{"id":71551,"date":"2015-03-28T12:00:34","date_gmt":"2015-03-28T18:00:34","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=71551"},"modified":"2021-03-16T10:30:07","modified_gmt":"2021-03-16T16:30:07","slug":"2015-03-28-10-ridiculously-easy-actions-today-purchasing-property","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/2015-03-28-10-ridiculously-easy-actions-today-purchasing-property","title":{"rendered":"10 Ridiculously Easy Actions to Take Today if You&#8217;re Serious About Purchasing Your First Property"},"content":{"rendered":"<p>Are you <em>serious<\/em> about purchasing your first property?<\/p>\n<p>Do you have the ability\u00a0to make an offer on at least one property in your area of interest <i>right now?<\/i><\/p>\n<p>If you are currently incapable of making an offer on a property in the area\u00a0that\u00a0you are trying to invest in, there\u2019s nothing wrong with that. There\u00a0are many reasons why you might not be able to &#8212; lack of funds, credit, or commitment.\u00a0I\u2019d encourage you to keep reading and learning about real estate here on BiggerPockets and take the plunge when you are ready.<\/p>\n<p>On the other hand, I sometimes run across folks that claim to be ready to buy real estate, yet do not have the basic capability of legitimately offering on property. \u00a0I have to disagree with their belief that they are ready &#8211; they aren&#8217;t.<\/p>\n<p>But I have some good news for you: <i>It\u2019s really easy <\/i>to be taken seriously as a buyer.<\/p>\n<p>It may not be really easy to find a great deal, to do all the proper due diligence on a property, or to get your offer accepted, but it\u2019s <i>really easy<\/i>\u00a0to put yourself in position to make a\u00a0legitimate offer on property<b>\u00a0right now<\/b>.<\/p>\n<p>All you have to do is demonstrate that you are<em>\u00a0capable<\/em> of purchasing the property to three parties:<\/p>\n<ul>\n<li>Yourself<\/li>\n<li>The Seller<\/li>\n<li>The Lender<\/li>\n<\/ul>\n<p>Below, I\u2019ll list the ten ridiculously easy steps you can take to demonstrate that you are serious about buying real estate, and put yourself in position to make an offer on a property <i>tomorrow<\/i>, assuming there\u2019s a good deal available. If you are unable to complete any of these steps, then\u00a0it may be a good idea to question whether you are fully ready to purchase real estate worth tens of thousands or hundreds of thousands of dollars.<\/p>\n<h2>10 Actions to Take Today if You&#8217;re Serious About Purchasing Your First Property<\/h2>\n<h3>1) Gather all your financial information in one place.<\/h3>\n<p>If you don\u2019t know how much money you are making,\u00a0spending, and investing right now, how can you possibly be considering buying real estate,\u00a0a business where people lose money all the time?<\/p>\n<p>Once upon a time, organizing your finances was a challenge and took a dedicated effort. \u00a0Luckily, we now live in 2015, and compiling and tracking your finances is\u00a0easy to the point\u00a0of silliness.<\/p>\n<p><em><strong>Related:<\/strong> <a title=\"An FHA-Financed Duplex is an Ideal First Investment Property: Here\u2019s Why\" href=\"https:\/\/www.biggerpockets.com\/blog\/2015\/03\/25\/fha-financed-duplex-ideal-first-investment-property\/\" target=\"_blank\">An FHA-Financed Duplex is an Ideal First Investment Property: Here\u2019s Why<\/a><\/em><\/p>\n<p>There are a whole bunch of financial software systems that make this ridiculously easy.\u00a0You only need one, though, and\u00a0I\u00a0personally use <a href=\"https:\/\/www.mint.com\/\" target=\"_blank\" rel=\"noopener\">Mint.com<\/a>.\u00a0Do yourself a favor and spend one hour or so connecting the following things\u00a0to Mint\u2019s (super easy to use) system:<\/p>\n<ul>\n<li>Bank accounts<\/li>\n<li>Investment\/retirement accounts<\/li>\n<li>Property (house, car, other large assets &#8212; it will suggest how to find market value)<\/li>\n<li>Credit cards, loans, and other debts<\/li>\n<li>Anything else that impacts your net worth<\/li>\n<\/ul>\n<h3>2) Examine \u0010your expenses.<\/h3>\n<p>Now that you\u2019ve hooked up your bank account and credit card to Mint,\u00a0spend just one hour categorizing each of your expenses\u00a0in the last month. Take action based on the results.