I'm panicking! Just bought my first property.

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I'm panicking! Just bought my first property.

Jeff Bisgier
Brewster, NY · Member since 2016 · 33 posts · 16 votes

Hi folks. I joined BP awhile back when my wife and I decided that we really wanted to get involved in real estate investing, namely flipping. I've tried to educate myself and have looked at a bunch of properties but never found the right one and didn't feel we were totally prepared anyway. I kind of laid off my search over the past few months.

Fast forward to last month when my agent sent me a listing for a foreclosure property about a mile from my home. It's a 2bd/1bth, detached single family, 1201sq ft, 1 car garage. Listing price was $125k. Property taxes are approx $4200/year, which is low for this area. Got a showing and the house seems very solid. Needs updating, but no signs of water damage anywhere, no mold that we could see, finished basement was totally dry, newer windows. Just needs a good cleaning, a kitchen and bath update and some cosmetic work. We may opt to put in new floorsThe house is a 4 minute walk to the train station and a 2 minute drive to 2 major highways, so an amazing commuter house. Great rental potential. My agent and I checked rental comps and it appears that $1600 - 1800/month is a solid number. We told my agent that we wanted to submit an offer. He got back to me the following day that the house was going to be auctioned off online.

To make a long story short, I signed up for the auction site. The opening bid was $52k and there was a reserve (plus this had to be an all cash sale). I wasn't super keen on buying this way as I had no experience, so I decided I would only go as high as $80k, figuring that I'd either get outbid or the reserve wouldn't be met. In the last minutes of the auction, there was some steady bidding action. When the price got to $77k, I submitted what was going to be my final bid of $79.5k. To my surprise, I won the auction but the reserve wasn't met. About 30 minutes later, I got notified that the seller decided to take my offer, even though it was less than the reserve price. That was 3 days ago and myself and the seller have already signed the contracts and earnest money has been sent to the title company.

So why am I panicking? I feel totally unprepared. I had to act so fast because of the auction and now I kind of don't know where to start. Even though I read so much months ago, I never really read anything about being a landlord. I also didn't know much about doing all cash purchases. I'm going to try to search for as much information as I can on my own, but if anyone has any advice or links to helpful posts or websites, I'd truly appreciate it!! Here are a few of my big concerns:

1. I'm laying out a lot of cash. I'm planning on getting an equity loan from my bank after 6 months to replace my bank account. Any advice on this?

2. Any good sites on what order to do rehab work in the house? Not sure where to start.

3. Where can I find the best info on being a landlord? I see there is a lot right here on BP that I'll read through, but anything else? Also, what about lease forms, etc.

4. How do I do background and credit checks for potential tenants? Am I better off listing with a real estate agent rather than placing ads?

Sorry for the long winded post, but I'll be grateful for any advice. Thanks!!!!!

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Carl C.
Investor · New York City, NY · Member since 2014 · 289 posts · 374 votes
9y

@Jeff Bisgier Your panic is understandable but believe me, many of us have been in similar positions and for most people it works out. You say you have been reading and preparing yourself so trust yourself a little. First things first. Decide what work you plan to do. Set a budget for yourself and figure out if you will contract the work or do it yourself. A good cleaning and fresh coat of paint go a long way. Figure out a schedule to get work comleted on time. I assume you want to get it rented as soon as possible so don't over do any reno. Make it just nice enough that people will be attracted to it. As you Say Brewster has a good location for commuters, you'll find a renter. It sounds like you are most worried about the reno work. Reach out to me at any time if you like. I'm up in Dutchess county regularly and happy to relay some of my experience with my first reno/rental in Poughkeepsie. 

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  • Mike ReynoldsPro Member
    construction · Nacogdoches, TX · Member since 2011 · 2k+ posts · 1k+ votes
    9y

    Congrats. Sounds like you got a good deal. Do you have a contractor? Have him look it over and see if there will be any obvious uh ohs.

    2Reply
  • Jeff Bisgier
    OP
    Brewster, NY · Member since 2016 · 33 posts · 16 votes
    9y

    Thanks, Mike Reynolds. I think (and hope!) that is was a good deal. Zillow (I take their numbers with a grain of salt), estimates the value at $215k. I figure if I can refi approx $100k in 6 months, my monthly expenses for loan, taxes & insurance should come to approx $800/mth. With a rental income of $1600-1800/mth, I should have a good positive cash flow.

