I have been working towards buying another investment property for some time now. I want to buy one by 2017 and I think I’m about to succeed in the month of October (or maybe November). I’ve written about the two houses that I didn’t get when I was using a real estate agent. I also wrote about my adventure on memorial day where I spent a lot of time researching a house offered by a wholesaler. But I think this one is going to work out!
One of the things I have been learning at work lately is how beneficial it is to plan ahead and to have a backup plan if the situation changes on you suddenly. So I’m writing out some of the steps I’m taking to plan for adding another investment property to my portfolio. Maybe some of my readers can offer improvements on these as well! I’m always open to suggestions.
So here are some of my thoughts.
For me financing is at the top of the list. There won’t be a transaction if I am not able to obtain financing. The great thing about getting financing right now is that rates are at historic lows. I would think most people should be considering refinancing with rates this low.
Aside from the good rates I also have a very high credit score. This is a reflection of me getting older. I remember when I bought my first house and had a FICO score in the high 600’s even though I was current on all my accounts! But since I was only about 24, I didn’t have enough years of credit history to really get into the higher scores. Now that I’m older, I am able to reap the benefit of having a longer credit history and correspondingly higher credit score.
There is much to be written about Financing and I will write a separate post on this because I want to discuss how I was able to obtain this property with $-0- down. Its pretty exciting and I can’t wait to tell you about it!
Closely related to the financing is the appraisal. Because a portion of my financing will come from a bank, my lender will be ordering the financing. I have discussed the details of the transaction with my mortgage broker, given him the address of the property, and all the other information needed for the loan.
The appraisal is ordered by the bank. After the housing crisis in 2008, banks must now order appraisals randomly from a pool of qualified contractors. By keeping the buyer from picking the contractor, and by requiring an appraiser to be selected randomly from a pool, there is less chance for the appraiser to be unduly influenced by either party.
Its more cold and impersonal! But I have had several appraisals since then and haven’t had any problems.
For the convenience of the seller I’m trying to get the appraisal and inspection scheduled on the same day. I will probably ask that the seller let me know when the appraisal is scheduled and I’ll get the inspector to go there the same day.
Even though my purchase is “as-is” the contract says that the purchase is subject to inspection. The idea is that I will be given access to the property and allowed to make a full inspection before buying. But I will not be allowed to ask the seller to make any repairs or add an addendum to the purchase agreement related to items found during the inspection. But that isn’t what I want to do.
I’ve already done a walk through of the property with a trusted friend who does home remodeling. The property is currently occupied by the homeowner who has done significant updates to the property.
I am working on lining up a property manager to manage the property for me. I have located one who manages thousands of properties and has good reviews. This is an important step as I don’t manage my own properties and I also need help working through the regulations related to being a landlord where the property is located.
Lead Certification and Landlord License
I don’t even know what these are! But I my property manager says I need them. That’s fine with me. They apparently have a contact who does the lead inspection and will walk me through the license. I might be a little confused on these right now but haven’t dug into the details because the property manager said they will handle it and walk me through it.
This is another huge benefit of using a property manager. Rather than have to sort through the regulations on my own, I can save my time and let the experts walk me through it. Over time I may become an expert myself and learn some ways to optimize this part of my real estate investing. But for now that is not the best place for me to spend my time.
Updates to the Property
Right now the house has a really nice deck on the back and an above ground pool directly adjacent to the deck. The deck partially wraps around the pool and it is a really nice outdoor space for grilling and relaxing in the pool. One problem is that I don’t want a pool at my rental property.
I hate pools right now. Don’t get me started on my pool story. I can’t remember if I’ve told you about my pool… ok ok I’ll make that a separate post. It warrants its own post. It really does.
When I talked to my property manager he reminded me that I would need to get landlord insurance. This shouldn’t be too much of a problem as I have gotten it before. My insurance contact may not be in the business anymore so I need to reach out to them and see what the next steps are. Basically this covers personal injury, accidental damage to tenant’s property, and lost revenue if the property is rendered unlivable. It is important to have this and it is likely that my property manager will require that I have it before he takes on the property.
The only other thing to do is to get tenants. But I’m not doing anything for that. That is what I pay the property manager to do! I really like this real estate investing thing.