Hello all! So I am going to meet with a realtor for the first time this weekend to go check out some homes. He just sent me a bunch in my price range via MLS. Some homes he sent me have current tenants paying rent. I have the following questions:
1) Is it better to buy a property with a tenant who is already in the home and paying the rent instead of a vacant property?
2) If I do come across a vacant property, what is the best/quickest way to get a tenant inside of the property? This part worries me that I will not find a tenant.
3) Should I trust the agent with his listings that saying current tenants in property are great tenants, owner is just trying to move property? Seems fishy, but not sure.
4) Basically how do I determine which is the best deal for me to pursue?
Hi Eric :)
How did you come to choose this realtor? Was he recommended to you by another real estate investor who has done deals with him?
1) I've heard arguments for both sides. Some don't like to inherit tenants. Others like the built-in cashflow.
2) The vacant property should be in an area where people want to live. If it's a less desirable area, you would get a lower rent amount and (typically) a lesser quality tenant. Interview property managers/management companiesand get their opinion on whether a certain property or neighborhood is in demand.
3) Is the agent sending you only his listings? I revert to my question at the top. How do you know this guy? As far as MLS listings in general, always verify. Mistakes in listings are, unfortunately, quite common in my experience.
4) Consult other investors who are doing similar deals in your area. And/or ask here on BP.
Thanks for the response Ruth. I found this realtor via realtor.com. I liked a property on a listing and he contacted me next day via phone. That is all I know about him. I am a newbie and want to jump in already and make my first deal. I just want to do it the right way and pick the right property. What steps should I take so I can make things go smooth as possible? I suppose asking others here on BP who invest in the area I am looking helps as well.
@Eric DeVito , I get you wanting "to jump in already." I've been there and I'm sure many other BP'ers have too. Since this is your first deal, I do urge that you seek the guidance of an experienced investor in your area. Have you attended your local REIA meetings? As far as realtors, I prefer to work with one who has worked with investors in the past or is an investor himself. This type of realtor is worth his/her weight in gold and can sidestep any landmines, especially in your first deal. A "regular" realtor just won't get it.
If you want to meet this realtor and simply window shop, that's fine. And you might as well interview him. Find out what the extent of his experience. How long has he been a realtor, how many transactions has he done this year and last year, do his listings sell for list price or higher, what's the average days on market for his listings, etc? Has he completed any short sales? Will he do comps for you? Ask him if he knows how to wholesale and do assignments. If he doesn't know what that is, I would move on.
I'll paraphrase Tom Hanks character in "A League of their own," this way: 'are you jumping? Are you jumping? There's no jumping in real estate! THERE'S NO JUMPING IN REAL ESTATE!'
@Eric DeVito , please calm down. Never be in such a big hurry that you make 'major league' mistakes. I think the reason you are asking these question is because you KNOW yourself the deal doesn't 'feel' right.
@Ruth Bayang is correct: find a realtor from recommendations of other successful investors, not just because they listed the space. Personally, I prefer no tenants. Gives me opportunity to do repairs/updates to property while I get my leasing and other paperwork together to find the best tenants. If you fear not being able to rent, if it's that hard to find any tenants- really, on Staten Island-then you should not buy there.
You're doing the right thing, asking for help. We all help each other here.
Good luck, Tim
I second everything that Ruth and Tim said. As one wise person once told me, "Real estate has two directions, fast forward and fast reverse" Take your time, learn, and trust but verify everything. Do NOT take what the current owner who is trying to sell, tells you about his tenants - that they always pay on time, they never complain about anything, that they hate to sell but they just have to, etc.. An agent who is also an investor is essential.
