I was sitting down for dinner with a friend the other night and he said to me “Brandon, I want to buy my first property but there is so much information out there. I just want to see the whole process, neatly outlined, so I know my step by step plan.”
And I thought “Isn’t’ that we all want when learning something new?
We want to see the whole picture, not just broken up parts.
Today I want to help you do just that – learn the step by step process for getting your first rental property in the next 90 days. For those of you who like something tangible to look at, at the end of this post I’ll show you where you can download a free 1-page PDF summary of this process- neat and clean, just like my buddy ordered.
Alright, let’s get started.
Step One: Get Pre-Approved.
Unless you plan on paying cash (which would be great) you are going to need a pre-approval letter from the bank or other lender.
We start with this step because I don’t want you wasting time only to find out you can’t afford it. Your lender will help you know exactly how much cash you’ll need.
Step Two: Get in Touch With a Real Estate Agent.
Don’t just call the name on the park bench by your house.
Look for an agent who is willing to spend the time needed to help you get the perfect deal.
Get recommendations from others and pick someone you get along great with.
The best part is, a real estate agent is paid by the seller- so it’s free for you to use one!
Step Three: Define What You are Looking For.
Let your agent know exactly what kind of property you are interested in. If it’s a duplex, you don’t want to waste time looking at single family homes. And vise versa.
Step Four: Start Looking
Yes, you’ll actually need to spend some afternoons with your real estate agent looking at potential properties. And like dating, the more you look at, the better you’ll recognize “The right one” when it comes along.
Don’t be afraid of looking at properties that might need a little TLC, but don’t get in over your head either. Once you find the right one, you’ll need to do Step Five, which is
Step Five: Do The Math
A rental property is only as strong as it’s math. (yes, you should Tweet that)
Run the numbers and make sure it pencils out. Be conservative, and be sure to plan for property management, vacancy, repairs, and more.
I’d recommend running the numbers through a good property analysis tool, like The BiggerPockets Rental Property Calculator to make sure you are looking at all the facts and figures.
Step Six: Make an Offer
Okay repeat after me:
I WILL NOT OVERPAY
Negotiate with the seller and stick to your math from step 5.
You might go back and forth a few times, and you might even lose the deal and have to start over. But whatever you do …
Do Not Overpay.
Soon enough you’ll get an offer accepted and you’ll be ready to move on to
Step Seven: Do Your Due Diligence
At this point, you want to make sure there are no hidden surprises at the property.
Hire a property inspector to walk through every inch of the property looking for potential problems.
If you find any, either :
- suck it up if it’s not too bad,
- ask the seller to fix it if it is bad,
- and if it’s really bad – walk away.
During this time your agent will help you shuffle the correct paperwork between them, your lender, and your title company.
Step 8: Close on the Property
It’s been a journey, but finally you are ready to close.
You’ll show up to the Title Company (or attorney) and they’ll take care of the rest. You might even get some chocolate at the front desk! Once the title and deed are recorded at the county, you’ll get the keys and be the proud owner of your very own rental property!
Now comes the fun part – managing your properties. And for tips on that, you’ll have to wait for another blog post!
As promised above, I created a simple 1-page PDF of these steps so you can print it out and hang it on your wall or just keep in your files. To get it, simply click the photo on the right and head over the BiggerPockets FilePlace and download it for free!
Finally, if you could do me two quick favors:
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