If you will recall, in the last article, we had figured out our first round of funding via a HELOC on our primary residence. Now that we had that, it was time to start looking and find our first property. We were beyond excited because this was our first foray into a whole new world. Luckily or unluckily, however you choose to look at things, we learned our first investing lesson right out of the gate.
The 20 Best Books for Aspiring Real Estate Investors!
Here at BiggerPockets, we believe that self-education is one of the most critical parts of long-term success, in business and in life, of course. This list, compiled by the real estate experts at BiggerPockets, contains 20 of the best books to help you jumpstart your real estate career.
Why We Chose This Particular Market
Our first step was to reach out to my real estate agent, who is a very integral part of the team we are creating, to inform her that we had the funding and were ready to go. She was more than happy to help, even though the target market we are looking at is about an hour away from us. We targeted this market for a few reasons:
- It is still close enough to us so that we can stop by and check on properties randomly.
- The buy-in rate is much lower than where we currently live.
- There is a military base, a VA hospital, and a university (which means that we have multiple avatars).
- The ROI is higher than where we currently reside.
A lot of investors that I have spoken with purchase properties “site unseen” and go based on pictures, disclosures, and gut instinct. We are a little bit more nervous about this style of purchasing because I have seen a lot of houses that certainly are not my cup of tea. But we were willing to take a risk if the right deal presented itself.
On this note, we went to this city multiple times looking at properties. We didn’t find anything on our first few trips that would suit our needs. This is primarily because we are interested in buy and hold only right now. While we are open to doing minor repairs to get the property rent-ready, we are not open to total rehab—nor are we fix and flippers. Each investor has their own style, and we have chosen to be buy and hold investors.
Related: Newbie Investors: Here’s the Truth You NEED to Know About $30k Properties
So, after these first few trips, we ended up finding a property that had been on the market for a little while. We didn’t look at it on any of our trips because it was over the price point we’d been targeting. However, the seller lowered it enough to fall within our parameters, thereby triggering our interest. The pictures all looked really good, and the area of town was decent, so it seemed like a good choice.
The price reduction apparently triggered a bidding war amongst investors, so we threw our hat into the mix. Because we were willing to close when they needed and we were cash buyers, we won the bid!
But, this was completely site unseen.
We had two weeks from the time that we went under contract until we closed, and we wanted to get an inspection and see the property first. Our inspector (another integral part of our team!) agreed to go down there to do the inspection. I planned to meet him, along with the property manager I was considering, while he was down there.
Our First Investing Mistake
Upon arrival, the outside appeared to be as advertised. The inside, however, was a completely different story.
This property looked NOTHING like the pictures!
It was an older house, so there was plenty of potential to make it something really great. However, that would take somewhere between $40-50k—and that was NOT in our budget.
Not only that, but we aren’t interested in fixing and/or rehabbing a property. That is not the business model we decided upon.
I spoke with my inspector and the property manager, and we were all in agreement that this property was not as advertised. I would simply have to pull out of the deal. The only way I could stay in would be if they reduced it to almost nothing and basically gave it to us, but I would still have to fix it. And we simply had no desire to do that.
What We Lost
By pulling out of the deal, we were out the $500 due diligence that we paid. However, in my opinion since this house was not as advertised at all, that should’ve been returned. But I am told that isn’t how it works. Still, I think it should be because what they did was just downright sneaky!
And on top of that, we were out the fee for my inspector. On the up side, since he is such a nice guy, he agree to cut the fee for us. This is because he didn’t have to actually write up the report, so less overall work was required of him. But he still needed to be paid for his time to go down there and do the inspection, which I understood.
Even with him reducing his fee though, we are still out $750—all for an investment property that wasn’t even within our set parameters, all because we went under contract site unseen.
Needless to say, we are not pleased and a bit stung.
Learning from Our Mistake
We try to learn from our mistakes so that we don’t repeat them. What we learned is that we just cannot purchase a property site unseen, like many other investors do. We simply just have to take the time to actually walk the property before we put an offer in.
After all, these properties are supposed to be long-term investments for us, and we want them to be good, stable properties in highly rentable areas. So, we are just going to have to put in more legwork on the front end to ensure that is the case. And if that means driving down there to go take a look at a bunch of properties at once, then so be it. I would rather spend the money on the gas as opposed to losing another small chunk of change.
We know that this lesson will stick with us long-term. But we are hoping that with more time and experience, we will become more comfortable purchasing site unseen. This is because we know that it can help us create a better overall investment portfolio.
We just aren’t there yet in our investment journey. So, for now, we will continue to walk the potential properties first to avoid making another $750 investing lesson.
Have you tried your luck buying site unseen properties? How has it worked out for you?
Let’s chat below.