Buying my first rental property.

[Susan Little]

Hello All: I have been working successfully in residential real estate and am ready to buy my first rental property. I am definitely starting small so I am looking in to out of state markets. My question is about foreclosures. I must say, there are so few of them in my market that I am ignorant when it comes to the pros and cons. I was thinking I should start by buying something turn key for my first, but wondered if anyone thought there was an advantage to buying a foreclosure. Are most in pretty bad shape? Does it have to be an all cash purchase? Thanks in advance for your insight.  So far I am considering the Pittsburgh, PA and Cleveland, OH markets.

[Don Petrasek]

@Susan Little I’ve bought pretty much all foreclosures in the Cleveland market and the comments above are all spot on.  There can be a lot of locked up value in them, but very difficult for a new out of state investor to manage.....even for an experienced out of state investor for that matter.   One thing I’d add to the list is that utilities typically aren’t on which is risky + a major pain when you transfer title.  On one house, the water dept wouldnt turn the water back on because the previous owner had messed with the meter multiple times and was on their blacklist.  They acknowledged that I had a perfect pymt record on other properties but it still had to be cleared by their “investigations unit”.  2 weeks later they finally turned it on.

You might consider looking for properties that are just cosmetically inferior......e g lots of big flowery wallpaper, pink tiles in the bathroom, etc.  things that turn off the retail buyer and in turn get the price down but that either are easy to correct or can wait.