5 Essential Financial Steps to Take Before Investing in Real Estate


Real estate investments could be one of your largest investments, and unless you have cash ready to invest, you'll need a plan for financing and a plan for cash flow in the future. Here's what you need to do before heading out to property shop:

1) Create A Financing Plan


2) Review Your Credit Report And Keep It Healthy


3) Get Mortgage Pre-Approval

With an approved mortgage in hand, most lenders will lock in an interest rate, so if rates fluctuate upwards while you're searching for the perfect investment property, you can relax knowing that your rate isn't going to change. To get pre-approved for a mortgage, you'll need to have the following in order: 



  • Proof of income: W2s, paycheck stubs, 1099s, or if you're self-employed, a year-to-date profit and loss statement. 



4) Stay Competitive By Doing Your Homework


5) Liquid Funds

Based on your financing plan, you'll have figured out how much cash you need to have in hand for a down payment and closing costs. Also factor in how much cash you'll need for renovations or repairs if the properties you'll be considering aren't turn-key. Consider your cash flow from month to month to make sure you're not projecting negative cash flow. Or if you are, that you have a backup source of cash such as drawing from your personal accounts.