    As far as a contractor, I don't have one yet, but need one. I've had work done on my own house and know it's not easy to find a good, reliable contractor. I did have a friend come with me on a second walk through. He's an engineer and knows a bit about construction. He said the house looked really good. Just dirty from sitting empty for so long.

    1Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    9y

    Congratulations! Don't make yourself nuts thinking too far ahead. If the house is already ready for tenants, concentrate on your closing and your cash-out strategy. If it needs some rehab work, gather your budget numbers and your crew for that (unless you're doing all of it yourself), and your financing methods. You have plenty of time to worry about tenants and forms; when you are 4-6 weeks from being ready to show the house, you can really put together your marketing strategy (RE agent, zillow, etc) and your technical aspects (lease forms, etc). Believe it or not, a lot of the rest of it will just come along as you go, and there's a good support team here for questions that you don't know the answers. 

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  • Carl C.
    Investor · New York City, NY · Member since 2014 · 289 posts · 374 votes
    9y

    @Jeff Bisgier Your panic is understandable but believe me, many of us have been in similar positions and for most people it works out. You say you have been reading and preparing yourself so trust yourself a little. First things first. Decide what work you plan to do. Set a budget for yourself and figure out if you will contract the work or do it yourself. A good cleaning and fresh coat of paint go a long way. Figure out a schedule to get work comleted on time. I assume you want to get it rented as soon as possible so don't over do any reno. Make it just nice enough that people will be attracted to it. As you Say Brewster has a good location for commuters, you'll find a renter. It sounds like you are most worried about the reno work. Reach out to me at any time if you like. I'm up in Dutchess county regularly and happy to relay some of my experience with my first reno/rental in Poughkeepsie. 

    7Reply
  • Lynn McGeein
    Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes
    9y

    Some nifty quotes for that feeling you have (which I still get every time I start a renovation or buy a house or have an unexpected turnover...).  Going outside your comfort zone can cause a bit of panic, but if you've done your research and stay the course, you should be fine.  It gets easier with more experience.

    "The only difference between fear and excitement is your attitude about it"

    "Fear is excitement without breath"

    5Reply
  • Luc Boiron
    Specialist · Toronto, Ontario · Member since 2016 · 564 posts · 425 votes
    9y

    @Jeff Bisgier Congrats on the purchase!

    It sounds like you got it for a great price.

    Have you thought about flipping it? You have a lot of capital tied up in it, you could make a great return and turn that money over to buy more flips/rentals.

    Also, 1,200 sqft sounds large for a 2 bed 1 bath. In my area, that house would be around 850 sqft + basement. If you can find somewhere to fit it in, perhaps you could add a bedroom and bathroom (master suite, inside the existing house), and increase the value significantly like that.

    Just a suggestion!

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    what does your realtor REALLY think its worth.. as you know Zillow is all over the place.

    in todays highly competitive market.. it would be quite rare to buy a property that is ARV 215 for 77k.

    I would really dig into this before I closed.. IE walk it with a contractor.. have the realtor SHOW you comps physically or at least give you addresses to drive by etc... once you convinced yourself this is really that kind of equity and value then pull the trigger...

    many times we have beginners luck.. I can tell you its rare as hens teeth to get that kind of equity out in the public domain and an auction site... so that's my only thoughts on the matter.

    and if it all checks out then a definite congrats is in order.

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  • Michael Boyer
    Investor · Juneau, AK · Member since 2015 · 980 posts · 741 votes
    9y

    Super job! The good news: that house isn't going anywhere. So breathe deep. You have time. 

    I would actually work by day and read by night. The forums, articles, and books here on BP and elsewhere can get you started right on the tenant management and documents. Try some terms on the search engine for starters.

    On the property....Remember, you just have to get that rascal in fair rental condition (not HGTV glory), so see what the basic conditions and features are of comparable nearby rentals. You may not need as much or expensive a rehab as you think.

    On the financing, if you had the cash and can stomach it, congrats--nothing pencils out like a paid for rental! Of course, you may need the equity to grow later, but do you need it right now? If you can get this one ready with sweat equity and low cost cosmetic improvements, all the better. That equity will be there (and even grow) if you need it later on down the road for rental or multiplex 2, 3 or 4. 

    Best of luck!

