How do you know when you have found a good deal?

Question

Let me begin by introducing myself... I am about to start my final year at Clemson University as a Financial Management major and a minor in Accounting. Real estate has always interested me but it wasn't until my tax professor told me his success story and one of my good friends began his own journey that I realized it was what I want to pursue. I have decided I wanted to do rentals because I posses most of the skills needed for home renovation/repair and do not mind screening and dealing with tenants. I plan to buy my first property when I graduate and I am leaning towards buying a multi-family home and living in one unit and renting out the other unit(s). Once I get on my feet I may begin to invest in mobile homes. I still have a lot of research and learning to do.

So, I have a few questions for the experienced investors...

1.) What are the things you look for in a property to ensure you are not making a financially devastating decision?

2.) If you find a property that interests you, what is your next step?

3.) Are the monthly mortgage estimates on some of these websites accurate and reliable (such as the ones listed for each property on redfin, trulia, zillow, etc)? I've never levered money so I am not familiar with the rates.

I would also like to hear some of your stories and experiences with investing in multi-family homes. And mobile homes? And any other advice that you wish you knew when you are starting out.

Thanks and I look forward to hearing from you.

Kyle Scofield · Answer

Account Closed sounds like you've got a good plan man! I think I can help with a couple of your questions:

1) This is a process. You've got to do your due diligence (I think there's a beginner's guide on the site for this). You'll want to do a title check, inspection of the property, check if there are any liens against the property, etc. etc... Just do a Google search or BP search and you'll find a lot of templates.

2) If you find a property that interests you, contact the seller to schedule a meeting and start the due diligence process or even start to gather information over the phone such as year built, square footage, beds/baths, etc. etc.

3) The mortgage payments are fairly accurate but not the best source to use. I recommend going in to talk to a banker (or calling over the phone) to see what rates are like in your area (although they are pretty standard across the country).. This will give you the best estimate to run your numbers.

Hope this helps get you started! Let me know if there's anything else I can help out with.

Matt Vogt · Answer

1) It all comes down to analyzing the deal and getting your assumptions (rent, vacancy, cost of repairs, maintenance, CAPEX, utilities, etc) as close as possible (or at least very conservative). Additionally, make sure you have enough cash (or LOC) to handle unknown/unforeseen expenses.

2) Model it, sleep on it, then model it again. Once you're set on it, figure out what it's worth to you and make an offer (assuming you have financing etc all lined up).

3) They are, however they dont capture your property insurance, your PMI, or taxes into the equation. Get familiar with the =PMT formula in excel, then compare results to the zillow calculators. You'll also want to account for the taxes and other expenses that get rolled into your mortgage (closing costs, PMI, etc).

Good luck.

Kyle Scofield · Answer

Account Closed and that does not necessarily mean you have to withdraw from the property.. Just adjust your offer accordingly (some people specifically invest in these types of property!)

Kyle Scofield · Answer

Account Closed it is public information and can be bought at your local county's office, usually for a small fee per report

Account Closed · Answer

Wow, that was a quick response. Thank you @Kyle Scofield and @Matt Vogt. This may be a real newbie question but what are some ways to run a title check and check for liens? What if the title comes back anything besides fee simple absolute? Is it time to back off and look for another property?

Account Closed · Answer

Wow, that was a quick response. Thank you @Kyle Scofield and @Matt Vogt. This may be a real newbie question but what are some ways to run a title check and check for liens? What if the title comes back anything besides fee simple absolute? Is it time to back off and look for another property?

How do you know when you have found a good deal?

How do you know when you have found a good deal?

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