Content of the material
- Why You Should Consider Real Estate Investing
- About Mark
- How Do I Determine The Potential ROI For My Rental Property?
- Active vs. Passive Investing
- Understand The Risks Of Real Estate Investing
- Step #6 Line Up Financing
- How To Determine Rent
- Should I Invest in a Condo?
- 3. Find the right location
- Real estate investment trusts (REITs)
- Pros of REITs
- Cons of REITs
- Getting Started
- Strategize Your Real Estate Investment
- Should I Find a Real Estate Investing Partner?
- Why Write A Business Plan
- How do you make money with rentals?
- Cash flow
- Buy below market value
- Tax advantages
- Principal pay down
- 2. Do the math
- The Bottom Line: Get On The Path To Owning An Investment Property
- What to know before investing
- Down payment
- Calculating return on investment
- Making practical choices
- Playing it safe
- Step #8 Create a Plan to Find Deals
- Marketing Budget
- Marketing Campaigns
- Free & Low Cost:
- Intermediate & High Cost:
- Decide on a Budget & Marketing Campaign(s)
- Bottom line
- Learn more:
Why You Should Consider Real Estate Investing
The biggest reason you should consider real estate investing is because of the potential for higher returns compared to other asset classes (such as investing in the stock market). In fact, real estate has had an average annual return of 11.42% since 1970. To compare, the S&P500 had an average annual return of 10.31%.
Real estate investing offers leverage over assets, control over the assets, and a substantial profit, if done correctly. You can even invest in real estate while you are still in college! Regardless of when you start, real estate investing is one of the many ways to grow your financial portfolio.
But it’s important to remember that comparing real estate to stocks is comparing apples to oranges. While there are some similarities, there are many differences that investors need to realize and understand as well.
Here’s what you need to do to get started.
I am a Real Estate Agent, Entrepreneur, an author and a Real Estate Investor. I am the founder of InvestFourMore, Managing Broker of Blue Steel Real EstateDon’t forget to follow @InvestFourMore on Youtube
How Do I Determine The Potential ROI For My Rental Property?
When looking for a great investment property, the first question you need to ask is “Can I actually make money?” If the answer is no, it’s obviously not a great investment. To see how much money your property could potentially make, you’ll need to consider the return on investment (ROI). The ROI can be calculated by first finding the property’s net annual income. This is the rent money that’s left over after you’ve paid the taxes, insurance, property management fees, expected repairs (plan to spend 1% of the property value on this), potential vacancy periods, HOA fees (if applicable) and any utilities that aren’t going to be covered by the tenant. To find the ROI, take the annual income and divide it by the amount you spent on the property. For example, if the net annual income is $7,500 and you spent $100,000 for the property, your ROI is 7.5%.Use this calculation to see if each rental property is a good potential investment.
Active vs. Passive Investing
Understanding the difference between active and passive investing is an essential part of learning how to invest in real estate.
Here’s a quick explanation of active and passive investing, including the pros and cons of each type of investment.
When you hear the term “real estate investing”, you probably picture purchasing and selling or renting a property. These types of real estate investments are known as active real estate investing. They involve hands-on real estate purchases, active property management, and market knowledge.
Active real estate investing demands a wealth of real estate and financial acumen.
If you’re not ready to buy a house, you can still reap the rewards of supplemental income and asset appreciation through passive investing. Plus, passive investors can benefit from greater real estate diversification without the ongoing responsibilities of landlording or the significant risk of flipping.
If you aren’t ready to commit to a large down payment for a single property, a passive investment can lower the financial barrier. Where properties can range from tens of thousands to millions of dollars in acquisition and operation fees, passive investments are more accessible. Plus, they allow you to make money in your sleep.
In addition to requiring less capital, a passive investment also requires significantly less maintenance from an investor. The responsibilities, and ultimately the success of a property, fall on the shoulders of the investor in an active investment. In a passive investment, an investor only provides capital and lets the investment professionals take it from there.
Understand The Risks Of Real Estate Investing
You have to understand the risks before making the investment. One of the key risks involved is buying a property and having to sell it at a significantly lower price due to market conditions or other conditions outside of your control.
Another common mistake includes the timing of purchases and sales may result in substantial losses or losing out in a deal or the market picking up ahead of your prediction forcing you to buy the same product that was available for a bargain at a premium.