    2Reply
  • Jeff Bisgier
    OP
    Brewster, NY · Member since 2016 · 33 posts · 16 votes
    9y

    Thank you everyone for your input!!!! It's great to get some knowledge and input from you folks. I appreciate everyone taking the time to write. I'm taking a few notes from each post.

    @JD Martin The house does need some rehab, so I'll follow what you said and get the marketing and forms going approx 4-6 weeks before it's finished.

    @Carl C. As soon as I have the keys, I'll go through the house and write down every project and try to come up with a budget. That part will be very new to me. Any tips on how you do that in your properties? And I totally agree with you about making it nice enough for rental. No travertine floor tiles or granite counters, although we are thinking about quartz or some type of solid surface countertops that will be fairly indestructible. I will reach out to you and appreciate the offer to talk to you about the reno work. Thanks!

    @Lynn McGeein Quote "The only difference between fear and excitement is your attitude about it". Great quote!!! Thank you!

    @Luc Boiron Yes, I think I got it for a really good price. We are thinking long term, which is why we want to keep the house as a rental property rather than flipping it. The house is listed at 1201sq ft in the county records, but I found something else in my searches that say the main floor is 858sq ft. It does have a finished attic (finished walls and ceiling and carpeted floor), and the basement has finished walls and ceilings with concrete floor. It sounds like they are adding in the attic space to the total square footage. Thanks for the reply!

    @Jay Hinrichs Based on what I've seen in researching comps, I'd estimate the ARV to be around $180k. I have to admit that I feel dumb that I never asked my realtor what he thought it would be. I knew we planned on keeping the house for a long time, but I still should have asked what the ARV would be right now. Besides being so close to transportation, the house is 3 blocks from Main Street in the village, which is about to begin a huge revitalization program. That should help the property value in the future.

    @Michael Boyer Thanks! Yes, a deep breath and maybe some meditation will help me! LOL I mentioned to Carl Carlson above that I just needed to make it nice enough. Clean and comfortable is what I'm after. I agree with you about not needing an HGTV dream home!  As far as the money, this is a big chunk of cash for me, so I definitely would like to replace it asap. Then maybe I can do this again if I survive this one!

    1Reply
  • William Jenkins
    Real Estate Broker · St. Louis, MO · Member since 2014 · 206 posts · 194 votes
    9y

    If everything checks out then it sounds like you got a good deal.  I do have to agree with @Jay Hinrichs though.  Make sure you inspect, inspect, and inspect some more with your contractor.  You either found a good deal in this market (rare), or there is something at that property that you are not seeing. 

    Try not to panic and think positive though.  You are used to watching from the stands with no pressure, and now you are actually in the game..... That is what you are feeling.  

    4Reply
  • Linda S.
    Investor · Richmond, VA · Member since 2016 · 1k+ posts · 2k+ votes
    9y

    Hi Jeff,

    Congratulations on your big purchase!   First, remember to breathe... I was in a very similar situation, where we bid on an auction, thinking it was crazy low, no chance they'd take it.. they took it!... I kept thinking this is either crazy, or crazy awesome!    You have TIME, as much as you need, if it takes 3 months, or 6 months.. you just saved yourself 40K by paying cash! 

    If you're worried about getting the cash back, depending on how much renovation needs to be done, you could go ahead and start the loan with the bank.. when we did our equity loan, the appraiser essentially just told us that comps are the biggest factor, and it's more of a check the box "does it have a bathroom, how many rooms,etc" instead of a thorough analysis of the renovations.    So if you are uncomfortable, I'd say get it started now.

    I agree with everyone else here, your general contractor should tell you what HAS to be fixed, and what you might have a few more years on, and what's just cosmetic.    

    We do all our screenings through Cozy.Co, they do a full background check and credit check, and then you just get a nice little PDF review of the person.. in addition to the basics (3-5x income/rent, no felonies, no evictions,etc) .. you have a few months until you can even start showing the place, so don't worry about landlording stuff yet.    Good luck!  Just take it 1 step at a time, sounds like you got a great deal! 

    2Reply
  • Account Closed
    Investor · Santa Rosa Beach, FL · Member since 2016 · 232 posts · 153 votes
    9y

    Hi @Jeff Bisgier

    CONGRATULATIONS! Welcome to the club, don't panic, take a deep breath and enjoy the ride. We've all been there. 

