steps for first absentee rental purchase

3 Replies

Hello BP,

I have been snooping for a while, but never posted before.  I finally got my courage up and did an offer, and it has been accepted.  I am now entering my due diligence phase, I will be calling inspectors and getting an inspection in the next ten days.  I am already aware of some problems and accounted for that in my offer.  it is an out of state single family rental which is currently occupied, the tenant is current and wants to stay.  they are long term.  I am currently trying to form up an order and procedure for my next steps.  I'm thinking something along these lines:

1. ensure the inspection is acceptable

2. form an llc in the state of the property

3. reach out to insurance agencies for coverage, rental and umbrulla

4. get a lawyer to draw up a new rental agreement for the tenant, as well as handle any other legal issues needed

5. complete the closing

6. get a contractor to fix major issues

7. start forming a team in the area.  contractors, cpa, legal, ect.

8. create a long term plan to ensure the house is increasing in value

My question for those of you who have done something like this before is, would you add any steps which I'm overlooking, or would you rearrange the priority or the steps, or combinations thereof.  

Also thank you to everyone on BP for getting me to this point.  

Hey @Miles Miller , welcome to the BP community!

Congrats on the first offer and acceptance! Also, congrats on the first post, but I do wish you had posted sooner. You have some terrific DD items there but you also have a big step that should have been done or at least started prior to submitting offers. You are also missing an item or two for DD. Here are some additions. This is a rough "order" but you can & should be doing a lot of these at the same time.

1. Get the lease - whether they're on month-to-month or term, you need to know what agreements exist because this carries over to your ownership

2. Order the inspection sooner rather than later - it should only cost $300-400 and you're not going to have a clue what you're getting yourself into until this is done.

3. Get a GC out for an estimate - this is only if there are major repairs needed

Step that should have already happened:

1. Start forming your team - you should already have at least a list of 2 or 3 pros within each major category. Even better would be if you've called them once to make sure they're taking on new clients and have any interest working with a new investor. 

Make sure you are not waiting to do anything because you "have plenty of time." The sooner you get rolling on DD the more time you'll have for any snags/surprises (they will happen). Hope this helps a bit - please, feel free to reach out anytime if you have other questions or just want to chat!

Thank you for your reply @Brenden Mitchum .  

I can see where that would have been beneficial, it all just fell together quickly.  I had tried before to buy a couple places, and ended up with analysis paralysis, or just getting overwhelmed.  I had decided maybe I needed the motivation of actually having to act.  Also being out of state made it harder.  I figure I will use this as a building experience, and develop a team with it to then carry forward.  I guess I know what my next post needs to be though.  

I have the inspection ordered for this week, my agent recommended getting a contract before the inspection so that I didn't pay an inspection then have someone else offer before I did.  

I also got some verbal confirmations on the rent and tenant but not the contract, that is something I will pay more attention to going forward.

When you say major category, I'm thinking: legal, tax, management, agent, contractor.  Are there any you would add to that?

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@Miles Miller

Hey, there's no arguing that trial by fire is a fantastic way to learn, but can be expensive so hopefully you're prepared for that.

Getting the lease should be your main priority right now. You just have no idea what you're agreeing to take on by taking over these tenants. Not having the lease would be like not having an inspection done..

Yeah, those are the main team members and hopefully your agent can help you with building that. 

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