If you’re owning the rental, maintenance and other large expenses can also be a challenge.
Step #6 Line Up Financing
Unlike other forms of investing, it’s fairly normal to use financing to help you with a real estate purchase. And there are many options to choose from.
I describe seven common financing sources in my Bigger Pockets article The Comprehensive Guide For Financing Your Very First Real Estate Deal. If you are a non-US investor, some of these specific sources will vary. But I think you’ll find at least some of them will be applicable. The seven financing sources include:
- FHA (Federal Housing Administration) Loans – Insured by the Federal government and easier to qualify for than most programs. Terms include a small down payment, a fixed interest rate, and a long-term (length) loan
- VA (Veterans Administration) Loans – You must be a veteran to qualify. Terms include a 0% down payment, a fixed interest rate, and a long-term loan.
- Conforming Loans – Loans conform to guidelines of mortgage giants Fannie Mae and Freddie Mac. Terms may include a 5% – 20% down payment, a fixed interest rate, and a long-term loan.
- Portfolio Loans – These are kept by banks or lending institutions instead of being sold off on the mortgage market. Terms vary, but they usually have a shorter term (5-10 years) and interest rates are competitive.
- Hard Money Loans – These lenders are most interested in the collateral (i.e. a hard asset) instead of the detailed lending regulations of other sources. The loan costs are much higher, so these are often used for short-term remodeling projects.
- Private Lenders – The type of private lender varies widely, from self-directed IRAs & 401ks to wealthy individuals. The flexibility and the long-term relationship you get from these lenders make them extremely valuable. I also include money partners in this category.
- Seller Financing – This is my favorite type of financing. A seller with equity can allow you to pay the purchase price over time with installments or by using more creative contracts like leases and options. It’s not as easy to find seller financing as walking into a bank, but the flexibility of terms make seller financing worth the effort.
The type of financing you choose will depend upon your financial situations (Step #1), your strategy (Step #2), and your personal preference. You will want to rely heavily on your mentors and your lending team members (Step #5) to help you line up the best fit for you.
Once you have a solid plan for financing, you can proceed to Step #7 to raise cash for your down payment & reserves.
How To Determine Rent
Rent can typically be determined by analyzing other properties in the area. Start by reviewing the average rental rates, and then look at similar units to see what they go for. Pay attention to properties with the same number of bedrooms, bathrooms, and amenities. This will give the best idea of what you can charge.
Another approach is to take your monthly loan repayment as a baseline, and raise the rate to cover maintenance and repairs. Maintenance costs can vary significantly, so again pay attention to the typical market. If your rental property is in a college town, you may want extra room for maintenance. However, if you already know you are renting to a tenant you know you may be able to leave less room for repairs.
The final number should stay in the range of other properties in the area. However, they may be some wiggle room to decide exactly where to land for your own property. Just remember: charge too much and you risk vacancies, charge too little and you lose out on valuable income. If you want to learn more about determining rent, be sure to read our guide.
Should I Invest in a Condo?
Condos are often less expensive than single-family homes, and they have fewer maintenance requirements. However, ongoing association dues and the potential for expensive special assessments are a risk. It is important to investigate the financial health of the homeowners association and the current condition of the overall building and the individual unit.
Condos can be a good option for rental property buyers and they are often located in desirable locations.
3. Find the right location
That old realtor mantra about the importance of location takes an interesting turn when applied to income property.
“The best locations with the most appreciation are where you’ll potentially have the worst cash flow with a rental,” Kisner says.
Why? Investors can earn a return in two ways: cash flow and appreciation. In some areas investors may want higher cash flow in order to compensate them for slower appreciation. But if investors expect an area to appreciate substantially, they may be willing to forgo some of the cash flow in order to enjoy that appreciation. The result: house appreciation outstrips the growth in rents, and houses appreciate while yielding relatively low cash flow.
“As a result, the property has to appreciate more in order to compete as an investment with properties in less desirable areas,” Kisner says.
His solution: Err on the side of appreciation. That’s what he’s doing with his two rentals, which, in a good month, barely break even. “But if I hold them until I turn [age] 60 when they’re paid off, even after property taxes and insurance, I’ll double my Social Security income,” he says.
