Is there an "order" to purchasing first property?

3 Replies

I have a real estate agent [my son], I have a relationship with someone knowledgeable in construction who is willing [for a fee] to come out and give do pre-purchase inspections, I have a few places to consider [more than a few].

What I don't have at the moment is the How I'm Going to Fund my first property.

My husband [a bit more risk adverse than I] thinks I need to work that out before looking at places.  I think it is hard to figure out money if you don't know what you're looking at [how much rehab $ will be needed along with the basics].  I want to start going to see some of the possibilities while I am figuring it out.  

Is there a correct order to this process?

You should do a quick assessment of your personal financial situation. What is your credit score? How much available cash do you have on hand? Talk to somebody at your local bank's commercial lending dept. about your plans and they can give you an idea of your buying ability. You can look into a 203K rehab loan possibly. Speak with your son about the market where you want to buy to get a sense of the price range of houses you are considering. Figure on having six months to one year's worth of carrying costs (mortgage, taxes, insurance, utilities, etc...) set aside in addition to your down payment and any rehab money you need. 

It seems that most advice given is to jump in and avoid "analysis paralysis", but I believe in knowing the lay of the land before jumping out of the plane. I think that you should start tracking sales, visiting properties, watching the market in one very specific area where you want to invest long before actually considering any kind of investment. 

Using my own experience as an example:

I have been watching an area now for 1.5 years. Specifically, the area I am in is approx. 8 square miles in one city, where I have lived for most of my life. I already had a passing knowledge of the market in this area, but after watching I have a vast, encyclopedic knowledge of the properties, neighborhoods, schools, parks, bus stops, etc.

I know each of the subdivisions in my area, when they were built and who built them. I know every style, floor plan and option that was offered in these homes. Give me an address, a size and a front of structure photo and I can sketch out the floor plan with dimensions, and with interior photos I can complete 90% accurate repair budgets before visiting the property.

I have tracked every sale from cradle to grave, and every investor working my area on every project over the past two years. I know exactly when the most successful investments were bought, exactly how long they were on the market, exactly what was done to rehab (down to the color names and cabinet manufacturers used), exactly how long the repairs took, exactly how long they took to sell after repairs, and I have a pretty good idea of the profit on the deal. I can look at photos of a newly rehabbed property hitting the market and know if corners were cut, and if the design choices will resonate with buyers. 

I waited to "jump in" until the movement of the market held absolutely no surprises. Then, I  submitted offers on three properties over the last three months, and currently have one property under contract to close in two weeks. 

Other more experienced folks here might have different or better advice, but for me this was the best way to start. The knowledge and confidence gained from this long but very inexpensive education has been invaluable, and I can confidently say that, while there are many (many many many) more experienced investors out there, I am among the foremost experts in my small market.

I hope this helps you. Please report back so that we can learn from your experience.

You say:

What I don't have at the moment is the How I'm Going to Fund my first property."

If you want to partner with your son and he is ready to move into his own place there is a 3 1/2% FHA loan and one that includes renovation that would be available to your son if he moves into the duplex or triplex that your son, or you and your son could buy. Your son gets a 3% commission to sell this housel So that would pretty much cover his end of the down payment. He would have to live in the Duplex or Triplex to be eligible for one year. This would be the most inexpensive way to start,

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