Am I prepared for first rental property purchase.......
Real Estate Agent · Buffalo, NY · Member since 2020 · 163 posts · 28 votes
Am I prepared for first rental property purchase.......
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Jonathan GreeneBusiness Member
Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votesIf you don't like to lose, that is the best way to lose on deals over and over. And I don't mean by not winning, I mean by bidding too much. If you get the eBay fever when you are bidding, you are bidding with your heart which should not play a role in your purchasing. You should know your numbers so well that you bid a number and that's your number. You walk away and bid your number on a few more. Most of the time you get outbid and then plenty of those times the deals fall apart because the person who won gets bidder's remorse.
How good are you at evaluation rehab budgets? How good is your agent about getting you rental comps? If you are looking for a two-family home, you should only be looking at rental comps in multi-family homes, not apartments - that is a mistake most agents make when sending you comps. What is your goal? Cash flow? Appreciation? Are you going to manage them yourself? Are you prepared for that? Do you have your own leases made up?
10 Replies
- Investor · St. Louis, MO · Member since 2017 · 109 posts · 77 votes6y
Dale,
My best piece of advice is to find a mentor to walk you through the process. This will take the anxiety out of the process. The best learning experience is hands-on.
I don't like to lose either, but took the plunge 10 years ago. I started with a single family house and continued to add more to our porfolio in the same area. Today, we own 12 single family rentals by simply "farming" an area. What amazes me is how many houses I drive by and know what it sold for, what is currently rents for, or met the neighbors.
You need to build a wholesaler list. Simply ask a wholesaler to be added to their distribution list. This will expand your deal flow. I have bought houses from wholesalers, a simple sign in the front yard, and direct from the homeowner.
Greg
- 6yJonathan GreeneBusiness MemberReal Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
If you don't like to lose, that is the best way to lose on deals over and over. And I don't mean by not winning, I mean by bidding too much. If you get the eBay fever when you are bidding, you are bidding with your heart which should not play a role in your purchasing. You should know your numbers so well that you bid a number and that's your number. You walk away and bid your number on a few more. Most of the time you get outbid and then plenty of those times the deals fall apart because the person who won gets bidder's remorse.
How good are you at evaluation rehab budgets? How good is your agent about getting you rental comps? If you are looking for a two-family home, you should only be looking at rental comps in multi-family homes, not apartments - that is a mistake most agents make when sending you comps. What is your goal? Cash flow? Appreciation? Are you going to manage them yourself? Are you prepared for that? Do you have your own leases made up?
- Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes6y
Originally posted by @Jonathan Greene:
If you don't like to lose, that is the best way to lose on deals over and over. And I don't mean by not winning, I mean by bidding too much. If you get the eBay fever when you are bidding, you are bidding with your heart which should not play a role in your purchasing. You should know your numbers so well that you bid a number and that's your number. You walk away and bid your number on a few more. Most of the time you get outbid and then plenty of those times the deals fall apart because the person who won gets bidder's remorse.
How good are you at evaluation rehab budgets? How good is your agent about getting you rental comps? If you are looking for a two-family home, you should only be looking at rental comps in multi-family homes, not apartments - that is a mistake most agents make when sending you comps. What is your goal? Cash flow? Appreciation? Are you going to manage them yourself? Are you prepared for that? Do you have your own leases made up?
Absolutely. Losing a bid at a good price you can justify is much better than winning and overpaying. Not all winning bids are overpaying, but don't let your perception of "losing a bid" cause you to overpay.
- Investor · Southeast, MI · Member since 2016 · 425 posts · 184 votes6y
What he said. Also, have you decided on your goals, and what you want from your investments in terms of returns in Dollars and/Percentages? This will let you know if after you analyze a property, should you buy it or not.
- Real Estate Agent · Buffalo, NY · Member since 2020 · 163 posts · 28 votes6y
Originally posted by @Greg Miller:
Dale,
My best piece of advice is to find a mentor to walk you through the process. This will take the anxiety out of the process. The best learning experience is hands-on.
I don't like to lose either, but took the plunge 10 years ago. I started with a single family house and continued to add more to our porfolio in the same area. Today, we own 12 single family rentals by simply "farming" an area. What amazes me is how many houses I drive by and know what it sold for, what is currently rents for, or met the neighbors.
You need to build a wholesaler list. Simply ask a wholesaler to be added to their distribution list. This will expand your deal flow. I have bought houses from wholesalers, a simple sign in the front yard, and direct from the homeowner.
Greg
@Greg Miller Hi Greg! That is what I say too. Totally agree with you. When I was an agent 20 years ago I was assigned a mentor at Realty USA. They took me on only one appointment. Now I am trying to buy my first rental and it would be definitely be helpful to get some hands on experience and see how to win and make smart decisions with very little mistakes.Problem is no one has the heart of a teacher and the desire to help make someones dream happen.