Here's what I do when I purchase a rental. I only look at properties that are vacant. I make sure to get the systems all up and running, replaced if older, whatever, to make sure it will be as maintenance free as possible when I do get tenants in. I especially thoroughly check out the plumbing. Fill all the tubs and sinks and let them go at the same time to check out the waste lines, have someone scope out the sewer line to the street, especially if it's been vacant for a long period of time. "Stuff" hardens when no one is flushing water regularly and this can cause a back up. You do not want these issues when the tenants are all moved in. Invest in a good quality toilet like Toto Entrada. No $99 HD cheapies. Make sure there are the appropriate GFCI's in bathrooms and kitchens, all these things that are better done before a tenant is moved in. You don't want to be called over repeatedly to take care of things. That is frustrating to you and the tenant. Be pro-active, not re-active.
Here's how I screen for tenants. I advertise on Craigs List. I allow texting, love it, in fact. Pay attention to the very first communication you receive from a potential tenant. If it goes somehthing like this, "When can i move in?" Don't even reply. On the other hand, if the first inquiry is well-written, contains an introduction of who the person is, first and last name preferred, what job they have, when they want to move, etc, then that is worthy of a reply. Throughout your communications the person should be prompt and courteous.
After all seems to be good, tell them you are going to have them fill out an application (get help from an experienced landlord in creating your application. You don't even know what questions to ask, most likely). You must apply the same criteria to ALL tenants, to avoid discrimination.
After you review the application, (submitted when the person said they would, not 5 days later), have them go to a tenant screening service like NTN or Tenant Reports.com and have them pay for the criminal and background check, the credit check, and eviction history. Should cost them $25-$30. You don't pay for it. The company then sends you their info so you can make an informed decision. I had to do this for a property in PGH, and I live in Lynchburg, VA and it worked out great. If you are local, you will meet your tenants in person, as an added benefit to your screening process.
I urge you to get involved with a local REIA and learn from other's mistakes. It will save you much stress and financial ruin, and help you get off to a great start. Keep reading BP forums and you will learn what to do and not do. It's a fantastic resource.
The rest have fairly well covered the most important information related to your situation.
Bottom line for you is that you are a very long way from being ready to invest in real estate. Your very basic questions are a clear indication you have not take the time to educate yourself on real estate investing and are most likely 6 months to a year away from actually being ready to move forward.
Learning about investing is a educational process that starts with extensive learning to be able to understand the basics. Money, risk, evaluation, landlord tenant codes etc. and ends with the purchase of a property. You are beginning your journey at the end point and need to put on the breaks.
Hello Tim, thanks for reply. Staten Island is where I live but I am not investing here. I am looking into Allentown and surrounding areas in PA. Figures I meet with the agent is to get an idea of the area. Any advice is helpful. Thanks
Hi Greg, thanks for homes feedback. That being said what steps do you advise I should take to become better prepared. I am listening to podcast and posting/reading on the forum here at BP. Also trying to save up more funds.
Thanks for the reply Nina. I suppose I would need to get all the information on how to be a landlord and deal with tenants, things of that nature before I jump into buying. For now I meant I just am house hunting in the area I want to invest in. Just looking to get a feel of the neighborhood.
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One point which others have alluded to, but I'll say outright:
Most realtors are useless. Anyone can take a few classes, pass the realtor exam, and become a realtor. They can make a few deals, etc. But when it comes to really knowing the area, being able to tell a good deal from a mediocre deal, and being able to sort through the problems that come up with closing, there are very few realtors who are really good. VERY FEW.
You want to find a realtor like this to help you.
A realtor can be very helpful when you're starting out (and likely onward too) but it's worth the effort to find a really good one to work with you. It will be well worth the time and effort.
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Hi @Eric DeVito
I echo what previous commenters have said. For your first deal, I would recommend
1. Find an "investor friendly" realtor. There is a specific skillset that most agents don't have. You can ask for referrals from other local investors, or ask for referral in the BP Ask About A Real Estate Company forum
2. While you are looking for properties to buy, educate yourself on the rental market for the areas you are looking. This research will help you evaluate deals, determine supply/demand.
3. If you do consider deals where you are going to "inherit the tenant," You'll want to review the lease, get in the house to see how they are taking care of it and meet them if possible to determine their long-term plans.
If you have any questions, don't hesitate to ask.
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