Outlining my research

[Andrew McKinnon]

Well, after listening to hours of BP podcasts, I am quickly discovering just how much there is to think about as well as how little I know about real estate investing. Honestly, it is pretty daunting. But as a stubborn attorney, I am trying to create a general outline and checklist for research topics to learn about this year while building capital for a down payment in the future. Just a quick background, I am living in Houston/Memorial Heights, Texas and looking to invest within 100 miles from my apartment. Having gone through law school, I know Texas property laws are a bit different than other states, for example, property taxes tend to be higher - something I will have to keep in mind while analyzing properties. So.... Here are the things I will continue to research to become more comfortable when I do decide to buy my first property. Obviously, there will likely be many things missing from this list, so PLEASE PLEASE PLEASE feel free to add anything that I am missing. I am still extremely new so I know this will reflect just how much work and research I need to do. But hey, everyone has to start somewhere right? 

I. My "Why." 

Real estate has always been something I've been interested in. I've seen family members and friends buy properties to be used for family vacations (beach house etc) but always wondered why they didn't rent out? Their response, "I just don't feel like dealing with tenants and learning to be a landlord." I never really liked that answer, and after listening to BP, it may not be as complicated with the right systems in place. What I want out of this is financial freedom to build wealth long after I retire. I do not feel comfortable in relying solely on Social Security as well as my 401k/Roth IRA/Investments to get me by. Also, unlike investing in stocks/market, I want that sense of pride in pointing at property and say, "Yes, that is mine." There is a definite sense of ownership that I want in life, and having a job and investing in the market just does not seem to give me what I am looking for.

II. Types of property and investing strategy. 

I want to begin looking at single family homes in West Houston, Spring/Woodlands, Tomball etc. I anticipate investing within the city limits to be both expensive and competitive, so beginning in outer areas could prove better. As I progress through the MLS with my agent, my opinion is bound to change, and I will adapt. I am also very interested in tri/quad units simply for the house hacking, and loan options are favorable if I am living in the property.

I am looking to begin with BRRRR/buy and hold properties rather than buy and flip etc. This is because I have no experience with Rehab etc., and could use the experience in managing my property as a landlord. Depending on how I do with this method, I am open to flipping in the future. Again, I will change and adapt as I go.

III. Researching properties. 

Using the calculators/tools on BP will prove very valuable as I look for deals in my area. But other than factors listed on those tools, there are some other things I should look for. 

• Exit strategy: if things go south, what is my estimate of the ARV of this property? Utilizing the 70% rule, I would like to feel comfortable with selling the property for at least what I put in to break even worse case scenario.
• Buying at 70% of ARV: calculating what the ARV of a property is is something I am still a bit confused on. I thing a walk through of the property with a contractor might help me come up with what the house is worth after repairs/rehab. I have yet to run a search in the forums for this but definitely something I will be looking into.
• 2% rule: Buying a property that yields 2% in rental income is an important concept I need to dig deeper in. Is this 2% of the costs that factor things like repairs, capital expenditures etc.? Logically, that would make sense but still something I need to research. 
• Other things I need to consider are comp sales, rent, vacancy rate, crime rate, school district, neighborhoods, demographic etc. But having friends spread throughout Houston, I will likely be able to ask around to get a feel for what I am working with. Also, I often drive through these places, but now I will be looking with an investor state of mind.
• Property Taxes. Let's just get a CPA to help me with this because taxes, are well, taxes. 

III. Financing. 

This is an area that scares me the most. Having just starting working, 10k is a lot of money in my eyes. So getting the mindset where I am buying properties anywhere from 60 - 120k and beyond through financing is a concept that is very intimidating. This will be the hardest part in my opinion just because real estate does involve using monies that I am just not used to seeing. There was a great podcast that discussed becoming more confident in yourself and increasing your value. I am reading through the BP investing with low/no money down and discovering loan different loan options. This has eased my mind knowing that I can pay with little money down as long as my numbers work. Also, I just listened to #124 and I agree that approaching lenders with a portfolio of my research with a professional vision will help me get what I need to get going. 

IV. Property management. 

Having never been a landlord or having worked on a property before, this will be another area that will be tough, arguably more so than getting financing for my property. There have been great book ideas from BP on being a landlord and I intend to read every last one. This is also the part where I need to be sure that I have systems in place to deal with maintaining the property and tenants (like screening tenants, contractors, and property managers). As stated above, I would like to live in a unit and rent the rest out, so I will get valuable experience and learn what it takes to manage a property. Moving forward, I would like to bring on a property manager to help out. But starting out, I think it will be best to manage it myself and continue to research and ask a million questions on the forum (thanks in advance). 

V. Future and building my portfolio. 

This is sort of a back burner for now. But I would love to partner up and create either an LLC or LP as I grow my portfolio. I will need to research the pros and cons of creating either option and get with an attorney with knowledge in this field.

I also know that taking every opportunity to network and meet people through BP and around Houston is my best chance in learning. Luckily, I enjoy networking events and meeting people so pretty excited to start meeting everyone.

So there it is, if you read this far, I really appreciate it. There is much to learn and I know I either glossed over or missed topics entirely but that is why I wrote this mini novel. Again, have to start somewhere so this is my first step in both discovering things I still need to look into and, most importantly, keeping me accountable. My plans moving forward is to keep updating my process as I go to keep myself on track. Any advice as to research tools etc would be awesome. Thanks again everyone!