Real estate investment trusts (REITs)
Investing in a REIT isn’t that different from investing in a stock. As an investor, you give money to a trust or corporation which purchases a property. You’ll get a portion of the dividends as the property appreciates.
This is the easiest way for a beginning investor to get into the commercial real estate world. It comes with a potentially high yield. Corporations pay out at least 90% of their incomes on the property as dividends to investors. Plus, your investment is liquid; you can sell your shares and cash out without having to deal with selling the building. And the corporation does all the management work for you.
Most likely you’ll be dealing in publicly-traded REITs. Accredited investors with a high net worth may be able to access private REITs — these trusts aren’t registered with the SEC, and the upfront investment required is much higher.
Pros of REITs
- You’ll earn income from dividends.
- You can own real estate without having to purchase a property (aka, you don’t need to be a landlord).
- They’re easy and fairly affordable for beginner investors.
Cons of REITs
- You’re taxed on dividend earnings.
- They’re long-term investments, so you’ll need to hold on to your investments for years.
While there are many variables to consider when purchasing your first investment property, you should start by doing your research. Look at housing prices and neighborhoods and begin saving for a down payment. And when you’re ready to dive head first into the real estate game, you can start by getting preapproved for a mortgage.
Strategize Your Real Estate Investment
Investing in real estate can potentially be very lucrative, but it’s important to choose the right investment based on your capital and risk tolerance. From investing in rental properties and flipping houses to REITs and REIGs, there are several ways to invest in real estate.
If you’re just getting started with investing, make it easier with tools like Mint. Mint gives you one convenient place to track all your finances, so you can monitor your real estate investments regularly. That way you can more easily see when you might need to make some adjustments to your investing strategy and keep your goals on track.
This is for informational purposes only and should not be construed as legal, investment, credit repair, debt management, or tax advice. You should seek the assistance of a professional for tax and investment advice.
Third-party links are provided as a convenience and for informational purposes only. Intuit accepts no responsibility for the accuracy, legality, or content on these sites.Read more blogs about investment options:
Real Estate Learn more about the pros and cons of real estate investing. Commodity Investing Get an introduction to investing in different commodities. Buy Bonds Here’s an overview of how to buy bonds. Stock Investing Learn more about investing in stocks..
Should I Find a Real Estate Investing Partner?
A real estate partnership helps finance the deal in exchange for a share of the profits.
Instead, you can ask your network of family and friends, find a local real estate investment club, consider real estate crowdfunding, or search for social media groups that target real estate investors.
Why Write A Business Plan
A well-crafted business plan will help in more ways than one as you learn to navigate the real estate industry. You can establish a clear framework of your goals and overall mission by writing a business plan. It should also include the reason why you want to start investing. This will ensure you remain focused as you make investment decisions and eventually grow your business. Think of a business plan as a roadmap for your future.
A business plan is also highly useful when speaking to potential lenders, designing marketing campaigns, and hiring new employees. These tasks will be made easier if you have a clear outline of what your business does (and how). For example, when you begin raising funds for your first deal, you will likely need to present your business goals to potential investors. A business plan can help take the pressure off — as the information will already be written down. If you are even slightly considering opening a rental real estate business, learning how to write a business plan is a great first step.
How do you make money with rentals?
Many people will say the stock market is a better investment than rentals because the historical price of stocks has gone up more than the historical price of real estate. However, the price of a home is only a very small fraction of the investment when buying rentals. I love to see my rentals go up in value, but I think of appreciation as a bonus. Here is how a good rental property will make you money.
Cash flow is the income you make after paying all expenses. The rent minus all expenses (including the mortgage) should leave you with income every month on a good rental. For example:
- Rent is $1,500 a month
- Mortgage with including taxes and insurance is $900 a month
- Maintenance costs are $150 a month
- Vacancy allowances are $150 a month
- Property management is $150 a month
- The property makes $150 a month
$150 a month may not seem like a lot of money, but that is just one way to make money with rentals. You will also find the rents, mortgage payments, and expenses will vary greatly on each property. Some properties will make more than others, and some will not make any money at all.
Buy below market value
I always get a good deal when I buy rentals. One of the greatest advantages of real estate over other investments is that you can buy it below market value. Every house is different. It is in a different location than other houses and it has different features. This makes real estate hard to value, and because it is hard to value, that creates opportunities to get great deals. Some sellers want to sell quickly, don’t want to make repairs, or don’t care about money (sounds crazy but it happens).
