Real Estate Investor · Columbia, MD · Member since 2014 · 172 posts · 94 votes
I am fairly new to BP but just wanted to share that my offer on investment property number 2 was just accepted today! I haven't closed yet and I know I'm counting my chickens too soon, but I'm excited to have jumped off the fence and put in an offer (that was actually accepted). I offered below list price by a lot even though the house is in "retail" condition but because I didn't use a buyers agent, I was able to negotiate a good deal.
I plan on "renting" out the top two portions to mine and my husband's law firm to use as our working office and I already have a renter for the basement apartment who will pay half our mortgage. We'll still keep a traditional office to meet with clients.
My goal this year was to buy one property per year as a buy and hold, but heck, I just upped it to a whopping two per year! I know I'm just a "small fish" but this is a part-time gig for me and I'm happy with slow and steady investing.
@Pyrrha Rivers. Not sure I'm the right one to follow on finding a deal.
But for me, its all about having a good size market to look for houses in and then learning the markets. I'm south of Chicago and really not a suburb of it. More just like a bunch of small towns that all flow into each other.
That being said. Here is my process for finding a deal. 1) Check the listing sites daily. And I do mean daily. Hud, realtor.com, auction.com, hubzu,com.
2) Look for my target properties: a) 1,200 or more square feet b) 3 bedrooms c) 1.5 bath
3) Look for anything listed around 130k or less. I'm looking to be all in (purchase plus rehab) at about 65% LTV. And the numbers only seem to work in that price range where the house sells for between 60k to 90k.
But I like to watch the stuff as it drops down to 130k or less because those houses at 130k can magically end up price dropping enough to where they can be had for that 60k to 90k range and I can be all in at my 65% LTV.
I won't make low ball offers on 130k listings that have been on the market for 2 weeks. Instead, I'll wait for those 130k listings to come down to say 100k and that have been sitting on MLS for 3 months. Then I'll try an 80k offer. HUD deals are the best. Just gotta be willing to sit on the sidelines until they've hit that 2 to 3 months mark. Then the discount magic can happen.
4) Go look at houses. This is a very underappreciated step. Bottom line is that its really important to see the houses before the prices really drop. Once I've seen it and have an idea on the rehab, then when they do drop the price, I can put in an offer that day.
And believe me when I say, that ability to offer that very day they drop the price has gotten me several houses.
Not only that but sometimes you see a house sitting and the pics make it look like garbage so you assume there's just no reason to look. GO LOOK. Pics can be very deceiving and you can really steal some houses that way. There are some houses that end up being really decent and, in terms of a rental, make for some great deal because there's some feature that puts people off that can be easily addressed.
Sometimes its no garage. Sometimes its because the cabinets are missing. I got one house strictly because the bathroom vanity was missing. The realtor said an owner occupant had an offer accepted on it before for about 20k more. The thing was missing a bathroom vanity so their lender said no way. The bank that owned the property then switched the offer criteria to cash only. Out by me, not many owner occupants doing cash deals and not as many investors either.
But I told the listing broker I wanted to do a rehab loan on and would they take that and the bank said yes. Put the bid in and got the house with rehab financing.
Funny part is the house was listed as a 3/2 but it was actually a 4/2. Another reason why taking a look at houses is really key.
But thats my process for finding a deal. 1) Watch your deal sources daily. 2) Go LOOK at houses. If you don't love to look at houses, you may not really enjoy being an investor. :-) 3) Put in your offers at numbers that make sense to you and to your source. For instance, I won't offer 50% of the list price on an REO thats been on the market for 2 weeks. Thats just wasting time. But I might put in an offer at 60% of list price on a hud deal thats been there for 3 months. Or, say, 15% off list on a homepath thats in reduced mode.
As you start putting in offer and getting counters or deals, you'll start seeing the patterns. But every once in awhile I'll throw out a flyer on something too and it gets accepted. Only with the hud deals though since thats some crazy formula and doesn't require my realtor or me to do much - just enters a number and no signing of an offer unless that number is actually accepted.
Even then, I try not to be silly. I think I have their new discount patter figured out. We'll see. Interestingly enough, I think hud caught on too and they stopped countering so that investors would stop going fishing. :-)
Just pick a pace and stick to it. You'll be surprised how fast time flies and how quick your portfolio will grow.
I was at 3 a year like clockwork for about 6 or 7 years. And before I knew it, we were in that 18, 19, area and then just boomed. Have added 13 properties in the last 14 months or so. And closing on another one this friday to give me 33.
Still consider myself a small time investor and probably always will. But for me, investing is easily one of the greatest hobbies on the planet and there is definitely a sense of accomplishment you get when you go through the process.
1) Finding the deal.
2) Getting the offer accepted.
3) Closing - signing a contract isn't the same to me as the day you leave the closing table with another home.
4) Managing the rehab and seeing it through to the final "AFTER REHAB" condition. This is also another absolute favorite phase for me. Knowing what the house looked like before we got it and what we brought it to has to be one of the more rewarding things we do......
5) Getting it rented and getting paid!
