When I was considering buying my first rental property I had a million things going through my head.
What if I get bad tenants?!
What if the neighborhood turns to Jurassic park at night?!
What if it doesn’t rent for what I think it will?!
What if I can’t find renters at all?!
Let’s be honest, most of this is just a human response that happens before we make a big decision – the fear of failure. But, it can be real! We’ve all seen the quote before “Fear kills more dreams than failure ever did.” But how do you know if it’s the fear of failure or it’s a significant concern you should be pumping the breaks on.
When I was in this position, I did something that really helped curb both my fear of failure and helped me answer my questions – and I strongly recommend it, especially for a beginner.
It was a sunny Sunday afternoon in June. I was still in the inspection period before closing on my first rental house so I drove to the house to take a look at it again. I parked in the drive way, walked around the house a few times, noticed a few trivial things and saw the neighbor sitting outside his house. I walked over and started talking to him. First, there was some small talk then we started talked about the neighborhood, his house, his family, etc. This is where the lightbulb turned on and I opened up my mental notebook. In 15-20 minutes I found out some very valuable information.
-What was the neighborhood like - Is it improving? Good? Bad? Is it safe? Is there a crazy lady who screams out of her window at night?
-Who was he - what type of person lives in the neighborhood. Students? Blue collar employees? Retirees?
-How big was his house and what was he paying in rent – and how does it compare to mine
-How long has he lived there - If the neighborhood is improving quickly and he has lived there for a number of years, his rent may be under market
-Who is his landlord - a family member could mean lower rent, If it’s a rental property management company it could be a good reference for future
-What does he like/ not like about living there – is there a rat problem? Flooding issues? Or just quiet peaceful neighbors?
I left that conversation and immediately walked a few more houses down and started talking to a different neighbor. I then continued down the street and talked to 8-10 more people who were outside enjoying their day. I started like this “Hey, how are you doing? I’m looking at buying this house right down from you. How do you like it here? How is the neighborhood?” And one things leads to the next.
I got comments like this:
“I just moved here and found this place for 850.00, it’s a good deal. I looked forever to find it because that’s I could pay.”
“Rents have been going up so fast!”
“The neighborhood is great! We have never had any problems.”
This was a game changer because it allowed me to gain a comprehensive understanding of the neighborhood where I was buying an investment. Although I had already done my analysis before I put in the offer, this process confirmed my decision to buy my first rental here. Just like a picture is worth a 1000 words, this process is worth a 1000 data points. Yes, I found out what rents were, but I found out many more valuable bits of information. Information I would have never been able to gather from a spreadsheet.
I was able to put my fear in check because fortunately, the snapshot of the market matched my business strategy. And the best thing is, it cost me nothing! Nothing but a few hours on a sunny Sunday afternoon.
Give it a try, let me know what you think.
