New Investor. House or Leasing-Contract, Which comes first?

Question

Hello everyone. I am currently looking over homes that can potentially become my first rental property when I began thinking about placing a tenant in the building. I thought to myself, "Should I have the home first and then create a leasing-contract, or create the contract first and then purchase a home?" I would assume that by having a contract ready-to-go I decrease the time the property will remain vacant, potentially saving me some cash . But what if I create a contract and I am unable to qualify for or unable to close on a home? Who can I talk to in order to even begin writing up this contract?

Would Appreciate some tips and suggestions from anyone that can help and has already gone through this process.

Brandon Rush · Answer

Joas,

Slooowww down lol. No need to think too hard about this.

My recommendation would be to start building a team who you can reach out to with these kinds of questions. For starters, I would recommend finding a realtor. I would recommend finding an agent who invest themselves as they will be able to give the best advice on purchasing rental property. You can find an investor friendly agent in a number of ways such as:
* Posting to the BP forums seeking out one
* Posting to your local facebook real estate investor groups seeking out one
* Looking at current MLS listings for available multi family and reaching out to the listing agent

Once you find a good investor friendly agent, they will be able to assist you with finding an attorney who has worked with investors. Between these two resources you will be able to obtain a lease agreement. I am sure there is a standard agreement that can be used for your region.

This can all be completed now but I would recommend you focus on finding a property first so you do not waste too much mental power thinking about the lease. Once you find a property, getting a lease together should literally only take a week or so.

Depending on your BP membership, you could also use one of their state specific leases. My lease is a combination of the BP Connecticut lease, the standard lease template for my region and a few personal touches.

Good luck and let me know if you have any additional questions.

Craig Bellot · Answer

Hey @Joas Espinoza,

The first steps I would recommend as a new investor is to get a handle on analyzing the income, expenses and ROI of these properties in Bridgeport.You can use the Bigger Pockets calculators to start.  Use Zillow and rentometer.com to get data and analyze a few from your home to see what type if returns there are.If these meet your investment criteria then start looking in person.

Let me know if you have any questions.

-Craig

Jorden P Dupont · Answer

Hey Joas, love the enthusiasm. I would have to agree with @Brandon Rush and @William Collins here. I'm currently in your shoes. I placed a bid on a duplex a while back and I would of inherited the tenant. After I sent in the offer I was thinking to myself...Man what did I just do? I don't have a lease, I don't know where to put the tenants security deposit after I get it, I don't even have a plumbers phone number in the event that the tenants toilet magically blows up at 1am. I was eventually outbid after scrambling around to find what I needed to start out. Network, Network, Network. Like the gentleman above stated, find an investor friendly realtor and ask them who they use. Type all of contact info you get into an excel sheet and start building your "team." Reach out to them and make the connection before you need something. Cheers and goodluck on finding your first deal! Stay motivated.

William Collins · Answer

Joas,

The chicken or the egg- which comes first?  How about you turn the question on the side.  Right now this is not about a deal or a fully built-out execution plan- it is about looking at the resources around you.

1) This is BiggerPockets.  Being a pro member gives you access to landlording forms, and for a nominal fee, a lease tailored to your state in which you live in. Lesson here- look around at what is available for reuse and calculate the cost of doing it versus alternate routes. 2 hours of a lawyers= $200, 1 year of membership is what?  (@Brandon Rush I totally agree with that part).

2) Take the time you have now to look for a deal, while you start building a list of what you need to do once the deal falls in your lap. The one thing you will hear time and time again on the podcasts is that successful people find the next steps and don't just stop because they aren't an expert in the full deal end to end.  There are two ways to get knowledge: doing and learning. Do both.

3) If you are concerned so much about being ready to turn this property into a rental day 1, but I also see a concern you might not qualify for the rental period.  Work on the 2nd part,  get together a plan for how you would qualify for what price rental.  The lease-up part of this equation comes only after acquisition and renovation and is highly dependant on the first two parts.   Being ready to lease, but finding out that you need to repaint the house 1st after furniture is moved out means take your time.

Cheers Bill

New Investor. House or Leasing-Contract, Which comes first?

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