First Rental Property Under Contract

[Chris DeHaan]

After many years of watching from the sidelines and suffering from analysis paralysis, I'm happy to say that I've finally taken the next step! I'm under contract on my first property after a couple days of negotiations with the agent.

The property is a 3bed/2ba 1940's bungalow on a corner lot in Greeley, CO. I am on the mailing lists for a number of agents in town, and contacted the listing agent within hours of receiving the email blast. The listing price was $99,900; I offered $95,000, and was countered at $97,500. The property was priced well from the get-go, so I did not expect them to come down in price much. I will not claim that this is 20% under market, but it's a fair price. I intend to own and rent out the property on my own for the long term.

I live in CA, so this will be a long-distance investment for me. I chose this area because I grew up in the Denver suburbs and still have family in the area (in case urgent issues come up).

Sale Price: $97,500 (20% down)

Rent: $950/mo (hoping for $1,000)

PITI: $477/mo (mortgage payment is $406)

Taxes: $585/yr (projected)

40% rule puts me at about $160/mo. 50% rule puts me at less than $100. So, for now I will attempt to self-manage. Being a college town with a strong oil/gas industry presence, I expect rents to remain stable and/or even increase over time.

The sellers recently replaced all the windows with dual pane vinyl units. The cabinets and appliances were replaced one year ago with basic "builder grade" units. The roof and exterior paint are about five years old and the interior of the house was re-painted this week. The furnace is older but was serviced this month. Don't know much about the water heater.

My primary goal with this rental is to finally get off the sidelines and start getting some experience. Depending on how this goes, I will continue to buy more in the area or come up with a new plan. I know it is not the most exciting deal out there, but it is a foot in the door for me.

My biggest lesson learned thus far was allowing the listing agent to double-end the deal. I thought it would give me an advantage over the other bidders, which proved to be true. He held other agents from viewing the property until the sellers and I finished negotiating. He's been easy to work with and very accommodating, but all that being said I don't necessarily trust that he's getting me the best deal possible. I may choose to do things differently next time.

I would appreciate insights and words of advice from everyone out there!