This is Part 1 of a 3 part series on getting a great deal with good returns on residential real estate in this economy. Keep in mind that real estate is local and these tips may not apply perfectly to your current market.

1. How are you going to pay for it? Traditional financing can be difficult to obtain for residential investment properties right now unless you have a substantial down payment and stellar credit. Home equity loans on primary residences can also be a challenge to get in this economy. Consider sitting down with a reputable, local banker, discussing your needs and goals and acquiring a line of credit. Other options include hard money lenders (if you are planning on rehabbing a property and selling it), private investors (consider multiple investors so risk is leveraged) and, of course, good 'ol cash.

2. The better your CASH position, the better your negotiating power. Be prepared to PROVE you have the funds ready to purchase or a loan already approved and ready to go.

3. Do your homework. Know your real estate market. Know what sells easily and what doesn't. Even if you plan on holding this investment long-term, you still want to have a property that could be easily liquidated if needed. Is the market saturated in a certain area, price range, style? What type of properties are in high demand? What areas are the most popular? Know the school test scores (this is a good way to gauge popularity) and the area crime statistics (this can be obtained from the local police department).

4. Find a real estate agent who understands residential investment property. Your cousin Sally who sells real estate on the side is probably not the agent you need. You want an agent with a business background who understands ROI, income valuation and forecasting future value. Try contacting managing Brokers in your area and asking for recommendations. Make appointments to meet with 3 agents and make sure they understand your goals, your timeframe and your needs. How many investors has the agent worked with in the past 2 years? Do they know how to sell bank foreclosures, auctioned properties, short sales and government owned properties?

5. Choose your real estate agent wisely, make sure the agent represents you and ask about their policy on dual agency (where 1 Broker represents both the buyer and seller). Understanding the laws of agency in real estate will help you to understand the level of confidentiality and representation you have with your agent (and will help you in your negotiations).

In Part 2 of this series, we will look at finding and tracking residential investment real estate.

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