Step by step process of buying rental properties??
Hi everyone, i want to purchase my first rental property by next May/June and i just want to ask if anyone can tell me step by step process of how you did it. Just some general info, i live in Philadelphia and want to purchase a property around 70-150,000k using an FHA loan.
1. Did you use an appraiser and agent?
2. How much did your contractor charge on average?
3. Also, did you need a closing attorney?
For my purchases: I used an agent to find properties on the MLS. Bank providing the loan does the appraisal. I've always done an inspection and required critical issues to be fixed before closing. The places I've purchased only have required minor work so contractor cost was minimal. I've invested out-of-state, so I also have a property management company (typically at 10% cost) to handle finding the tenant, all interactions with tenant, as well as manage any repairs needed using their contractors. Also, I've always had my own attorney as part of closing, so I know they have my best interest in mind.
Good luck!
@Scott C. how long did it take once you found the properties you wanted from getting a loan to the property being rented?
The MLS/Realtor/bank loan route is definitely slow. I'd say minimum is 3-4 months, but on the short sales we've purchased it was more like 6-9 months.
Do those 3-4 months include searching for the properties? Also, how did you keep buying properties? I read about rehab/cash out refinancing and wanted to look more into it
Justin,
I am assuming since you want to go the FHA route that you are interested in purchasing a MFH? Conversely you could get a property with several bedrooms and have roommates pay your mortgage (and then some) for the first year. After which point you would no longer have to occupy the property personally. Its a competitive market in Philly for MFHs, depending on the area, which is why a SFH could be a workable alternative. What parts of Philly were you considering to purchase in? Also, you definitely want to have a good lender, and with this kind of transaction you are looking at minimum 45 days from getting a property under contract to settlement. I am an agent in the city, and am always on the lookout for good investments, feel free to hit me up with any questions.
Best of luck,
-James
@James Brand Hi James, thank you for the info. I want to purchase a multi unit and live in one of the properties, multi family homes are duplexes/triplexes right? Also, how would i go about investing in a single family, how do i make profit while living in it? Lastly, how much do banks usually charge for closinh costs? I currently live in West Philly (university city) so i wish to purchase one here so i am close by.
1) learn how to analyze deals by listening to the podcasts and reading the forums/articles. 2) get a realtor and start looking at the area and price points you want. 3) run the numbers on properties you're interested and once you find a deal, pull the trigger and jump in. Best of luck
@Vincent Crane thanks Vince! I'm hoping to take the leap soon, saving up for a downpayment now. What propertiee did you start with and how did you keep buying properties?
Originally posted by @Justin Lee:
@James Brand Hi James, thank you for the info. I want to purchase a multi unit and live in one of the properties, multi family homes are duplexes/triplexes right? Also, how would i go about investing in a single family, how do i make profit while living in it? Lastly, how much do banks usually charge for closinh costs? I currently live in West Philly (university city) so i wish to purchase one here so i am close by.
Yes Justin, Multi-Family properties would include duplexes, triplexes, and quads. I am very very familiar with UC as it is where I got my undergrad degree (Drexel U.), and where I have worked professionally for several years. Having a good idea of all the costs involved is definitely key to understanding what you are commiting to. To help you along with this I could show you an estimate of closing costs, as I put them together all the time. The alternative to a MFH that I referenced earlier was having roommates who pay rent. UC is a great area for this with the myriad of students and professionals in the area. PM me and we can chat about what kind of costs you'd be looking at with either strategy...
-James
I bought my first house (a duplex) in about 6 weeks from when I started. I wouldn't recommend that but I really wanted to move out of my parents house so I jumped at the first opportunity I found and 6 years later its been a great investment for me. My point is there's no "right" timeline or step by step process that always works. I like the saying "If you stay ready than you never have to get ready," meaning that if your saving your money and have $$ for a down payment together and you're looking for deals and opportunities to buy everyday you will find one and as long as your ready, you can buy your house. Look for the deal and take action, the steps will happen as a process of buying the house.
Did you buy your first property?
Part of the process of buying the first one is already having your mind on the next one, and the one after that. Think "How will this purchase allow me to get the next one?" You have to think farther ahead so you don't limit yourself. Another words, decisions you make on the first deal will affect you as an investor. Make a poor decision and pay too much, have no cash flow, etc. you may not be getting another one anytime soon. Become familiar with financing available to you and the number of loans they'll allow you to have. How will you be able to purchase properties not based on your DTI ratio but on the DSCR of the property? These are things you need to know and ask lenders. Take lots of notes and compare your resources. It's crucial. THINK AHEAD. The Millionaire Real Estate Investor is a great book on how to train the mind to think ahead. Knowledge is king! If you haven't, come up with a business plan. Don't write it and file it. Keep it where you can see it everyday. Good luck.