<\/p>\n<p>I personally do this each and every month, and after the initial setup, it takes me just 10 minutes to examine my spending. Be honest with\u00a0yourself about which expenses were unnecessary, and make sure you don\u2019t get hosed by your bank, credit card company, or with any other unusual expenses (though once again, as a Mint fanboy, I have to give them credit &#8212; they usually email me right away when any of those things come up).<\/p>\n<p>If your life is currently cashflow negative, you might want to re-examine whether you are ready to buy property. You are about to play a high stakes financial game, and if you are unable to control spending in your day to day life, that is an indication that you are not ready to purchase real estate.\u00a0I\u2019d <a href=\"https:\/\/www.biggerpockets.com\/blog\/2014\/12\/20\/save-money-invest-in-lifestyle\/\" target=\"_blank\">rectify your personal finances first<\/a>, then move forward with your real estate goals.<\/p>\n<h3>3) Decide where you want to buy.<\/h3>\n<p>It\u2019s my opinion that you\u00a0aren\u2019t serious about purchasing property if you don\u2019t have a region, city, or neighborhood that you are committed to focusing on.<\/p>\n<p>You are going to work with professionals that are local, banks that are local, contractors that are local, and anyone and everyone else related to the property will be local. If you aren\u2019t sure where you want to buy, you\u00a0aren\u2019t ready to buy.<\/p>\n<h3>4) Check your credit score.<\/h3>\n<p>Another layup.\u00a0You had better believe that anyone getting ready to lend you money to buy a property worth hundreds of thousands of dollars is going to check your credit score, and not knowing this critical piece of information is a huge disadvantage to getting started.<\/p>\n<p>Once again, there are a ton of options out there for doing this.\u00a0And once again, I\u2019m going to give you a simple and obvious solution &#8212; just go ahead and use <a href=\"https:\/\/www.creditkarma.com\/\" target=\"_blank\" rel=\"noopener\">Credit Karma<\/a>. I use it, it\u2019s free,\u00a0and it\u2019s simple. Takes 10 minutes.<\/p>\n<h3>5) Demonstrate a history of standard life payments<\/h3>\n<p>This is one that\u2019s a little more subtle than the first four, but not being able to\u00a0demonstrate a history of payments that the vast majority of Americans are making each and every month can actually delay you significantly.<\/p>\n<p>When you ask a bank for a loan, especially if you are a first time buyer applying for FHA financing, the lender will want to see the following:<\/p>\n<ul>\n<li>Your credit score<\/li>\n<li>Your income<\/li>\n<li><i>A track record of\u00a0consistent and significant\u00a0payments<\/i><\/li>\n<\/ul>\n<p>Here are some examples of payments that you\u2019ll want to have made\u00a0(consistently) for at least a year if you are looking to get financing for your first property:<\/p>\n<ul>\n<li>Credit card payments<\/li>\n<li>Rent or mortgage payments<\/li>\n<li>At least one instance of a utility bill like electric\/water\/internet<\/li>\n<\/ul>\n<p>It\u2019s really easy to check and make sure that you are paying these consistently, but it\u2019s also easy for a lot of folks to informally pay roommates\/parents\/loved ones for these types of services.\u00a0<i>Make sure that your name is on any credit card, lease\/mortgage, and utilities that you pay.\u00a0It\u2019s important to demonstrate that track record to your lender.<\/i><\/p>\n<h3>6) Gather important legal and tax documents.<\/h3>\n<p>Here\u2019s a list of documents you\u2019ll almost certainly need\u00a0in the process of applying for financing. Make them easily accessible if you are considering financing a property:<\/p>\n<ul>\n<li>A few recent paystubs<\/li>\n<li>Two years of tax returns<\/li>\n<li>Contact information for\u00a0your\u00a0current landlord or information about your current mortgage<\/li>\n<li>Recent utility bill<\/li>\n<li>Recent statements for all bank\u00a0accounts, credit card, investment accounts, and retirement accounts<\/li>\n<li>Government ID<\/li>\n<\/ul>\n<h3>7) Contact a local agent.