My First Out of State Rental Purchase in 8 Steps

Hi everyone! 

In my first post I thought I'd outline my first out of state real estate deal in hopes that it encourages new folks to go out there and get started. I'm just getting started as well, and after 4 years of hemming and hawing I finally pulled the trigger. Hopefully after reading this you'll see that if I can do it, then you can do it too. 

Step 1: Save Some Money

Ugh, yes you do actually have to save some money to buy a house. 

I know, I know... you can do no and low money down and lot's of people have proven the merits of doing so... 

For most regular Joe's though, who are working corporate jobs and too nervous to borrow from their credit cards or somehow convince someone to give them 100% financing... it's not always practical. Unfortunately you do need a little money, Not a ton though! I saved up 20,000 and only ended up using about 15,000 for my first deal which included 2k in repairs. You can do it! If you're thinking there is no way I can save 15k then you are wrong! It is absolutely possible and I will outline how it's possible for anyone to save 15k dollars in another post. 

Step 2: Find the Property

I actually found this first deal here on BP. It was in the marketplace and I called up the broker (okay I'm 28 which means I emailed him first).

It was a 3 bed 2 bath for 59k in a B-/C+ neighborhood with a current tenant paying 950/month. Even better... one of those bedrooms and a bathroom were actually a part of a mother in law suite with its own kitchen. Not technically a multi family but the agent felt that rent was a little low for this type of property... He felt that 1100-1200 was reasonable if we ever turned the tenant over. Home run right?! 

Step 3: Stop talking yourself out of it and buy the darn thing

I called the lender that I had used when buying my primary residence. He was able to get me a pre approval letter in about 30 minutes (keep in mind I'm doing this all at work), then I submitted an offer of 51k dollars.

Later that same day the seller countered at 54.5k and I accepted. No turning back now! At this point I hadn't even seen the inside of the house so I was a bit nervous to say the least.

Step 4: Home Inspection

I listened to the advice given by Bigger Pockets and included an inspection contingency with my offer. My agent gave me a recommendation and I really liked the guy. I impressed upon him that I wanted a ton of photos taken as I had only seen the front of the house and he was happy to do that for me.

Everything checked out other than some minor repairs that I decided to pay for... and that was that. 

Step 5: Print, Sign, Scan, Repeat..

This was actually the toughest step. Paperwork! Now that you have an accepted offer and the house is "under contract", you've set a process in motion that can feel a little stressful.

Your lender will ask for pay stubs, tax returns, w2's... and for certain lenders.... a whole lot more. Luckily my lender is awesome and this part was a breeze. 

You will need to pay for an appraisal and the title company will likely reach out to you for some signatures... but overall its not too bad. 

Step 6: Close

I went down to my bank and wired the down payment and closing costs to the title company (about 13k). Then a mobile notary came to my house to go through the closing docs. The whole process took about ten minutes in my dining room and it was all a piece of cake.

Just like that.... I'm a real estate investor! That has a much better ring to it than "guy who is on zillow a lot and listens to a ton of REI podcasts.

Step 7: Obtain management

My broker also owned a property management company, so I just signed up through him. To be honest they aren't super responsive (I can't blame them since they only make 95$ a month off me) but overall I'm happy. They're doing the minor repairs mentioned earlier under budget, and 4 months later I am still cash flowing about $300 per month. 

Step 8: Count the Benjamins

Haha okay not really. Using conservative estimates this deal doesn't look like it's going to  be a huge home run. The problem is that I initially used Zillow's property tax numbers in my calculations, and real taxes ended up being much higher. 

Still though, 4 months later and about 300 dollars go into my account each month after all expenses... but I'm hesitant to say that is my cashflow. Repairs and vacancy have yet to rear their ugly heads, so we will see. 

None of that really matters for this first deal though. I've learned so much by finally taking action. There is no school like the school of trial and error. Just try not to error too much if you can! 

Let me know if you want any specific details. This first deal was a lot of fun, and I have absolutely no regrets. If you haven't started yet, I hope you take the leap as well!

Closing on a Triplex tomorrow, wish me luck,

Oh.. and go buy a house already!