First Purchase Process

[Theodore Gibson]

I'm a new investor, and this will be my first purchase so please bare with me. My plan is to purchase a duplex as an owner occupant using an FHA loan.

I’m currently struggling with the fact that right now in my area (Minneapolis, MN) it is a seller’s market.

When looking at potential properties, should I have an appraiser with me to determine the true market value of a property? Then based on that information make my offer below market value? For a lot of the properties I have viewed -the list price has been set by the seller and these homes aren’t on the market for very long. As an investor, how does one find deals in this type of market? Or should I wait it out until the market changes?

Any advice would be much appreciated.

-Theo

[Amber Gonion]

@Theodore Gibson House hacks are the best way to get started. You have the advantage of being right next door for tenant issues and repairs. While numbers here in the twin cities are tight, that doesn’t mean there isn’t value. Often it is a matter of finding properties that match your advantages, if you are skilled and can do some work yourself, if you know rents in the area (or have a real estate agent that also manages properties in many different areas), everyone brings something to the table.

Your realtor ideally should have experience in investments, management, rehabs, house hacking, and boiler license and or HVAC are helpful.

We often have conversations with appraisers to adjust appraisals as they don’t always see the big picture and are human and miss things. Appraisers look at properties in a few different ways ie. income approach, comparison, and cost approach.

It is difficult without professional management experience to determine potential rental rates for an area. This is one of your most important variables in determining the price you want to offer.

A good agent should be able to let you know a good property and guide you on price. We tell our investors to ignore the listing price and make offers based on the return that they are comfortable with. If that means offering 20k under or over asking, then sometimes that is the right approach.

Don’t get too caught up in how much you will make in the first two years, it is year 2-30 that really make a property a good value. Making money is different than building wealth.