My Real Estate Journey

One of my goals this year (2023) is to prep to buy a house (for investments) for next year (2024). Luckily, Nick did it 2 years back and is guiding me through the process and accelerating my real estate adventures.

I’m sharing the steps here and will use it as a way to “invest in public” as well. 🙂 Hope it’s helpful for you, a fellow budding real estate investor.

Update: Closing time! @August 11, 2024

• We made an offer in a house and are in the process of closing!
• Took us about 18 houses visited, 3 that we attempted to make an offer on and 1 that we are closing on today!
• More soon. Excited to get that cashflow in 🤑

Steps

Last updated @August 11, 2024

Step 0: Figure out your goals

Step 1: Figure out rough estimates of what you want to buy.

Tips

• Figure out what your rough budget is for a down payment and choose an area, size and range that you’re comfortable with. Also put estimates for a rough rent to make sure your ROI and cashflow align with where you need to be
• Ideally you or someone else knows the area well enough to determine if it’s a good investment.
• Think about where you might see yourself living in as a benchmark for whether others would consider living there as well.

Step 2: Set saving goals to work backwards from (how much to save and until when)

Tips

• Target amount: down payments are usually 25% (you get better interest rates the higher the down is) + ~10k buffer (for title and other processing expenses)
• For timing: consider market conditions — When do I want to liquidate cash? When do I think we’ll be roughly out of a recession.
• Feasibility > the actual date.

Step 3: Find a loan you’re pre-approved for with a good interest rate

Tips

• Good: 3.25%. Now (Jan 2023): (6-7%)
• How do you find loans? Very easy — banks, Rocket Mortgage, Fannie Mae. Or search: “Rental Property Loans” on Google!
• Why do you want to find a loan and a realtor/broker at roughly the same time?
• Shorten the time it takes to get a mortgage.
• You want to have everything ready when you send an offer (bank statements, pre-approval for a loan), otherwise someone might grab it from you.
• Credit checks?
• Don’t hard pull on credit checks such that it impacts your credit score
• Tip: if you do it once, for the next month, it’ll be “free” with no impact

Step 4: Find a house, with your realtor.

Tips

• Heavily consider finding a house with a realtor. It’s virtually free for you as the seller is the one that pays them in rent. They organize all of the trips, and also give you lots of tips about the area, types of things to look out for, etc.
• Realtors have sophisticated search tools: MLS database.
• Be more rather than less opinionated about the kind of house you want - it helps the realtor with the search.

Step 5: Send an offer

Tips

• After you are accepted, it’s all a waiting game. Realtor, Broker and Title Company work together to close the deal (all incentivized)
• Make sure your money is in a checking account so:
• You can get 1-2 month statements for proof. Helps with the loan.
• Easy liquidate your money to pay the downpayment and close the offer.
• Know that you have an Earnest Money Deposit ($5k) to show real interest to the buyer so make sure you actually want the property!
• You’ll likely be repeating this step and the previous step until you get the right offer and not priced out!

Step 6: Find a property manager

Tips

• What does a prop manager do?
• Will help find a tenant if you don’t have one. Payment is usually first month’s rent and 6-10% in fees.
• Or you can find your own tenant but that also means you’ll do all the rental contracts, negotiations, listings, looking for service workers in the area such as a plumber, contractor, etc.
• Especially if you’re away, the property manager can deal with all your tenants’ requests, broken fixtures, etc. They have contacts and deals with other people locally to help out on this.

Step 7: Rent house

Tips

• Make sure it aligns with your goals. Our #1 goal for example is to be cashflow positive