely come in handy! Real estate is a fast-paced, infinitely nuanced global industry and not something that can be learned in one’s spare time, and the average CPA or stock broker receives very little advanced training about investing in real estate. Therefore, it’s absolutely imperative to select your real estate agent very carefully in order to ensure that you are able to negotiate the best possible price on your next home.

“At the end of a good negotiation, both parties should feel as though they won and the terms are fair”, wrote Bigger Pockets. “Keep the negotiation light, and don’t get offended. When possible, use data to negotiate your point. Real estate is largely a game of mathematics and numbers, so while negotiating, stick to your numbers, and don’t let emotion take over”.

 

6. Buy Property Using Money in Your IRA Account

Many financial advisors also won’t tell you that it is perfectly legal to buy real estate using funds in your IRA account, in part because they can’t make a commission from the sale (unless he or she is also a licensed real estate agent). Using a Self-Directed IRA to invest in real estate is a smart way to save money for retirement, especially when you buy income producing properties and other types of real estate investments that are designed to provide ongoing ROI. Owning this type of real estate investment in an IRA allows investors to benefit from either tax-deferred or tax-free income, depending on the type of IRA account you set up. If you decide to invest using a Self-Directed Roth IRA, for example, you can opt to pay the taxes up front at what is most likely to be a very reduced rate, compared to what you would have had to pay in the future whenever you start taking the required minimum distributions. On the other hand, a traditional Self-Directed IRA will allow you to collect ongoing income tax-free until you start taking required minimum distributions after retirement.

 

7 Ways to Save Money When Buying Your Next Home - Consider Off-Market Properties

7. Consider Off-Market Properties

Finally, it’s important to mention the benefits that finding off-market properties can provide! An off-market property is one that is in the process of selling or has been sold without public knowledge or advertising, so they aren’t going to be something members of the public can locate easily online. Especially in top vacation destinations or other real estate investing hotspots around the world, finding an off-market property can sometimes be the difference between making money and wishing you had just stayed home… Not to mention, looking online at the national or international multiple listing service (MLS) can be overwhelming to put it mildly, so this is another aspect to consider when selecting a local realtor, who should have carefully-curated network of local property owners, managers and other real estate professionals who continuously keep one another aware of new opportunities - even before they come to market!

Do you have questions about buying your next home? Post them in the comments!

 

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Topics: Real Estate Investment Learn How

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