When I buy rentals, I create instant equity by purchasing below market value. Here is an example:
- I bought my first rental for $97,000
- It needed $5,000 in work to get ready to rent out
- I fixed it up and rented it out for $1,050 a month
- After I had fixed it up, I could have sold it for $130,000 to $140,000
I created instant equity and increased my net worth by $30,000 to $35,000 with one rental. When you get a great deal, it makes investing in real estate much less risky.
Rental properties have some amazing tax advantages as well. Almost all the expenses on a rental are either deductible or depreciable. If I get a mortgage on a rental, the interest paid on that mortgage is an expense and deductible.
The big kicker is that the structure can be depreciated as well. On residential rentals, the structure of a property is depreciated over 27.5 years. Using my first rental as an example, the structure was worth $80,000 when I bought it. Every year, I can depreciate $2,909 from my income, which lowers my tax bill. I am not spending this money, and the house is not really losing that value, but I still am able to deduct the depreciation. When I sell a rental, the profits are taxed lower than ordinary income in most cases as well, and it is possible to complete a 1031 exchange, which defers all the taxes.
Principal pay down
When you have a loan on a property, you are paying part interest and part principal with every payment. While we may only be making $150 per month on the rental example I gave above, a couple of hundred dollars is being paid off on the loan every month as well. Hopefully, you are making much more than $150 a month and are paying down the loans as well.
I do not like to count on appreciation, but that is what most people focus on who are trying to convince you real estate does not have good returns. Appreciation is great, but I never count on it…it is a bonus to me. It can be a very big bonus in some cases. I bought that first rental I mentioned earlier in 2010 for $97,000. It is worth almost $300,000 today. Now, to be fair, I am in Colorado, which has had one of the highest-appreciating markets in the country. I would never count on prices going up that high.
2. Do the math
Not all real estate automatically makes money. Mehta says every investor needs to "become an expert at calculating cash flow and realizing equity potential," which he learned about at his job at Sotheby's.
Cash flow in real estate is the difference between a property's income and any expenses. You might think of this as rent minus the mortgage payment, but that is not the only cost you need to account for in a rental property, for example. There are also operating expenses and savings for future improvements and emergency repairs, Mehta says.
Mehta also considers how much more value he can add to a property through physical improvements. That could include updating the kitchen or remodeling the bathroom. Mehta and his brother are currently adding a second story and unit in the backyard of one of their properties, which he estimates will add around $1.5 million to the total value of the property.
The Bottom Line: Get On The Path To Owning An Investment Property
Are you ready to take advantage of the benefits of real estate investing? If so, it’s time to research properties in your area. There are other ways to consider whether you’re ready: Assess your financial stability and return on investment for a particular property, and decide whether you have time to manage a property. You’ll also need to consider the housing market, property taxes and whether you’d want to hire a property management company.
If you’ve carefully considered whether you’re ready and would like to move forward with buying an investment property, the next step is to get your financing in order. Get approved with Rocket Mortgage and you’ll be on your way to purchasing your first investment property.
What to know before investing
According to Albaum, the right real estate investment “depends on someone’s risk tolerance and experience level.”
Of course, it also depends on your budget.
Commercial property investors, for instance, should have around $50,000 ready to go. If you don’t have anywhere near that much, there are less pricey ways to invest.
Though Albaum mentions $100,000 as a typical starting point, he says “there are cheaper ways to [get started] in every market.”
Bencuya notes that many young investors these days are maximizing their dollars by
“looking in suburban-urban locations where there are urban elements in a more spacious and less expensive environment.”
These days people are willing to pay more to live near a city, without the hassle of actually being in the city. If remote work is here to stay, this trend might continue.
Real estate research hub iProperty Management recommends smaller apartments, multi-family properties, and suburban homes for the best returns. But the details may differ depending on specific variables in the location where you’re investing.
Before you pick your first investment, you should decide how much you’ll want to spend on a down payment.
The standard down payment is between 20% – 25%. Even if you bought a home with a smaller down payment percentage, be prepared to cough up the full 20%+ for an investment rental property, which won’t have mortgage insurance.
Calculating return on investment
For a basic estimate of how much your investment might pay off, take your net profit (aka, how much you think you’ll make) and divide it by your initial costs, including down payment, mortgage, property taxes, maintenance costs, and funds for emergencies.