Your right there is some cold feet and anxiety to buy my first rental. I'm sure its normal, I mean people are saving up for many years and making sacrifices to get a decent down payment.
Congrats on your success and owning a great portfolio
- Real Estate Agent · Buffalo, NY · Member since 2020 · 163 posts · 28 votes6y
Originally posted by @Jonathan Greene:
If you don't like to lose, that is the best way to lose on deals over and over. And I don't mean by not winning, I mean by bidding too much. If you get the eBay fever when you are bidding, you are bidding with your heart which should not play a role in your purchasing. You should know your numbers so well that you bid a number and that's your number. You walk away and bid your number on a few more. Most of the time you get outbid and then plenty of those times the deals fall apart because the person who won gets bidder's remorse.
How good are you at evaluation rehab budgets? How good is your agent about getting you rental comps? If you are looking for a two-family home, you should only be looking at rental comps in multi-family homes, not apartments - that is a mistake most agents make when sending you comps. What is your goal? Cash flow? Appreciation? Are you going to manage them yourself? Are you prepared for that? Do you have your own leases made up?
@Jonathan Greene Sounds like you have to be able to deal with a lot of losing. I definitely don't like to lose. I automatically thought if I save up for 5 years then I will be able to buy a rental property just like that.
There's so many challenges that go with. So much competition, seller's market, Covid rules, agents lack of communication and mentors.
Estimating rehab budgets is new to me, I can guess about how much things cost since I have totally repaired and replaced everything in my house but as far as a contractor labor charge dont know.
My agent put me on the email MLS list but no rental comps and says that I forgot to include a few expenses but I am pretty sure they were included.
Yes, looking for a 2 family because that is what is available in my area. Would prefer a 4 unit but nothing for sale.
Just looking for a rental to cash flow 400 a month after all expenses for a 2 unit along with appreciation over a number of years. My dream would be to make enough to retire early because I am currently working 40 hour weeks with half hour drives to and from. But that would take 10 or more properties so I'll just hope for 1 or 2.
Don't know if I should manage them myself. Seems like a huge chunk out of my earnings get wiped out along with fees and hourly charges for repairs. The one said it was 10% of the gross rents.
I don't have my own leases made up yet. That's another thing I am unsure of.
Thanks for your reply!
- Real Estate Agent · Buffalo, NY · Member since 2020 · 163 posts · 28 votes6y
Originally posted by @Christopher B.:
What he said. Also, have you decided on your goals, and what you want from your investments in terms of returns in Dollars and/Percentages? This will let you know if after you analyze a property, should you buy it or not.
@Christopher B I'm starting with small goals which I thought were easily attainable but I was wrong. Just a 2 family for my first property that cash flows $400 a month after all expenses. Still iffy on the percentages not sure what a good cap rate is or coc return is. Read that a good cap rate is between 4-12% which is a huge difference. and coc should be 10% or higher - Rental Property Investor · Boca Raton, FL · Member since 2018 · 24 posts · 5 votes6y
@Dale, first of all i dont think anyone likes to loose. But i think by calculating the risks you can effectively control that emotion.
I dont know many investors who are getting every deal they are bidding on. Sometimes it takes thousands of calcs, bidding etc to get one deal.
I always hear “ it’s important to get started” but do that with again, the calculated risk. If your numbers work out and you know how much you can bid to still make it work for you than yoi should always be ok with loosing out sometimes. I cant tell you how many times i didnt get a deal because someone offered cash etc and sometimes i cant believe how much it sold for and how someone is making money off of it.
As with always, practice and experience will take away the fear.
Keep putting yourself out there, good will come from it
- Investor · Southeast, MI · Member since 2016 · 425 posts · 184 votes6y
I'm still working on meeting my goals, but I like helping others meet their goals as well. If you want to discuss, feel free to reach out.
- Real Estate Agent · Buffalo, NY · Member since 2020 · 163 posts · 28 votes6y
Originally posted by @Andreas Schneider:
@Dale, first of all i dont think anyone likes to loose. But i think by calculating the risks you can effectively control that emotion.
I dont know many investors who are getting every deal they are bidding on. Sometimes it takes thousands of calcs, bidding etc to get one deal.
I always hear “ it’s important to get started” but do that with again, the calculated risk. If your numbers work out and you know how much you can bid to still make it work for you than yoi should always be ok with loosing out sometimes. I cant tell you how many times i didnt get a deal because someone offered cash etc and sometimes i cant believe how much it sold for and how someone is making money off of it.
As with always, practice and experience will take away the fear.
Keep putting yourself out there, good will come from it
@Andreas Schneider Seems like you have to stay patient and accept losing some bids. I agree practice and experience will make things go smoother.That's what I'm trying to work on and I'm glad to be able to go on here and vent or ask questions.
Thanks for your reply!
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