What to Do Before Buying First Rental Property

Question

Hi All! I've been reading through old posts trying to find the answer to my question, but didn't have any luck so I figured I'd make a new post.

I am currently on the hunt for my first property - I found one where the numbers all work great on paper, and I plan to tour it within the next week. What are some things I should do prior to purchasing my first rental property? Things that come to mind are: getting pre-approved (is this always necessary?), opening a business checking/savings account, etc.

As for touring my first property - what are some things I should do, ask, look for etc. I have a realtor who has been great in giving me tips and suggestions along with friends who do REI as well but wanted to get this group's thoughts. This specific property has existing tenants (15 year and 2 year...it's a duplex), no pictures of the inside were posted on the listing. The outside definitely needs some work, may have potential water damage on the front porch as far as I can tell from the pictures. Would it be smart to bring a contractor with me on the tour to be able to give me rough ideas for how much renovations would cost to make an informed decision? Anything I should ask the selling agent prior to touring the place to identify any causes for concern before wasting their time touring the place?

Any tips are greatly appreciated - anything you've learned over time that you always do prior to buying a property and/or things you wish you knew before buying your very first property.

Thank you!

Scott

Stephanie Hrico · Answer

Your story is almost identical to how we started. The first house we looked at was an up and down duplex on spring street near the hospital. It was in about the same condition you described. When we left the tour our agent said "dont panic, they are not all like this". My husband and I both work full time W2s so we are not looking for houses that need a ton of work. We looked at a bunch before we bought our first in latrobe. Now I only look at side by side duplexes that are in pretty good condition since I think you get less noise issues with tenants.

Scott Gordon · Answer

@Stephanie Hrico thanks for your response, Stephanie! I’m happy to see another RE investor nearby :) The tour was....an experience lol. The 15 year tenant vanished just before the tour according to the sellers agent. No idea if or when he’s coming back, but all of his stuff was still there. The upstairs needs a total overhaul, but the downstairs unit is in pretty good shape. The front porch is very concerning and would likely need to be replaced. A lot of the mortar is falling out of the bricks, but could obviously be fixed. The basement has two doors that are basically styrofoam so they would need replaced which is fine. We were asked by a neighbor of the property who appeared to be a mother of about 8 kids who were all running around if we had weed. All in all, any experience is a good experience and my wife who knows Greensburg better than I do was right that we need to stay away from that particular area of Greensburg and look in south Greensburg.Good to know you went with an LLC before buying your first property - I’ve heard mixed thoughts on wait til you have several properties vs. doing one right away. I’m not going to make an offer on this one but actively seeking my first property!!!Thanks,Scott

Stephanie Hrico · Answer

Hey! I saw your post and I happen to live close to you so I thought I would respond. We own two side by side duplexes. One in latrobe and one in south greensburg. I think I actually know which property you are looking at based on the description. We own our properties under an LLC which I set up before we purchased anything. Since we use commercial loans they don't offer pre-approval letters. If the seller asks for one I offer to show them our bank statements but no one has ever actually made us show them. We originally used a property manager but stopped after a couple months since its really not that much work to manage them and I felt like I was wasting money. Keep us updated on what happened with the tour and if you made an offer!Good luck!

Dave Poeppelmeier · Answer

Hi Scott, great to see you're starting to jump in! I guess my first question is who is your support system right now? You need experts to help you in addition to the education you have done yourself, until you are experienced enough to do it on your own if you need to. Do you have a Realtor? If you have a Realtor that knows Investment Properties (most will say they do, most don't know what they are doing), have them get you in to see the property and lean on their experience. If you don't, I suggest you find one. In this market, you have to move FAST. If you plan on financing, you need to get your Pre-approval or not many people will seriously consider your offer. Ask Realtors in your area (if you don't have one) which institutions are Investor-friendly. Finally, I would still walk the house. If the other agent is willing to meet you there then great. You need the experience of looking at homes, being able to pick out problems to give yourself a better idea of what to offer on the house (stains on ceilings? Flooring issues?). Overall, the most important thing is to take action, which it sounds like you're doing. Good luck!

Nicholas L. · Answer

@Scott GordonThings that come to mind are: getting pre-approved (is this always necessary?), Yes, you need to have either cash or financing lined up. If financing, your agent will want to see a pre-approval letter from a bank.opening a business checking/savings account, etc.No I have a realtor who has been great in giving me tips and suggestions Is this realtor your agent, or just a friend?This specific property has existing tenants (15 year and 2 year...it's a duplex)Get copies of the leases Would it be smart to bring a contractor with me on the tour to be able to give me rough ideas for how much renovations would cost to make an informed decision? If you can get one, sureAnything I should ask the selling agent prior to touring the place to identify any causes for concern before wasting their time touring the place?Typically your agent would work with the selling agent. Do you have an agent?