Just closed on 1st property - Here are some lessons I learned

[Dan N.]

So after 1.5 years of searching, putting in offers, losing deals after inspections, yesterday I finally closed on my first investment property.

I put together a document of all the lessons I learned that I did not know prior, despite countless hours of investigation on my end. 

This is meant fo the newbie out there who is in my situation and is just thirsty for any info to help them make a good decision. These are the data I wish I knew beforehand.

Hope it helps.

1. Add  50% (yes, 5 0) above what the contractor quotes you for underwriting purposes. Best case scenario - it goes as originally planned, but at least you did your underwriting based on the worst case scenario

2. There is a very different cost to insurance if the house cannot rent within 30 days. Make sure to find out and plan accordingly

3.   Get insurance quotes on similar houses to what you are looking to buy BEFORE you even put in offers. The state i bought in apparently had many companies bail in the last 2 years and insurance was way higher than expected

4. Make sure you know the EXACT age of the roof from the seller and if not, you might have a problem even getting the house insured for roofs older than 15 years old in some states

5. When I did underwriting, since a portion of the insurance costs and property taxes are collected at closing, I reduced those from the first year of expenses. What I didn´t understand is that you pay 1 year of insurance in advance, plus 3 months insurance for escrow, plus every month from the first month you will still pay insurance. Same with prop taxes

6. Unless it´s a screaming deal, do not buy a house from someone going through bankruptcy.

7.  See if there is a way to get a police report to see if there are any criminals, or sex offenders on that street.

8. In certain states where termites are an issue, you should include $150-$200 yearly for renewing your termite report in your underwriting.

While some may read these points and say "duh, you didn´t know that", this is meant for those who want to gather as much info as possible before deciding on a deal.

Happy investing to you all.