The number you’re left with is your potential ROI, or return on investment.
King Harbor Wealth, a California wealth management company, suggests you aim for a 10% ROI – but even a 6% ROI is great for a first-year landlord, since the first couple of years tend to bring smaller returns.
However, experts recommend erring on the side of caution. Avoid “offerings that seem too good to be true,” Bencuya advises.
“It’s difficult to achieve high returns in this market and too many investment offerings flat out lie about what probable outcomes look like. The past year  has conditioned many investors to expect returns that are, on a longer timeline, not persistently achievable.”
Making practical choices
If you’re a homeowner – even if you’re a renter – you probably have some emotional stake in where you live. Maybe your house is close to family or in a neighborhood you like, or you just fell in love with the property.
But investing is a different process, so be careful about letting feelings and biases get in the way. Just because you love a certain area of town doesn’t mean it’s smart to invest there. On the flip side, Albaum advises,
“there are places I’d never want to live [that] would make great investment opportunities. If [you] can divorce investment from emotion, you can make better investments.”
Playing it safe
Albaum says one of the biggest mistakes young investors make is
“assuming the numbers you put on paper are going to be reflective of reality.”
He especially warns against “assuming too little on the expense side of the equation.”
Take some precautions, even if you have the cash and comfort level for a lot of risk.
- Leave plenty of cash for an emergency repair fund – more than you think you’ll need.
- Have an “exit strategy,” preferably more than one, in case the deal falls through.
- Real estate can be a risky business, so don’t invest any money you can’t afford to lose.
“Your tenants don’t care what numbers you put into your spreadsheet,” says Albaum. “Neither does the weather.”
Real estate can also be a significant investment of time. Fixing up a property isn’t easy, and even basic maintenance is a regular task you’ll have to keep up with. Some real estate investors outsource maintenance to management companies at an extra cost.
It’s a good idea to talk to a qualified attorney before making your first purchase. Holding investments through limited liability companies (LLCs) is a lot less risky than making an investment in your own name. If the investment fails, you want your assets protected, and you don’t want legal liability if you can avoid it.
Step #8 Create a Plan to Find Deals
Good deals don’t just land in your lap. Finding good deals is more like a treasure hunt. You have to turn over dozens and dozens of stones before you find a hidden gem.
Periods like 2008 – 2011 during the Great Recession are the exception to this rule. The treasure hunt for real estate deals was much easier then. Warren Buffett in his 2016 letter to Berkshire Hathaway shareholders described this period nicely:
Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons.
We should always have our washtubs ready for periods when “it rains gold.” But what about the rest of the time? During normal economic times, you have to work hard and create a plan to bring good deals to you. And you have to stay disciplined with your investment criteria (Step #4) so that you don’t succumb to the fever of a hot market.
You can learn the 17 methods I used to buy 33 deals in one year inside my popular course “Real Estate Deal Finder” (and get 30% off by using the coupon code THIRTYOFF-DF-REI101 at checkout.
My recommended plan to find real estate deals includes two sub-steps:
- A budget for marketing
- Marketing campaigns to bring prospective deals to you
If you have a $0.00 budget for marketing, you will have to get creative and plan to spend more personal time instead. It’s more challenging this way, but it’s not impossible. With approximately $500 per month, you probably have enough to create workable marketing campaigns. And for $1,000 per month or more, you can really set yourself apart within your market.
Investments in marketing have always been one of my best returns on investment as an entrepreneur. But you have to choose those dollars carefully with the right marketing campaigns.
There are many possible marketing campaigns to choose from. And because marketing is an inexact science, the campaigns that are effective change like the wind. So, I recommend carefully testing different campaigns, and then stick with what works.
Here is a list of some of the most effective campaigns with my brief explanations. They are organized by cost:
Free & Low Cost:
- MLS Campaign – Find a buyer’s agent who will send you leads based upon your criteria (see Step #4). Using the MLS (multiple listing service), these agents can set up automatic emails that will reach your inbox any time a new or reduced property hits the market. Warning – move fast on these deals (like this minute, not hours or days)! Everyone else is doing this campaign, too.
