Start to Finish, Steps to Invest in Multifamily Properties

3 Replies

Hello BP Nation, my name is Rehan and I am new to real estate investing. I started by learning with BP books and podcasts and still have so many questions on the process of buying your first property. Below are the steps I have taken so far. I would be grateful if the community would be able expand on it both for myself and other new investors. 

Steps

1) Begin reading books and listening to podcasts on Real Estate. Bigger Pockets is a great source on this, and I highly recommend “The Book on Rental Property Investing” and “The Book on Tax Strategies for the Savvy Real Estate Investor” (any other books recommendations that don’t overlap on these books is much appreciated).

2) Ask other investors what they did starting out as well. You have gained knowledge from various investors at this point from Bigger Pockets podcasts and conversations.

3) Decide on an investment strategy, residential, commercial, land, Wholesaling, etc.

4) After picking residential as your investment choice, estimate what your end goal is.

5)My end goal is to own 10-15 properties with a value of $1-2 million in equity and eventually 1031 exchange into a large apartment complex or a commercial property.

6)I decided to start FHA loan on a multifamily house that requires little to no repairs. This will allow me to either further my onsite learning or bypass this and get a property management company. In this scenario, I am working full time and will assume the usage of a property management company.

7)I create a cash flow estimator model in Excel and adjust it to be more realistic based on other people’s models and what their actuals came out to be versus estimates. I continue to refine it by looking at multiple properties every day, for about a month. I use websites like https://www.rentometer.com/ and https://quantmaps.com/ to assist in getting accurate numbers for rent.

8)Next, I get pre-qualified for a loan to see what the maximum borrowing power I have is, and further filter out properties I can afford for my first purchase. To avoid getting credit score dinged too many times, phone call various lenders and banks to get a range of what their rates would be first, before settling on one.

I am currently doing Step 8. I am left with some questions now, but feel free to add to these steps and adjust prior steps as well, the more detailed, the better. 

Questions

What are the next steps, do I need to get an attorney to set up an LLC since I intend to grow the portfolio? Should I get a CPA to set up my QuickBooks at the beginning in case of audit and to prevent poor bookkeeping. Is this a good idea given I have low equity currently and using these professionals' costs quite a bit of money?

What does a Title Company do?

What does a Property Management company do?

Should I just find a good Real Estate Agent, who will then connect me to a good Property Management Company, Title Company, CPA, Attorney, Contractors, etc.? How do I find this real estate agent?

If a property I buy needs a little rehabbing, how do I find good contractors if I don’t have a real estate agent to give me one?

The title company checks for liens, handles the closing, holds escrow, issues title insurance, and a bunch more functions. Someone at your local REIA or a real estate agent can usually give you a recommendation.

Property Management keeps your property occupied, handles renovations and rehabs, and other operational functions. Ours provide us with financial statements as well.

If you're looking for recommendations from an investor perspective, local networking groups tend to be the best. Get management recommendations from people who have experience with particular managers. Networking is really your best bet in my opinion, as most real estate agents are not too keen on working with new investors, nor are most realtors particularly experienced in sourcing properties for investors.

Personally I would read a book on bookkeeping and just use that at this point. Using a CPA for your bookkeeping gets pricey. Paying a CPA to help with your tax planning is probably a better use of the funds.

Thank you for the feedback Taylor, I have now furthered my next steps.

1)My next steps will be to find the best rates from various lenders, then get pre-qualified from the best one.

2)Complete my education on book keeping. Any book recommendations on this, in case I decide to do it myself rather than let the property management company handle it.

3)Talk to CPA on tax planning.

4)Then, go to an REI meeting and interview/network with agents and investors to find the best fit. Additionally get referrals on good property management companies while I am there.

5)After picking final real estate agent and property management company, begin to physically inspect houses that meet my cash flow criteria.

I was talking to an agent before, and she wanted to run my credit to find what I pre-qualified for. Is that something I should do, or find the lender on my own? I've read that you have the benefit with an agent doing it as they have had time to find the best lenders whether they be from national banks, credit unions, mortgage brokers, etc. I am not sure what the cons would be?
Originally posted by @Rehankhan Daya :

Hello BP Nation, my name is Rehan and I am new to real estate investing. I started by learning with BP books and podcasts and still have so many questions on the process of buying your first property. Below are the steps I have taken so far. I would be grateful if the community would be able expand on it both for myself and other new investors. 

Steps

1) Begin reading books and listening to podcasts on Real Estate. Bigger Pockets is a great source on this, and I highly recommend “The Book on Rental Property Investing” and “The Book on Tax Strategies for the Savvy Real Estate Investor” (any other books recommendations that don’t overlap on these books is much appreciated).

2) Ask other investors what they did starting out as well. You have gained knowledge from various investors at this point from Bigger Pockets podcasts and conversations.

3) Decide on an investment strategy, residential, commercial, land, Wholesaling, etc.

4) After picking residential as your investment choice, estimate what your end goal is.

5)My end goal is to own 10-15 properties with a value of $1-2 million in equity and eventually 1031 exchange into a large apartment complex or a commercial property.

6)I decided to start FHA loan on a multifamily house that requires little to no repairs. This will allow me to either further my onsite learning or bypass this and get a property management company. In this scenario, I am working full time and will assume the usage of a property management company.

7)I create a cash flow estimator model in Excel and adjust it to be more realistic based on other people’s models and what their actuals came out to be versus estimates. I continue to refine it by looking at multiple properties every day, for about a month. I use websites like https://www.rentometer.com/ and https://quantmaps.com/ to assist in getting accurate numbers for rent.

8)Next, I get pre-qualified for a loan to see what the maximum borrowing power I have is, and further filter out properties I can afford for my first purchase. To avoid getting credit score dinged too many times, phone call various lenders and banks to get a range of what their rates would be first, before settling on one.

I am currently doing Step 8. I am left with some questions now, but feel free to add to these steps and adjust prior steps as well, the more detailed, the better. 

Questions

What are the next steps, do I need to get an attorney to set up an LLC since I intend to grow the portfolio? Should I get a CPA to set up my QuickBooks at the beginning in case of audit and to prevent poor bookkeeping. Is this a good idea given I have low equity currently and using these professionals' costs quite a bit of money?

What does a Title Company do?

What does a Property Management company do?

Should I just find a good Real Estate Agent, who will then connect me to a good Property Management Company, Title Company, CPA, Attorney, Contractors, etc.? How do I find this real estate agent?

If a property I buy needs a little rehabbing, how do I find good contractors if I don’t have a real estate agent to give me one?

 Welcome to the site. To your question a PM handles all the day to day operations of your rental portfolio.

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