Things I wish I knew when starting

[Jamie O'Connell]

I figured I would post a few things that I wish I had thought about OR thought about harder when starting out when I started buying investment real estate. I am only a year or so in so I will still have lots to learn. Some of these I learned the hard way. Some I learned from others. 

1. Always account for escrowed funds when accounting for closing cost. I have constantly under estimated the cost of escrowed taxes, insurance and the such. Lenders aren't always the quickest at getting settlement sheets over to you to review so if your buying more than one prop every few months and have to account for cash to close this can definitely bite you in the butt. It doesn't seem like it would be much but 6 - 9 months of escrowed adds up.

2. Seasoning periods - Each bank and lender has different requirements. Usually a cash out refi has a different seasoning period than a normal loan seasoning period. Some have 0 months, some 3, some 6. Legal changes for some types are now a year minimum. So if you're buying in cash, make sure you find someone who doesn't have a long cash out refi seasoning period if you plan on doing so.

3. Buying in cash is definitely easier (and usually a better deal) but must account for paying insurance on your own, paying taxes on your own. Which for me wasn't hard but definitely want to keep up on it. Also dont have to pay for appraisal if you're sure of price comps which helps with closing cost. 

4. If you are out of town investor I would be cautious about buying multiple places unless you have a team together.

5. You DEFINITELY need an A team of Realtor, Property Manager, Contractor/Handyman. Also important is the "B" Team - Lawyer or Settlement agent, insurance person, inspector. 

6. Always fight for yourself. You can still be respectful but also sticking up for yourself. That comes with making sure the appraisal is where you think it should be. Sometimes you cant change their mind but you can definitely dispute.  Lenders are there to help you, they always have a ton of clients so be respectful that you're not their only person but keep on top of any questions you have. Same with settlement. 

7. Never assume!!! If it's not in writing with BOTH side signatures it does not matter. 

8. If buying multi family make sure it's legally multi family with the county. 

9. Dont be scared off by different type of loans. Just do your research to see what works for you.

10. Interest rates are huge. But not everything. 10% on a 30 year lean can be a killer, 10% on a 12 month loan in the grand scheme isn't that big of a deal IF you know it can be refinanced at end. 

11. Find your level of property class and go with it till you perfect it then branch out if you want. I do mostly section 8 rentals, so in my first year to try and do Long term section 8 AND Class A airbnb probably would have hurt me in the long run. 

12. Definitely dont suggest quitting your job when you start like I did. Life is definitely easier when you have a nice monthly income. And W 2 definitely helps with regular loans.

13. Save for taxes. Better safe than sorry. 

14. All lenders ive met so far only lend on the purchase price, not the appraised value. So even if you start out with 25% equity, they will still expect you to bring 25% down. Few ways around it with different type of loans and strategies and I could be wrong on this but in my experience. 

15. Theres limits to seller assistance - I believe it's normally no more than 2% of the contract price can be asked for seller assistance (money at closing given to the buyer by the seller.) 

Thats all I can think of now. I hope others will add to this as just having some common sense pointers when I was starting out would have been helpful. Even if it makes sense as soon as you hear it, you dont know what you dont know. 

From 1 month experience to 50 year experience everyone has helpful hints.