On the verge of my first property!
Hello everyone, I could use some advice. I looked at a FSBO single-family house in St Louis that is within my price range and will cash flow right off the bat. In a good area, good schools, it all checks out. I also have another property that i'm interested in, but it's through a very reputable turnkey company and it's out-of-state. Very similar financials, with purchase price and cash flow.
I am torn. Part of me wants to start locally, learn how to be a landlord, earn my place in this real estate investing world. But that comes with more uncertainty. The turnkey property is out-of-state, so it would be almost 100% passive, but more of a sure thing in my opinion.
Considering I have almost NO experience or skills other than educating myself, do you have any advice on what to do first? I only have enough capital to purchase one property at this point.
Also, the seller is going FSBO. He would have to raise his price if I wanted to bring in my real estate agent. Is pursuing a FSBO without a realtor seriously risky? Would it be worth a couple thousand to get the realtor involved in the process?
Thanks all, hope you're having a great week!
#4 All Forums Contributor
- Plymouth, MI
I would go with the REA at this point in your education. The REA is worth their commission. The questions is can the property financials handle it?
Quote from @James Hamilton:
There's no right answer. I think it's a good experience to try managing on your own, but it also comes with increased risk of making a mistake during the purchase process or as a Landlord. If you have the ability to self-educate and are pretty good at handling difficult situations, then I think you should give it a try.
I do not recommend buying without a REALTOR. They can help cross-check the contract. They understand market prices and can ensure you're not getting taken for a ride. They have contacts for inspections. They are objective and not emotionally/financially involved.
If you can find a really good property mgt company there and cash flowing well, out of state is fine
Quote from @Nathan Gesner:
Quote from @James Hamilton:
There's no right answer. I think it's a good experience to try managing on your own, but it also comes with increased risk of making a mistake during the purchase process or as a Landlord. If you have the ability to self-educate and are pretty good at handling difficult situations, then I think you should give it a try.
I do not recommend buying without a REALTOR. They can help cross-check the contract. They understand market prices and can ensure you're not getting taken for a ride. They have contacts for inspections. They are objective and not emotionally/financially involved.
I'm going to respectfully disagree. You can hire an attorney for a few hundred bucks to get you to the closing. A RE agent is going to raise the price and take a commission for not bringing much to the table. You can ask them to work for a flat fee. I did that with a FSBO guy. His lawyer wanted $3,500 to draft the sales contract. My realtor would do it for $1500 which we split 50/50.
I would not use a realtor unless you can get them to agree to working on a flat fee. But if you need a lawyer for the closing then you don't really need a realtor as a buyer.
I bought my second house FSBO, I hired an attorney and a great inspection company. I put financing and inspection contingencies, waived appraisal, extended the probation period so we could negotiate more.
I really think the seller makes all the difference. He was super amicable and pleasant to work with it.
At the same time my brother bought a house FSBO in Phoenix and it was hell. The guy was harassing to get it closed faster, yet took the longest time to respond to requests and just all the nonsense you could imagine. The day prior to closing he asked my brother if he could live in it temporarily, and when asked how long he said like a year or so.
Quote from @Tom O.:
If you've ever worked with a skilled REALTOR, you know they bring more value than just filling out a contract. I've seen people buy a FSBO without a REALTOR and spend a lot more fixing problems than they would have paid for a skilled REALTOR to keep them out of trouble.
Everyone is free to do what they want and my advice doesn't cost anything.
#1 Creative Real Estate Financing Contributor
- Lender
- Austin, TX
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#1 Creative Real Estate Financing Contributor
- Lender
- Austin, TX
If you are planning real estate investing to be a long-term wealth building strategy to you and view this as just the start of scaling and building a portfolio, absolutely hire a realtor that knows what they are doing to help, a couple thousand is nothing in the large scheme of things and if something goes seriously wrong because you don't know what your doing, that could set you back years
Quote from @Nathan Gesner:
Quote from @Tom O.:
If you've ever worked with a skilled REALTOR, you know they bring more value than just filling out a contract. I've seen people buy a FSBO without a REALTOR and spend a lot more fixing problems than they would have paid for a skilled REALTOR to keep them out of trouble.
Everyone is free to do what they want and my advice doesn't cost anything.
I'm not saying they don't bring value and I'm not saying what they do is limited to filling out the contract. Please don't put words in my mouth. My point is they don't typically justify a commission for a hefty fee on a FSBO deal.
And if you need a lawyer for the closing I'm not sure what the realtor bring sto the deal. If the realtor wants to do it for a flat fee, that's a different story and they may be well worth it.
Quote from @Tom O.:
An attorney will not give you the same advice. They don't know the sales market. They won't negotiate on your behalf. They don't have a network of experts.
Going it alone can save you money . . . Until it doesn't.
You do what you feel is right for you. My advice is worth exactly what you paid for it.
Merry Christmas!
#2 Contractors Contributor
- Severna Park, MD
I would go for the local property , you can take care of problems yourself . As far as the FSBO I hvae bought 7 properties FSBO with no Agents involved . ( I was 24 on my first ) No problems whatsoever . Lawyer did settlement . I did my own inspections every time . Used an agent 1 time on a purchase , it was a a lot of agrivation . I had to lay down the law and tell the Agent , I am in charge , not you , Its my way or there is no deal . That deal took longer than any FSBO I have done .
@James Hamilton
I'd prefer to learn in my backyard first. Far away problens are still problems after the sale.