<\/h3>\n<p>There are a million different ways to get started investing in real estate, but if you ask me, I\u2019d suggest just getting yourself an agent. If your experience is at all similar to mine, you\u00a0are going to overanalyze every step of the process, and having an experienced professional to go to with questions is a HUGE benefit.<\/p>\n<p>Here are three reasons why I&#8217;d recommend that anyone looking to buy a property for the first time go through an agent:<\/p>\n<p><em><strong>a) Experience<\/strong><\/em><\/p>\n<p>Unlike me, my agent had been through the purchase of a property in my market before. She was there to answer every question I had, remind me of deadlines, and pointed out problems to watch out for.<\/p>\n<p><em><strong>b) Incentives<\/strong><\/em><\/p>\n<p>My agent got her commission\u00a0when I closed on my duplex. That commission was a powerful incentive to\u00a0ensure that I hit every deadline and to quickly respond to any and all questions I had about inspections, legal documents, financing, etc. It&#8217;s possible that attempting to get my own license and study the market solo would have delayed my entry into real estate 6 months or more. \u00a0Assuming that working with an agent got me into my property that much sooner, her commission was easily worth it.<\/p>\n<p><em><strong>c) Connections<\/strong><\/em><\/p>\n<p>There are quite a few people that\u00a0you will need to work with on any property. You can either vet each and every one individually, or you can vet your agent and trust their judgement.\u00a0My agent connected\u00a0me with an inspector\u00a0and a lender, both of whom I ended up working with.<\/p>\n<p><em><b>Here are three very easy ways to connect with an agent:<\/b><\/em><\/p>\n<ol>\n<li>Post to the <a href=\"https:\/\/www.biggerpockets.com\/topics\/new?select_forum=1\" target=\"_blank\">BiggerPockets Forums<\/a> and ask if anyone can recommend a\u00a0reputable\u00a0agent\u00a0in your town.<\/li>\n<li>Similarly, you can <a href=\"https:\/\/www.biggerpockets.com\/meet\" target=\"_blank\">meet\u00a0BiggerPockets Members<\/a> in your area and ask for a referral.<\/li>\n<li>Outside of BiggerPockets, you can find agents anywhere and everywhere\u00a0&#8212; I&#8217;d look on Zillow, Trulia, or start with a good, old fashioned Google search.\u00a0Just make sure that you work with an agent that\u00a0understands your unique situation.<\/li>\n<\/ol>\n<h3>8) Contact a local bank and get a pre-qualification letter.<\/h3>\n<p>In order to seriously offer on any property, you\u2019ll likely need a pre-qualification letter from a lender.\u00a0 This document is an <i>informal<\/i>\u00a0letter stating that the local bank believes that\u00a0you are <i>likely<\/i> to qualify for a mortgage.\u00a0Making an offer with one of these makes it more likely for the seller to take you seriously.<\/p>\n<p>Much of the time, these pre-qualification letters can be obtained with a simple phone call. In my case, my lender asked me how much income I earn, what large debts I had, what assets I had, how much I could afford to put towards the downpayment, and what my credit score was.<\/p>\n<p>Because you\u2019ve already taken care of the easy steps prior to this, you should have absolutely no problem giving your potential lender this\u00a0information and obtaining a pre-qualification lender.<\/p>\n<p>There are many ways to find a lender. Three really easy ones that I recommend are:<\/p>\n<ol>\n<li>Ask your agent for a trusted lender<\/li>\n<li>Ask for referrals on BiggerPockets<\/li>\n<li>Google \u201chome loans [your city]\u201d and shop around<\/li>\n<\/ol>\n<p>Keep in mind that some BiggerPockets users will suggest that you get a \u201cpre-approval\u201d letter\u00a0instead of a pre-qualification letter. The difference between the two is simple: A pre-qualificaiton letter is <i>informal<\/i>\u00a0and is the bank&#8217;s way of saying that you are <em>likely<\/em>\u00a0to get approved for a loan, while a pre-approval is a <em>formal\u00a0<\/em>means of demonstrating that you are <i>already\u00a0<\/i>approved.