    First, I agree with @William Jenkins You are going to want to go over every inch of that property with your contractor. I would recommend posting a separate entry asking for GC referrals in your area. BP is a great place to start. You can ask your agent and even drive around the neighborhood in the morning, see who's working. This is how we just found our GC for a full gut we closed on last month. It was our first flip in a new town. He is AWESOME. 

    There is plenty of time to learn what you need to get started as a new landlord. 

    Take some time to read over and learn your state specific landlord/tenant laws. It is the responsible thing to do and will give you a lot more confidence as you get started. 

    I hear the laws in NY are very tenant friendly, so you will probably want to connect with an attorney who specializes in landlord/tenant law. A good place to look is your local NARPM chapter's approved vendor list. 

    If you have any questions, don't hesitate to ask. 

    2Reply
  • Jeff Bisgier
    OP
    Brewster, NY · Member since 2016 · 33 posts · 16 votes
    9y

    @William Jenkins I'm hoping I found that rare good deal. When I was looking for flips a few months ago, I probably saw around 25 houses, and spotted so many issues with each house. This house was different right off the bat. No sagging floors, no water stains on basement walls or floor moldings, no water stains on ceilings or walls, no mold or mildew, updated electrical panel, newer windows, etc. For the price I paid, it looks really good. Yes, it's easier watching from the stands though!

    @Linda S. Thank you! Yes, the auction certainly put the pressure on me, but I feel like I got a really good deal. Thank you for all of the information about the appraisal and the screening company. I will look them up. Do you have the perspective tenant pay for the background check? I have no idea about how that is done or how much it costs. Thanks again!

    0Reply
  • Linda S.
    Investor · Richmond, VA · Member since 2016 · 1k+ posts · 2k+ votes
    9y

    @Jeff Bisgier, the tenant absolutely pays for the background and credit check.   It weeds out serious vs. non-serious potential tenants and is a great way to determine if someone is legitimately interested or not...      With Cozy.co, it's $25 for a background, and $40 for a background and credit check.   It's 100% worth it!    

    1Reply
  • Jeff Bisgier
    OP
    Brewster, NY · Member since 2016 · 33 posts · 16 votes
    9y

    @Account Closed Thank you, Meghan! I'm trying to relax but the first one is scary. Do you know which forum category is the proper one to ask about GC referrals?

    I just took a quick look at your post that you linked to. It looks SO informative! I will be reading that over a few times. Thanks for help!!!

    0Reply
  • Jeff Bisgier
    OP
    Brewster, NY · Member since 2016 · 33 posts · 16 votes
    9y

    @Linda S. Great information, Linda. Thank you so much!! Let's say you have an available rental and 4 perspective tenants respond to your ad. How do you handle that? Do you charge each of them for a report and then decide based on the report information? If so, are the other 3 perspective tenants just out of luck on the cost of the report? Do you have them send you a check to cover the report cost before you get the report? Sorry for so many questions!!

    0Reply
  • Linda S.
    Investor · Richmond, VA · Member since 2016 · 1k+ posts · 2k+ votes
    9y

    Yes, I'd tell all 4 of them to apply and pay the fee for the background/credit check.  The 3 that don't get it,  unfortunately, they're out of luck and $40.   I only let people apply if they could get it, I wouldn't lead anyone on or have them waste money unless they were a strong prospect.    Believe it or not, most people weed themselves out when you state all your requirements.    

    They pay Cozy.co directly,  we don't deal with any cash.    Feel free to ask questions, we've all been there!

    0Reply
  • Jeff Bisgier
    OP
    Brewster, NY · Member since 2016 · 33 posts · 16 votes
    9y

    @Linda S. That's super helpful! I'll make sure that I put in my ads that there will be a credit and background check, so that they know what they are getting into. Thank you so much!

    0Reply
  • Account Closed
    Investor · Santa Rosa Beach, FL · Member since 2016 · 232 posts · 153 votes
    9y
    Originally posted by @Jeff Bisgier:

    @Account Closed Thank you, Meghan! I'm trying to relax but the first one is scary. Do you know which forum category is the proper one to ask about GC referrals?

    I just took a quick look at your post that you linked to. It looks SO informative! I will be reading that over a few times. Thanks for help!!!

    Great!

    There is a  Contractor Forum here on BP, could be a good place to start. 

