@Todd Aaron
Hey Brett,
My first was pretty easy... I did a lot of research first... lots of it! And I read Brandon's books on buying and on leasing rentals before jumping in and that was super super helpful!
I already knew the mortgage person because we were already friends before... She already had real estate that she owned and leased and I asked her all sorts of questions to ease my mind going in. When I found the property I did a quick analysis and also I called her immediately and after I told her the location her response was "Buy it! Make an offer now! Don't wait or it will be gone!" Well, it was... I had found it offered for $40k and needing a lot of rehab. But a few months later it was offered for sale again... it was a flip. So I called my friend again and got the exact same response... so I make an offer on it and we negotiated briefly and I bought it. Probably for a little more than I was as comfortable with, however it was extremely well done and has options that were above average for the location. I had a rental appraisal done for it for additional cost during the process and the results were good enough so that 70% of that number covered my Principal, interest and insurance and property tax payments with a little left over.
I have rented it for nearly $200 more a month than the appraisal said was the max it would get the entire time I've had it.
So all I really met were the title company that we used to close with and that was the seller's choice.... I met the seller who does the occasional flip.... good to keep her number handy in case I am looking for something in the future... and apparently her dad has a small construction company, so thats handy if I need to possibly get a price on some repairs or remodelling that I don't want to tackle myself.
I met an inspector inthe process because while I was looking for something, I made an offer on a duplex and I had an inspector check it out and I was there at the time and I was able to ask all sorts of questions and he pointed out many things to look for that I could look at before paying a pro to come check next time.
I had just the month before closed on the house I am living in, using the same mortgage company, so I got really familiar with the process and all the documents needed, so this time I was told that I was so efficient with all that that the loan processor would not need to do anything if all the customers were like me. So learning what the mortgage companies want to see is a big thing on your first one... like that they want to see a savings to offset 3 or 6 months of payments in case the place doesn't rent immediately...
I met no contractors because I am a little familiar with construction as I was a residential electrician for years a while back, and I have also done a little framing in the past, and I deal with commercial construction some with my current day job, so being a general contractor isn't a scary thing to me at this point if necessary.
I learned that if you have a ROTH IRA, you can remove all the money you contributed without penalty and without being taxed on it as income as long as you don't remove any of the interest that has been earned on it... That makes it very liquid for doing down payments and closing costs.
I learned that lenders do not like any money showing up in your accounts that do not have a paper trail... and making all this easy on the lender will help you get the loan done faster and easier, so no gifts from family or anyone within several month before you start looking to get a mortgage loan. If you do get gifts be prepared to get a letter from the giver formatted to make the lender happy that explains that it was a gift and is not something that has to be paid back. They do not like to see anything that may turn into a loan situation that they are not including in their decision making.
The most difficult part for this one was that the seller was wanting to close in 30 days and 45 is considered fast these days and 60 is normal if everything goes right... but my lender agreed to it and I had to act very fast each time the lender needed something in order to help make that happen. The seller had a legitimate reason for wanting to close that fast.... she was adopting a child and needed the money quickly to facilitate that. So the lender knew about it and everyone worked together to help her make that happen... and it did and they are a happy little family now.
The second most difficult thing was that I had to trust what I had read and trust the numbers on the spreadsheet I had put together as a calculator to show that this would be a cash flowing deal in the end... And trust all that with no previous experience. That was really hard for me. But once I did it and everything did work out... actually better than my numbers showed because the lender was able to lock in a lower interest rate when there was a dip because it was closing faster, so my payment was lower meaning a larger spread available for profits... once I saw that this all does actually work... and pretty much exactly textbook from those books from Brandon on here... It really gives you a ton of confidence moving forward, that you can actually do this and that there really is no massive secret to it. After reading the books I was thinking that it seemed too easy.. that there had to be so much more to it... but like my friend was telling me, you just have to jump in and things tend to work themselves out in the process.
Be as prepared as you can but then go for it. And you have to have a certain amount of trust but then you have to switch from research and calculating to doing it.
I hope that was helpful
Hey Todd, thanks for taking the time to share. Much appreciated.
So what were the things you were looking for when you went to your friend about a property? For example, you saw a house for sale and then what? How did you analyze the property I guess is what I’m asking. I’ve tried doing some analyzing and haven’t come very close to finding one that works. Not sure if my numbers are right. Honestly I’m kind of just guessing at things like expected rent, interest rates and closing costs, not to mention rehab costs.
I’m not even sure where to begin when it comes to getting accurate numbers.
I’ll have to pick up BP’s book on buying rentals. Everyone says it’s great.