FSBOs Sellers are a mixed bag. I work with a lot of them and I have to say most are quite unreasonable because they believe the kool-aid that media spits out to grab eyeballs; few look at raw data. Plus many times I find that they don't read the contract they are signing or make assumptions by what they read after searching on Google.
Is it possible to find a reasonable FSBO seller? Sure, but it just hasn't been my experience.
I.e. Most FSBO sellers see the list price as the "true sales price", versus realizing that most of the time it is the price agreed that paid for all fees, NOT the value of the home. And most are pretty firm on price. I looked in an area near me, took all of 15 mins. The avr 3 bed / 2 bath / 1,900 sqr ft home is actually selling for 10% less list price in my area that I searched. One of those homes sold, one was a FSBO, yet it was a renter that bought the home from their landlord after 5 years of on-time payments. Every other contract, each party had an agent. And all non-FSBO homes sold with seller-prepaids and closing cost concessions averaging $10k or 2.5%. Since all other transactions had agents and buyer closing costs were paid, the true net to the seller was 7.9% less (incl commissions) than list prices avr $475k = $437,475. If I was an unrepresented buyer buying from a FSBO seller, if home was $475k I would offer 12.9% less list to account for lack of realtor fees too, not counting potential repairs. $475,000-12.9% = offer of $413,725 true net to seller. But getting to that number is rarely a straight line. Imo, a good negotiator is what most people need, even if they save you less. A savings of something is better than nothing. Good luck.
Quote from @Nathan Gesner:
Quote from @Tom O.:An attorney will not give you the same advice. They don't know the sales market. They won't negotiate on your behalf. They don't have a network of experts.
Going it alone can save you money . . . Until it doesn't.
You do what you feel is right for you. My advice is worth exactly what you paid for it.
Merry Christmas!
Of course an attorney won't do that. But most realtors don't either. Most realtors want the deals to go through so they can get their commission. Mr. Gesner is playing on fear. Fear that these realtors have some sort of "secret sauce" that you are screwed unless you have it. I have four realtors and NONE of them brought any of this to the table. A "team of experts"? Don't make me laugh. Experts at what?
And please let me be clear on something: I don't mind realtors. I use realtors. I've had a realtor on everything that I have ever bought. They don't really cost the buyer anything and they will guarantee the seller the full price on the MLS. And there are discount brokers who will put you on the MLS for 1% or less.
They definitely can add value to the transaction. But if you have a house to buy there is no real reason to use a realtor and give them a commission. If you want to use them as your closing agent I think that's a good idea but at a flat fee because I don't think that justifies a commission.
Just want to thank everyone for their advice and knowledge on this thread! Didn't work out with the FSBO house and I'm of the mindset now that my realtor needs to be a part of my team. Also wanting to stick in my own backyard in St Louis and learn the ins and outs locally rather than thinking about turnkey properties out-of-state, which is enticing but not what I need at the very beginning of my real estate career.
Thanks again everyone, and happy holidays!
So if I was looking in St. Louis, I would look for a 4-unit or bigger. They are dirt cheap down there. I don't know if they are in horrible areas or not as I don't know the area. But look at this one:
https://www.trulia.com/p/mo/sa...
four units for 300K.
Look at this search:
https://www.trulia.com/for_sal...
There's a 4-unit for as little as $225K.
Quote from @James Hamilton:
Just want to thank everyone for their advice and knowledge on this thread! Didn't work out with the FSBO house and I'm of the mindset now that my realtor needs to be a part of my team. Also wanting to stick in my own backyard in St Louis and learn the ins and outs locally rather than thinking about turnkey properties out-of-state, which is enticing but not what I need at the very beginning of my real estate career.
Thanks again everyone, and happy holidays!
Keep at it. Making deals is the most laborious part of REI. The squeaky wheel gets the grease.
Quote from @James Hamilton:
Just want to thank everyone for their advice and knowledge on this thread! Didn't work out with the FSBO house and I'm of the mindset now that my realtor needs to be a part of my team. Also wanting to stick in my own backyard in St Louis and learn the ins and outs locally rather than thinking about turnkey properties out-of-state, which is enticing but not what I need at the very beginning of my real estate career.
Thanks again everyone, and happy holidays!
Feel free to reach out if you want to discuss any St. Louis specific deals. I would love to check over your numbers and help out any way I can with finding a good deal in a good neighborhood. Just closed on a duplex in St. Louis and have done a lot of market research in the area and living here I am pretty familiar with the neighborhoods. Happy Holidays!
Quote from @Nicholas Jackson:
Quote from @James Hamilton:
Just want to thank everyone for their advice and knowledge on this thread! Didn't work out with the FSBO house and I'm of the mindset now that my realtor needs to be a part of my team. Also wanting to stick in my own backyard in St Louis and learn the ins and outs locally rather than thinking about turnkey properties out-of-state, which is enticing but not what I need at the very beginning of my real estate career.
Thanks again everyone, and happy holidays!
Feel free to reach out if you want to discuss any St. Louis specific deals. I would love to check over your numbers and help out any way I can with finding a good deal in a good neighborhood. Just closed on a duplex in St. Louis and have done a lot of market research in the area and living here I am pretty familiar with the neighborhoods. Happy Holidays!
That sounds great, Nicholas! Would love to talk St Louis with you. What are your buying areas right now? I've been looking at St Louis County and some areas near the city (Affton, Crestwood, Maplewood, Ballwin, Valley Park, Chesterfield, Fenton, Sunset Hills - those types of places). Not as many deals in the County as there are in the City, that's for sure.