<\/p>\n<p><em><strong>Related:<\/strong> <a title=\"An Easy, Slow, Low-Risk, &amp; High-Reward Way to Buy Your First Investment Property\" href=\"https:\/\/www.biggerpockets.com\/blog\/2015\/02\/21\/easyslowlow-riskhigh-reward-buy-investment-property\/\" target=\"_blank\">An Easy, Slow, Low-Risk, &amp; High-Reward Way to Buy Your First Investment Property<\/a><\/em><\/p>\n<p>While getting a pre-approval letter may not be a bad idea, I personally was able to purchase my property just fine\u00a0with a simple pre-qualification letter, and I went through the approval process afterwards. I chose not to get a pre-approval letter because I wasn\u2019t sure if my offer on the property was going to be accepted, and I didn\u2019t want to have to go through the intensive formal approval process until I knew that I was under contract.<\/p>\n<h3>9) Set aside cash for your earnest money\u00a0and downpayment.<\/h3>\n<p>If you are serious about buying a property, you will have access to cash.\u00a0Most first time purchasers will likely need to bring cash to the table just to make an offer on the property. \u00a0This cash is called \u201cearnest money,\u201d which is basically like a security deposit when you offer on a property.<\/p>\n<p>Most first time purchasers will put down earnest money, and get a mortgage formally approved by the bank AFTER the offer is made (like I did).<\/p>\n<p>In my case, I offered to buy my duplex for $240,000, and the seller required that I deposit $5,000 earnest money into a holding account managed by a third party to demonstrate my seriousness. If I had decided to back out of the deal for a bad reason, I risked losing $5,000.<\/p>\n<p>You can be sure that I was extremely interested in the property, and believed strongly that I was able to purchase it with $5,000 cash on the line.<\/p>\n<p>After I got the property under contract, I applied for, and was approved for, my mortgage, and my earnest money was used as part of my downpayment.<\/p>\n<p>Setting aside this cash is very easy, assuming that you have saved up for this purpose. Just move it into a separate\u00a0savings account. Generally, earnest money will be around 2.5% of the purchase price of the property, so plan accordingly by looking at recent sales prices for properties in your area of interest.<\/p>\n<h3>10) Set up automatic alerts for MLS Properties in your area.<\/h3>\n<p>I would not call myself serious about\u00a0purchasing real estate\u00a0if I was unaware of the properties that are publicly available for sale\u00a0in my area\u00a0of interest.<\/p>\n<p>\u0010The super-simple way to do this is to do this, and the method I use, is to simply ask your agent to send you\u00a0every property that hits the MLS in your\u00a0area, and that meet the criteria for properties you&#8217;re\u00a0interested in. Most agents will do this for free &#8211; just send him\/her an email outlining the types of properties and locations that you are interested in.<\/p>\n<h2>Conclusion<\/h2>\n<p>These steps are the absolute bare minimum if you are seriously considering buying property. If you aren\u2019t ready to take the\u00a0easy actions above, then you aren\u2019t even in position to <i>offer<\/i>\u00a0on property.<\/p>\n<p>Do yourself a favor, and take these simple actions\u00a0to put yourself in position to purchase property &#8211; if you are seriously interested in real estate.<\/p>\n<p>No one will sell to you if you\u00a0don&#8217;t.<\/p>\n<p><em>For those with some experience under your belt, what would you add to my list? For all the newbies out there, what questions do you have about this process?<\/em><\/p>\n<p><strong>Let&#8217;s talk in the comments section below!<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Are you serious about purchasing your first property? Do you have the ability\u00a0to make an offer on at least one property in your area of interest right now? If you [&hellip;]<\/p>\n","protected":false},"author":1676,"featured_media":71581,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5524],"tags":[],"class_list":["post-71551","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-investing-for-beginners"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/71551","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/1676"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=71551"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/71551\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/71581"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=71551"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=71551"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=71551"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}