Runum
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[FONT="]Many first time RE investors want to get started but they don’t know what to do. Here are some steps to buying your first single family home(SFH) investment property that I hope can save you some money and will contribute to your future success. These steps can be done in various sequences relative to your expertise. If you analyze enough properties and do enough deals you will be able to complete this checklist in a very short time and be ready to make a bid on the property.[/FONT]
[FONT="]In order to spend as little time on each property as possible I do these steps before I attempt to enter the property.[/FONT]
[FONT="]1. Where do you look to find your diamond in the rough?[/FONT]
[FONT="]•[/FONT][FONT="]Online Multiple Listing Service(MLS)[/FONT]
[FONT="]•[/FONT][FONT="]Realtor[/FONT]
[FONT="]•[/FONT][FONT="]Classified ads[/FONT]
[FONT="]•[/FONT][FONT="]Word of mouth(friends & acquaintances)[/FONT]
[FONT="]•[/FONT][FONT="]Real Estate Investors(REI)clubs[/FONT]
[FONT="]•[/FONT][FONT="]Driving neighborhoods[/FONT]
[FONT="]2. Don’t be fooled by the first impressions of a property. You will literally look at hundreds of properties before you find one that will work. A property that may look good visually may not work mathematically and visa versa.[/FONT]
[FONT="]3. Once you find a property of interest to you will need to know the fair market value(FMV) for this property. You can find that number by comparing this property to similar properties(comps) within the same area.[/FONT]
[FONT="] Sources:[/FONT]
[FONT="]•[/FONT][FONT="]Classified ads[/FONT]
[FONT="]•[/FONT][FONT="]Realtors[/FONT]
[FONT="]•[/FONT][FONT="]MLS listings[/FONT]
[FONT="]•[/FONT][FONT="]Your knowledge of the neighborhood.[/FONT]
[FONT="]•[/FONT][FONT="]Zillow.com(data may be out of date and unreliable)[/FONT]
[FONT="]4. You will need to know rental rates for comparable properties.[/FONT]
[FONT="]Sources:[/FONT]
[FONT="]•[/FONT][FONT="]Classified ads[/FONT]
[FONT="]•[/FONT][FONT="]Realtors[/FONT]
[FONT="]•[/FONT][FONT="]MLS listings[/FONT]
[FONT="]•[/FONT][FONT="]Your knowledge of the neighborhood.[/FONT]
[FONT="]5. You need to know the taxable value and the real estate taxes.[/FONT]
[FONT="] * Your source will be your local taxing authority.[/FONT]
[FONT="]* This is public information.[/FONT]
[FONT="]* It may also be online.[/FONT]
[FONT="]* Zillow.com[/FONT]
[FONT="]6. You will need to know insurance rates. Your source will be insurance agents.[/FONT]
[FONT="]7. Take your possible gross rent and subtract your possible expenses.[/FONT]
[FONT="]8. You then figure your finance costs and deduct that from your net rent. I use my financial planner tool on my Quicken software to figure the amortization(finance costs) of the possible loan. There are also many webpages that provide this service for free.[/FONT]
[FONT="]9. If the look good so far, then you take a tour of it and note any damage(other expenses).[/FONT]
[FONT="]10. Make a formal offer. I do this through my RE agent. I also get and submit a conditional pre-approval letter concerning my finances. This can be procured from your banker or a mortgage broker.[/FONT]
[FONT="]11. When a price is agreed upon you will submit earnest money and you will have a short period of time to inspect the property. Time is of the essence during this time.[/FONT]
[FONT="]12. Hire an inspector o go over the property. You need to go with him to see what he looks at. Wear work clothes so you can crawl all over and under the house.[/FONT]
[FONT="]13. Figure any repairs that will have to be made and resubmit another offer with the repairs discounted.[/FONT]
[FONT="]14. If your offer is accepted you will go to closing(may last as long as a month)[/FONT]
[FONT="]With the previous steps you should be ready to look at potential SFH investments. Most beginning RE investors mainly look at cash flow. That is OK to look at but it’s not the Fastlane way.[/FONT]
[FONT="]You want to buy your property as far under FMV as possible(I aim for 40-60% under FMV). That is what is known as buying or capturing equity. This strategy will usually give you cashflow and equity. If you do this you may be able to sell the property and make tens of thousands of dollars on each investment. Then you can rinse and repeat.[/FONT]
