Newbie with questions!

[Mariana Moldovanu]

Hi all! Just finished reading the "How to Invest in RE" book and want to build my "to do" lists and work through MINS (not trying to show off, just using the book terms for "reinforcement"). 

What are the MOST IMPORTANT NEXT STEPS based on your experience? 

For me, I'm thinking I need to:

1. Find a CPA

2. Find an attorney

3. Find a broker

4. Find a realtor

Some nagging questions are floating around my head-would love some input:

1. Are interest rates and lending process on a secondary property (2nd home, investment home) different than your primary home? If so, how are they different?

2. How much cash should a new investor have to be in a good position to get started?

Thank you all!

[Anna Swartz-Lopez]

Good for you for mapping out your steps! As the saying goes, one minute of planning can save ten minutes of execution. 

Step one is to make your first purchase. As the saying goes, don't let the "perfect" be the enemy of the "good". There are a lot of layers to being a sophisticated investor, and you will get there, but everybody has to start somewhere. Don't be intimidated to just go purchase a property and rent it out. This website has a lot of encouragement and resources for newbies, and helps you map your path forward. 

A good CPA is important, but comes after your transaction. A good real estate attorney is important before the transaction, so that when you find a property, your attorney can help you set up an entity to hold the property. You never want to hold investment property in your own name. Mark J Kohler is an attorney and a CPA, and his law firm and his accounting firm have real estate investor clients all around the country. Even if you just read his blogs and watch his Youtube videos, there is a lot of good info there. 

A realtor may or may not give you leads on good deals. You might want to develop a strategy, like networking with probate attorneys via your local Rotary Club or BNI, in order to get access to properties from a deceased person's estate. Or you can focus on foreclosures, or use some other strategy. A strategy or system can help you stay focused. Remember, if it's obviously a great deal, there will be six other people in line before you. Here again, as you start down this path, it's ok to have a "good" deal, and not a "great" deal. I know plenty of sophisticated investors who look back at their first deal and say, "I had no idea what I was doing." 

Yes, rates on investment properties are higher than rates on home mortgages. And because of COVID, they have gone up even more. You will need a specialized lender for this, your local home mortgage broker won't do investment properties. I have a lot of resources for investors in this regard, as do others here on BiggerPockets. 

If you are just looking for a property to hold long term and rent out, you should expect to bring about 20% down payment, plus interest and cash reserves. That is under normal conditions, right now because of COVID, estimate more like a 30% down payment. That will get you the best terms from a lender, especially since you are a newbie. I'm estimating high, because bringing more cash to the table always helps the lender feel more confident in your deal. If you have strong credit, that will help too. 

If you want to go the fix and flip route, there are lenders that will fund your rehab, as well as your purchase of the property. That is a more involved process though, and you will need a good contractor. 

I hope this gives you some help, and best wishes to you in your new ventures!