So I've been doing lots of reading, watching lots of webinars, listening to blogs and I found a property I was really interested in purchasing. It is a 4-unit property that I could either purchase and rent (all four units have tenants currently in place), or house hack once one of the current tenants moves out. If I were to pay full asking price, keep the rents the same, and put no money in to rehab -- the Cash Flow would be $620/mo and a CoC return of 13% after figuring in vacancy, repairs, capex, and management.
For me, this is a no-brainer that I wanted the property, but I don't have the funds to get it. I've been trying to figure out my options, but don't really know where to begin to find either the money to do it myself, or a partner to do it with. I have read the posts and info on doing it with low/no money down, but I just couldn't get my ducks in a row fast enough this week since finding the property. My realtor said that they updated the notes on the listing to say that they've been getting lots of offers and that they were going to take the highest offer as of 9/1 at 5pm, but it is still showing available, so not sure if they actually accepted an offer or not.
I know there will be plenty of other deals that come along, but I am frustrated that I wasn't fully prepared yet. My original goal when I came to BP was to begin my real estate investing when my lease is over in February, but I don't want to keep sitting on the sidelines. I'm eager to get in the game and learn through experience. Back to the books I go...for now!
Hey there Duane,
I feel your pain...shopping for my 1st deal in a hot market right now, and every second that you delay due to financing, knowledge gaps, or not having the right realtor could mean a deal lost. (and I've lost a few myself already). But, honestly, even though it hasn't been fun - it's been an incredible learning opportunity. And I can guarantee I won't make the same mistakes twice!
Do you have any sort of funding in hand at all? Mortgage Pre-qual/pre-approval? Proof of Funds letter? Line of Credit? etc? You don't mention it...
Here's what's helping me now; I'm sure other BP members will give more tips:
1. Figure out your financing *first* (and consider having a plan B funding source as well). If you're doing a mortgage, get at least pre-qualified and work to get pre-approved asap. That way, you're $ is in order, the seller takes you seriously, and you have a fighting chance. If you're doing private $/hard $, contact the lenders, and get a proof of funds. When the market is hot, and you're looking at 2-4 units, you could be going up against more seasoned investors ready to do all cash, with more experience, and better market knowledge than you. Get the $ together ASAP and have the letter to show it if you want a fighting chance.
2. Figure out if there's any 'seasonal patterns' that you can work in your favor. In my particular market, I'm realizing that this particular summer may have been the absolute worst time for me to look using the MLS only. *EVERYONE* was doing the same thing = bidding wars. You may see a shift in the market after the Fall officially sets in.
3. Consider trying to find off MLS deals. I've started doing that now, and it's been promising so far...there was *way* too much frenzy in my market, and 90% of what what on the MLS was trash, overpriced trash, and overpriced awesome properties that won't cash flow if you pay anywhere near the asking price. Even when it hasn't worked, for me, dealing with the owner directly (at least to start) has actually been pretty refreshing. And usually, they're just talking to me - not me and 20 other investors.
Each one of these topics is covered pretty extensively all over BP (and more), but these are the ones that I wish I really understood earlier. Good luck! :)
Hustle as much as you can to get as much cash in your pocket so that you can present the strongest offer possible.
Well I have to ask the obvious question.....Why would a professional Realtor take a client shopping for properties when their clients don't have any money to buy anything? Did your Realtor get you prequalified with their mortgage brokers? Did they at least sit you down for a serious discussion of your real estate goals and your means of achieving them? You should be spending time with local investors at their club meetings and learn from people how to achieve success in the manner you want to do it in the future.
@Duane Gunkler , the odds of getting a nice property off the MLS in a hot market with no money down is extremely low. You need to either get money to buy with and get preapproved, or buy a distressed property, or even get an off market deal. Either way keep learning and good luck.
@Nicole Dunbar Thank you for the encouragement! I hadn't gotten any of my financing in order yet because I wasn't planning on acting on anything yet. I was analyzing properties because I wanted the practice, etc. Problem is, I am not the type to sit the bench! Put me in coach!!! I have started the process of getting my financing in order, but just not there yet. Since I'm looking to purchase as a buy and hold strategy, I'm not looking to do private money or hard money. If I were looking to flip or even do BRRRR, I would consider those options. In my case, if I don't have the financing ready, then I'm not in a position to get the property yet and I need to bust my tail to get in that position so that I can. I am definitely going to start pursuing off market deals too, but at this stage I am going to get all my finances in order first. I am definitely learning a ton through the process and can't wait to officially get my first one under my belt!
@Logan Allec Working on that now Logan! ;)
@Brandon Battle Fair question -- but the Realtor in question is actually my ex-wife (who just got her license after the divorce) and all I had her do was write the seller to get some questions answered, like current rents on the units, etc. She spent no time on it, and I wouldn't tie up a Realtor going to look at properties without having my ducks in a row first (although you're right, a Realtor should screen any potential clients first before getting to that point). I wanted to go to the local meet-up this past month, but was out of town for work that day. Definitely plan on attending them when I'm available!
@Jerry W. I realize that. One can dream though, right?!? ;) I'm working on bettering my financial situation now so that I am in a better spot when an opportunity like this presents itself. Like I mentioned, I need to be patient while I get my ducks in a row, but I'm very eager to get that first one under my belt! I'm working on learning as much as I can now to better capitalize when the time comes. Thank you for the input and encouragement!
@Duane - I had the exact same experience on a duplex last summer. Well-priced, 120+ days on mls, and good area, but hadn't finalized my funding. It's a painful, but important lesson many of us have to learn, it seems! Sounds like you've learned it :-)
Hang in there!
PS - Fidelity Bank had some decent loan products in GA, as did a small outfit called Movement mortgage. It may be worth checking them out when you are ready. Also, if you're a 1st time buyer, the Fannie Mae homepath program lets you pick up a reo that you owner occupy, plus there's a 2 week wait period before non-owner occupying investors can bid. There's a down payment grant you can get if you take an online class. I think there's a homeready mortgage as well that may be worth looking into.
Chalk it up to practice! There is always another deal around the corner! I am pretty sure I found the best deal I will ever find by just practicing and analyzing deals. I think its great practice to continue to run the numbers on properties even if you aren't ready (just don't blow a lot of other people's time - which it doesn't sound like you would). After looking at a lot of deals you will know a great deal when you see it when have your financing in place...
@Nicole Dunbar - I wasn't expecting to buy anything until next Feb/March when my current lease is up, but I'm chomping at the bit, which is why I want to act now, rather than sit on the sidelines. I knew that I needed to have my ducks in a row first, but just didn't expect to want to jump into the fray so soon after starting to learn more about REI on BP. I will definitely check out Fidelity and Movement Mortgage. I briefly looked at Movement's website tonight and I intrigued to learn more, so I will reach out to them this week. I definitely don't fall into the first time buyer category as I have purchased 5 SFH for myself over the years, and 3 properties I bought pre-construction, but walked away from my deposits because the market dropped while they were being built.
@Lisa Thoele - Definitely good practice to run the calculator and go through the steps. Each time I learn a little more and gain confidence. I try to analyze at least 10 properties a week, just to help myself realize the numbers. I wouldn't waste anyone's time. I know when I am ready to move forward, and when I'm "just looking". I'm getting to a place where I have a lot more confidence in my numbers, which is why I am bummed I missed out on this one, although it is still showing active...
Anyone want to partner...? ;)