Picking your pace and finding a way to meet it is going to put you on the track to success. But be sure you get to enjoy the race too. So many points of satisfaction/fun in investing that I don't think people who don't invest can truly appreciate.... :-)
Congratulations! Going from 1 to 2 is doubling your business! Now is a great time to start systemizing your biz to prepare for growth. I waited much longer than I should have for that step, and it cost me more time and money in the end. Way to go!
@Mike H. your words could not ring truer to me! Keep up the good work. I hope to be at your level I'd like to say soon, but I know it will be awhile.
@Jonna Weber , systemizing my business... You are right and that's something that I need to look into but can you give me an example or two of what you mean exactly to get me started?
I just had the pleasure of being on podcast 110 which will be released later this month. When they asked me "what's your hobby?" I could honestly say real estate because I'm hooked too. It's like playing a game. What I like about BP is we can share our enthusiasm with like-minded strangers because our friends/ family probably "aren't" like-minded and my experience is, they get tired of hearing about it. Good luck!
@Glenn McCrorey - very true about others getting tired of hearing about real estate. My husband is on board but I think he even thinks I'm a little obsessed at times :) Looking forward to listening to your Podcast!
@Kenneth Hynes I chose a mixed use property this time around because my husband is risk averse. He wanted to get a property for our law office but also wanted the security of being able to rent out some portion of the house. When our law firm grows, we can then move into the basement apartment and expand. We purchased something that is on the nicer side as far as a rental goes so that we can be comfortable working in a nice environment, but what comes with that is a higher mortgage. Renting out the basement lowers our monthly nut and satisfies my husband. The next time though will be a solely residential rental (like our first is).
.......what I did was look on the MLS in a neighborhood where there were a more than an average amount of homes on the market, then I targeted the one that was on the MLS the longest. This homeowner was definitely a motivated seller. I found that representing myself and not using an agent allowed me to negotiate a lower price because I worked out with the listing agent that he would forgo the buyers agent commission. Because of that, when I submitted my offer, I pointed out that my offer was in reality $XXXX more than the submitted offer because there was not a buyers agent commission. I bought my primary residence with a buyers agent and was not satisfied at all with the process, so I decided to go it alone this time around and it worked out (so far).
Way to go @Sandra Holt! Congrats! I used a similar strategy with my current acquisition. I watched it, waited for the DOM to rise and the price to drop, contacted the selling agent directly, and contracted a great deal pointing out the savings of the buyers agent fee as well. Did the appraisal today, got my tenant lined up already, just waiting to close....looking for the next. Keep rolling! Congratulations!
I and most of the posters here started with one house at a time except for some big time investors I know who buy entire blocks at once. One at a time allows you to be more selective. I find it thrilling to buy the house, go through it and decide what changes I will make, and then offering it to a prospective tenant when it is all done. The best part is certainly receiving those checks.
@Joe Fairless Buying in Columbia is HARD! Howard County (where Columbia is) has a school system that is consistently rated in the top 5 in the nation so housing prices are high. If you do have a rental, you'll have potential tenants knocking down your door especially if you have a property that's big enough for a family.
This townhouse that I just bought, I got for $30,000 below last year's median purchase price for that neighborhood and I think I got a steal. Most investors though would laugh at that type of "discount," but for my area, that's good.
Investing in the fringes of Howard County is a better bet than Columbia.
If anyone who invests in Howard County has a different opinion, I'd love to hear it.
Awesome job @Sandra Holt , I have the goal of locking down my first investment property this year, but who knows I might run into the same confidence you have and try to make it two! Could you give some insight into how you approached your first two rentals? Did you buy as an owner/occupy?
@Andraise Scott This is the first time I've tried this strategy and I love how it worked out, so I'll definitely be trying it again. It's interesting how different strategies work in different areas. Congrats on getting your newest property and getting a tenant already!
@Mark Forest Thrilled to be buying houses is exactly how I feel! The rent checks aren't too bad either ;)
@Jeff Formeller Sure, the first rental was a townhouse that my husband and I were renting and when the landlord wanted to sell, we asked if we could buy using seller financing (since we were two poor law students and couldn't qualify for a mortgage), and he agreed. Seller financing was awesome and I highly recommend it! When we outgrew that house (and had more cash!), we rented it out, and moved into our current primary. That townhouse has been rented out for the last four years by the same three, professional women and I couldn't ask for better tenants. They can't screw in a lightbulb to save their lives, but the house is immaculate every time I stop by.
This one that we just bought was one where we just hunted in the neighborhood using the approach that @Andraise Scott outlined and we were lucky to score a deal. The townhouse was always intended to be a working office for our law firm and we are thrilled that our obligation is a thousand less than the rent we were paying for the dinky offices we currently have. And we're building equity to boot. The day that my offer was accepted, a friend asked if we had a place for her good friend to rent since he was in the beginning stages of a separation. Since we bought the property with the intention of renting out the basement apartment, it was such good timing and we now have a tenant in place when we close.
Anyway, that's probably more detail than you wanted, but there it is!