- Referral & Networking Campaign – Tell everyone you know to send you leads on prospective properties. Talk to friends and family, but also reach out to professional contacts like your CPA, attorney, financial advisers, real estate agents, property managers, etc. Attend networking meetings at landlord associations, REIAs (Real Estate Investment Associations), and other real estate and business-related meetups. Get business cards and print flyers with your investment criteria so that people remember you.
- Drive (or Walk) For Dollars – Regularly walk or drive your target neighborhoods. Look for FSBO (For Sale By Owner) signs, For Rent signs, vacant or run down properties listed with agents, and vacant properties with no signs. Call numbers on signs to talk to owners or agents when possible. For vacant properties, talk to the neighbors when possible to try to get in touch with the owner. Also, write down the vacant house address, and later look up the owner contact information. You can find the mailing address using your local online tax assessor records, and you can sometimes find phone numbers using whitepages.com or similar online phone listings. You can either call or send them a letter in the mail to ask about buying their house.
- Find Wholesalers & “Bird Dogs” – Some people are in the business of finding deals for other investors. Wholesalers typically buy (or control) deals, and then quickly sell them for a small markup to other investors like you. Talk to these wholesalers, get on their mailing lists, and be proactive with them. A bird dog is similar, but he or she simply sends you leads. You then get to follow-up to turn the lead into a deal. The bird dog will likely need to have a real estate license in order for you to legally pay them a finders fee.
- Cold Calls – For those who can handle 50 rejections for every 1 promising phone call, this could be an effective method. You can search the online classifieds or local paper to find for sale by owner and for rent by owner listings. Then just call listings one by one and ask questions. Few people will do this, so you may find some gems that others pass up.
- Classified Ads – You can advertise your service (buying real estate) through free or low costs classified ads online or in local print publications. Not every avenue will work, but if they’re low cost or free, try as many as possible and get your information out there.
Intermediate & High Cost:
- Direct Mail – You can send letters or postcards to various lists of property owners. Finding these lists is sometimes as easy as paying a list company list company or local service. Other times it’s a wild goose chase. Don’t be discouraged if it’s hard. That’s actually a good thing because fewer investors will choose to follow up and you will (right?!). Some lists that have worked well for me in the past are:
- Non-owner occupied houses (aka absentee owners)
- Owner-occupied houses with equity (long-time homeowners)
- Multiunit property owners
- Eviction landlords (landlords who have recently filed or evicted a tenant)
- Expired listings (owners whose real estate listing recently expired)
- Owners with delinquent property taxes
- Estates and probate properties
- Preforeclosure properties
- Website & Social Media– A website & social media channels (Facebook, Twitter, Linked-In, etc) are like an online business card that tells about your real estate investing business. Be sure to tell people who you are, what you’re looking for (investment criteria from Step #4), and how you can help. Most importantly make it easy for people to contact you.
- Car Signs – This means using magnetic or vinyl lettering on your car that says “I Buy Houses” or some other message with your phone number. This approach may be beyond your comfort zone, but it’s relatively inexpensive. I did it for 4-5 years when I started my business, and I bought at least 1 property per year because of it. So, it will work if you choose to do it.
- Yard Signs – When you are selling or renting a house, why not put an “I Buy Houses” sign next to your for sale or for rent sign if your local municipal laws allow it? Signs are an inexpensive and effective way to generate leads.
- Advertising – Use online ads like Google Adwords, traditional advertising like newspapers, magazines, and community bulletins, and even radio advertising (talk radio is best). The cost for this type of marketing can get out of hand fast, but if you’re careful about testing, it can be a great return on investment. I bought properties from both print and radio advertising for years.
Decide on a Budget & Marketing Campaign(s)
There are actually many more marketing campaigns that I could share (and you’re welcome to share your own favorites in the comments below). But these are effective options that will give you some choices to start with.
So, decide a rough marketing budget and choose one or two marketing campaigns you will start with. Then move on to Step #9 to schedule and prioritize your next actions.
Rental property can be an excellent investment if you approach it in a business-like way. But you’ll want to understand (as much as possible) what you’re getting into before you lay down your money. While the appeal of generating a passive monthly income with real estate is high, it’s important to remember that it often requires a lot of work to keep that income flowing.
- How much house can you afford?
- These are the best (and worst) times to sell a house
- 8 things to do immediately when you buy a new home
— Jay McDonald wrote the original version of this story. Bankrate’s Brian Baker also contributed to an update of this story.