    0Reply
  • Account Closed
    Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
    9y

    If you truly have that much equity, you should rehab to flip and use the rental as a back up exit plan. Renting is good if you buy at or just below market and recover your investment over time. In this case its better to take the cash now and redeploy it.

    2Reply
  • Jeff Bisgier
    OP
    Brewster, NY · Member since 2016 · 33 posts · 16 votes
    9y
    Originally posted by @Account Closed:

    There is a  Contractor Forum here on BP, could be a good place to start.

     Thanks, Meghan!!!!

    0Reply
  • Matt Jones
    Real Estate Agent · Pensacola, FL · Member since 2014 · 379 posts · 307 votes
    9y

    @Jeff Bisgier

    Congrats!  Your first deal is really exciting and scary at the same time but it sounds like you got the most important part right...  Buy it cheap enough to afford some mistakes and still turn a profit.  That's how I did my first one.

    As far as a book to help with the renovation - I recommend Flip: How to Find, Fix, and Sell Houses for Profit by Rick Villani and Clay Davis, you already have the property so you will just want to focus on the fix portion which is covered in detail and tells you what to fix when and why.

    For learning about becoming a landlord I recommend listening to the buy and hold related episodes of the bigger pockets podcast.  I remember learning so much from the first 100 episodes that made me money on my first flip and first rental.  

    For background and credit checks and even rent collection I have been using cozy.co  I doubt its the best but it works, it's free and applicants pay the site directly and it sends me their credit and background checks.  I've been using it about a year with no complaints.  Cozy.co also has a feature to make listings and then syndicates your ad out to other sites.  I have never advertised my rentals with an agent and I have had plenty of applicants but I think this would vary by location.  Cozy.co, Zillow, Craigslist and a sign out front have kept my phone ringing steadily. 

    Finally, for forms - I always check my county websites for existing forms and if I cant find what I want I google it and look for a quality, recent form that is approved by my state bar. 

    2Reply
  • Jeff Bisgier
    OP
    Brewster, NY · Member since 2016 · 33 posts · 16 votes
    9y

    @Account Closed I left a message for my agent about an hour ago requesting that he check the comps and let me know what he thinks the ARV would be. As far as this house goes though, I like the idea of getting rental income for years to come, although the thought of a quick flip profit is tempting! It is a bit tough to find a decent house to flip in my area. Plus, I'd estimate approx 85% of the homes in my area have septic systems and well water, which is a big unknown when purchasing foreclosures that have been winterized. A new septic system can run you $25k - $30k. This house I just purchased has municipal water and sewer. That makes me more comfortable having a renter in it.

    0Reply
  • Jeff Bisgier
    OP
    Brewster, NY · Member since 2016 · 33 posts · 16 votes
    9y

    @Matt Jones Thanks for some really good information! I will look for that book and definitely look for those podcasts. Linda DellaRipa also recommended and uses Cozy.co. Meghan Martinez also had the name of another company in the link she gave me. I'm glad to have 2 companies to check. Also, thanks for the info on the forms. I appreciate all the info you gave me!!!

    0Reply
  • Michael Gansberg
    Investor · New York City, NY · Member since 2015 · 388 posts · 563 votes
    9y

    @Jeff Bisgier, congratulations on your first purchase. I think you'll do great with it. Here's my advice if you want a nice edge at little cost- go for water and energy efficient appliances. Once you put in water-saving devices, you'll save money for as long as they last(and your tenant will save on water-heating costs.) If you put in LED bulbs, your tenant will have a lower utility bill and will never have to get on a ladder to change bulbs. The way I see it, "pretty" gets tenants in, and "inexpensive bills" keeps them in.

    Here's my quick list: .8 gpf toilet(Niagara Stealth at Home Depot,) Niagara Sava Spa 1.75 gpm showerhead, Watersense-labeled faucets, and LED bulbs from either Lighting Ever(LE) or Hyperikon(go for the 2700 K color temperature, and usually 9 watts or so is equivalent to a 60 watt incandescent.) Longer term, a high efficiency heating system and sealing and insulating properly is also a good idea, though I'd get it up and running before worrying about these last items. Energy star ovens and fridges seldom pencil out. 

    If you do most of the above, you can advertise your rental as water and energy efficient- most tenants will only care about the money they save, but being environmentally friendly is desirable to some small subset of people. Enjoy! 

    MG

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