What would be your first steps?

Question

Interested to see peoples different steps you take from start to closing!

Much Appreciated.

James Masotti · Answer

This and also the Ultimate Beginners Guide.

I would challenge if you have the right agent if they are telling you to go get pre-qualified to get started. What they are really asking is, are you a tire kicker and someone who is going to waste my time. You don't need pre-approval to go shopping. You need some sort of proof of funds to write an offer. So the agent is telling you to put the cart before the horse.

Since you asked opinion I'll give you James' Steps to buying your first real estate deal. (eventually I'll need to turn this into a blog post)

1) Read the aforementioned Ultimate Beginners Guide

2) Once you have read step one and decided what type of investing you want to do then read the next most relevant book (this could be Out of state investing, and BRRRR. If you are going to BRRRR or Flip, than you need to make sure to read J Scott's books on estimating rehab costs)

3) Consider your level of risk that you want to take and what kind of "investor" you will be. You will be able to get better terms buying in your personal name and using conventional mortgage, however you now assume all of the risk personally. If instead you plan to run a business that happens to involve real estate you can plan to set up an LLC. (NOTE: I did not say go set one up!)

4) Identify your market

5) Research the nuances of your market

6) Start analyzing property data publicly available on Zillow/Trulia/Redfin/Realtor.com etc.

7) Keep track of who the agents are who are listing the cheap/ugly (relatively speaking for your market) houses.

8) Put together a 1-2 page synopsis that details out your planned investing style

9) Set alerts and or manually check publicly available listings that based on your initial analysis would meet your investment criteria

10) When you find something that passes the screening criteria for the prior step, contact the agent and send them your synopsis. Let them know who you are, what you're looking to do, and that you're just getting started. Let the agent know you'd like to make an offer but you need some referrals to be able to do so. Ask for referrals to a lender (who can either do investment mortgages in your own name, or commercial mortgages). If you're going to go the commercial route, ask for a local attorney who works with real estate investors who can help create your LLC.

11) Get your financing lined up. There's lots written about on strategies for financing whether you have approval from a hard money lender, a commercial lender, a residential letter, you have cash in the bank, a business partner has cash in the bank, you have a 401k you can leverage, you have a private lender, etc. etc. Doesn't matter which option you go with, just figure out getting one of these that you can submit with an offer once you make one.

12) Contact the list of agents you have been keeping track of in step 7 and share with them your synopsis and let them know you're set up and ready to make offers if they come across any deals that meet your criteria.

13) Start attending or networking with local investors (arguably this could be step 0 as I think there is huge value in doing this even if not in your local market)

14) Join facebook groups for real estate investors in your local market and start asking for contractor recommendations.

15) Ask on BiggerPockets for contractor recommendations

16) Understand good contractors are worth more than gold bars in Fort Knox, so don't expect everyone to give you their top choice contractors if they do any serious volume of deals then they are trying to keep their contractors busy themselves. You'll have to work through this.

17) Make an offer

18) Make more offers

19) Get an offer accepted eventually

20) Ask one of the contractors you've talked with to walk the property with you. Be prepared to pay them $100 or something to do this, so they know you're not just a tire kicker and that you're serious about learning from them so that you can do better on the next deal.

21) Assume your offer will fall through because the property will need more work than you originally assumed

22) Refine your criteria with this new knowledge

23) Repeat steps 17-22 until you get an offer accepted and it passes the walk through from the contractor you're working with

24) Get your paperwork in order to get to closing (Leaving this a little vague because my list is getting long, but this will include all the financing, insurance, title, etc.)

25) Close on your first property!

Okay there is way more that obviously has to happen after this, but you'll notice that getting a CPA is no where on this list. There are a ton of great CPA's on BiggerPockets with whom you can eventually talk to, but understand the amount of tax optimization that you're going to get when you only own one or two properties is almost zero. CPA friends please feel free to disagree and argue with me here :)

Buying real estate isn't complicated or hard and people try to make it hard and complicated. Part of the problem is that all the advise that you're hearing isn't wrong. At some point you will have a lot of risk and liability that you'll want to make sure you're talking to an attorney about proper asset protection. At some point your tax return will be complicated enough to need to talk tax strategy with a CPA (or you can just read @Amanda Han's book on Tax Strategies )

Hopefully this all makes sense and I'm really looking forward to seeing what kind of feedback I get from other investors on this post.

Cheers!

Bill Goodland · Answer

Check out @David Greene's book on investing OOS. He goes in-depth explaining the process and steps of getting your team in order.

Whitney Hutten · Answer

@Colin M. You are getting some very sound feedback from the forum (especially about jumping the gun on the LLC part).  Reading your OP, you mention you want to buy and hold MF across the US.  So I'd do a little more pre-work (and maybe you have done it but just didn't share it):

1. Why are you doing the whole real estate venture anyways (dig deep on this)?

2. What type of investment strategy with MF (Size of units, turnkey, MLS, BRRRR, condition, etc.)?  Also, line this up with how you want your life to look.

3. What market and submarket are you looking in first that will stack the cards in your favor for investing and offers the type of product and strategy you are looking for (this is where I'd get the LLC at some point when it makes sense)?

4. Then build your team to help you find that deal.  The realtor/dealfinder, the property manager, the construction crew (perhaps vertically integrated with the PM), and lender.  This is where going to groups can be helpful.  But also look for online groups and conferences.  Comb podcasts for people who are doing the EXACT thing you want to do and learn from them (one that comes to mind is Nathan Tabor who was on the BP RE podcast just recently).

5.  At the same time, get really good at analyzing the type of deal you want.

6.  Then execute the deal, close the deal, execute your business strategy.

If you've done steps 1-5, fantastic!  If not, start there and see where it leads you :)

Aaron K. · Answer

@Colin M. well your first mistake was setting up a DE LLC, you paid the money and you get to do it again unless you're buying in Deleware.  By wanting to purchase with an LLC and the LLC not having any assets or income history you are likely going to have to personally guarantee any loan it gets for a while.  You also probably don't need to talk to an attorney, your RE agent will be able to guide you through purchase just fine.

You have made this way more complicated than it needs to be.

What would be your first steps?

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