[FONT="]I hope this wasn’t too long and I hope it helps someone to avoid some common mistakes. If I left out anything please let me know. Good luck to all and happy hunting.:cheers:[/FONT]
[FONT="]In order to spend as little time on each property as possible I do these steps before I attempt to enter the property.[/FONT]
[FONT="]1. Where do you look to find your diamond in the rough?[/FONT]
[FONT="]•[/FONT][FONT="]Online Multiple Listing Service(MLS)[/FONT]
[FONT="]•[/FONT][FONT="]Realtor[/FONT]
[FONT="]•[/FONT][FONT="]Classified ads[/FONT]
[FONT="]•[/FONT][FONT="]Word of mouth(friends & acquaintances)[/FONT]
[FONT="]•[/FONT][FONT="]Real Estate Investors(REI)clubs[/FONT]
[FONT="]•[/FONT][FONT="]Driving neighborhoods[/FONT]
[FONT="]2. Don’t be fooled by the first impressions of a property. You will literally look at hundreds of properties before you find one that will work. A property that may look good visually may not work mathematically and visa versa.[/FONT]
[FONT="]3. Once you find a property of interest to you will need to know the fair market value(FMV) for this property. You can find that number by comparing this property to similar properties(comps) within the same area.[/FONT]
[FONT="] Sources:[/FONT]
[FONT="]•[/FONT][FONT="]Classified ads[/FONT]
[FONT="]•[/FONT][FONT="]Realtors[/FONT]
[FONT="]•[/FONT][FONT="]MLS listings[/FONT]
[FONT="]•[/FONT][FONT="]Your knowledge of the neighborhood.[/FONT]
[FONT="]•[/FONT][FONT="]Zillow.com(data may be out of date and unreliable)[/FONT]
[FONT="]4. You will need to know rental rates for comparable properties.[/FONT]
[FONT="]Sources:[/FONT]
[FONT="]•[/FONT][FONT="]Classified ads[/FONT]
[FONT="]•[/FONT][FONT="]Realtors[/FONT]
[FONT="]•[/FONT][FONT="]MLS listings[/FONT]
[FONT="]•[/FONT][FONT="]Your knowledge of the neighborhood.[/FONT]
[FONT="]5. You need to know the taxable value and the real estate taxes.[/FONT]
[FONT="] * Your source will be your local taxing authority.[/FONT]
[FONT="]* This is public information.[/FONT]
[FONT="]* It may also be online.[/FONT]
[FONT="]* Zillow.com[/FONT]
[FONT="]6. You will need to know insurance rates. Your source will be insurance agents.[/FONT]
[FONT="]7. Take your possible gross rent and subtract your possible expenses.[/FONT]
[FONT="](Monthly gross rent) – (Monthly taxes) – (Monthly Insurance) – (other expenses) = Net rent[/FONT]
[FONT="](Net rent) – (finance costs) = your monthly cash flow [/FONT]
[FONT="]10. Make a formal offer. I do this through my RE agent. I also get and submit a conditional pre-approval letter concerning my finances. This can be procured from your banker or a mortgage broker.[/FONT]
[FONT="]11. When a price is agreed upon you will submit earnest money and you will have a short period of time to inspect the property. Time is of the essence during this time.[/FONT]
[FONT="]12. Hire an inspector o go over the property. You need to go with him to see what he looks at. Wear work clothes so you can crawl all over and under the house.[/FONT]
[FONT="]13. Figure any repairs that will have to be made and resubmit another offer with the repairs discounted.[/FONT]
[FONT="]14. If your offer is accepted you will go to closing(may last as long as a month)[/FONT]
[FONT="]With the previous steps you should be ready to look at potential SFH investments. Most beginning RE investors mainly look at cash flow. That is OK to look at but it’s not the Fastlane way.[/FONT]
[FONT="]You want to buy your property as far under FMV as possible(I aim for 40-60% under FMV). That is what is known as buying or capturing equity. This strategy will usually give you cashflow and equity. If you do this you may be able to sell the property and make tens of thousands of dollars on each investment. Then you can rinse and repeat.[/FONT]
[FONT="]I hope this wasn’t too long and I hope it helps someone to avoid some common mistakes. If I left out anything please let me know. Good luck to all and happy hunting.:cheers:[/FONT]
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