I'm totally new to the REI game. I've read a couple of books and feel that I have a pretty good handle in the individual tasks, but I'm having a hard time putting together a general sequence of events. I think my confusion comes from the fact that the books I've read don't necessarily follow from one logical step to the next.
Here is how I see the process right now, please correct me if I am wrong.
1. Find a mortgage broker and figure out what I can afford.
2. Find a property and a buyer broker / agent
3. View the property, ask general questions, and determine if I still have interest.
4. Make an offer. Negotiate most of the details.
5. Enter into contract at an agreed upon price. Put down a deposit or earnest money.
6. Have the home inspected.
7. Conduct my 'due diligence' and review tenant records, taxes, etc.
8. Go back to my mortgage broker and finalize the details of the mortgage.
9. Go to the closing table and seal the deal.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
18y
Are you looking to buy a single property to live in, a single property as an investment, or multiple investment properties? If you're investing, what's your exit strategy? Fix and flip? Rental? Wholesale?
Your strategy will dictate some additional steps that are needed. If you're fix-and-flipping, you'll need to figure out values for move-in condition houses. Then, back into the value you can afford to pay. For rentals, figure out the rents for the area. Then figure out what you can pay. If you're just looking for a place to live, then indeed, your income and assets are the main determinant of what you can pay.
There are really two key events -- making an offer and closing. A bunch of things need to happen before making an offer, and a bunch between the offer and closing. The exact order of events for each bunch isn't really critical.
Before making offers, you have two threads - properties and finances. You need to locate an area that works for you, based on the strategies described above and your finances. And, you need to get your finances in order. On the property side, you'll need to scout our areas, find a broker, look at properties, and find one or more to make an offer on. On the money side, you'll need to find a lender, either directly with the lender or with a broker, find out if you can get approved for the properties (if investing), or how much you can get approved for (for primary residence.)
That assumes you're trying to go with a broker to find property on the MLS. There are other ways to find properties, as mentioned in numerous threads.
You will probably look at a bunch of properties. You may want to get a contractor along for a few, if you're not confident of your ability to estimate repairs.
Before making an offer, you'll want to "run the numbers" and determine what the property is worth to you. Make your offer based on that. You should get all financial information, like taxes, rent rolls, previous operating expenses -- everything, on the table. You want a complete story before making an offer.
After you get an accepted offer, typically after several rounds of back and forth with the seller, then you have to complete your financing, and do your "due diligence". That includes all your inspections (basic inspection, termites, radon, mold, anything specific such as foundation or roof, whatever.) If this is a significant rental, such as an apartment building, dig into the financial records and rental histories. Here's where you want the seller to prove what was claimed before the offer. Read all the leases. Get estopple letters (search for this) to ensure there are no side or verbal agreements between the tenants and seller. For any property, inspect it thoroughly. For a 50 unit apartment building, you should look at, hmmm, all 50 units.
If there is any rehab needed, now's the time to get your contractors to give you detailed estimates.
There's usually another round of negotiations here, based on what you've learned. The deal can sometimes blow up at this point.
After closing, get into the property. Change locks if appropriate. Take any steps to secure the property. Get your contractors started.
Thanks for the replies. I'm interested in buying a quad, non owner-occupied. How would the details differ for this kind of property?
Thanks again for all your help,
Mike