Landlord Input Desired
I have seen the light and am totally convinced that buy and hold investing is what I want. With that said, how have most of you acquired your properties? I have a full time job and not a lot of time to find foreclosures and other great deals.
Secondly, how have most of you set up your business entity? Finally, what types of creative financing are available to get started ASAP (Good credit, low cash). Sorry it's so long, and thank you in advace for any advice.
The first step is to learn how to recognize a good deal. Most great deals don't advertise themselves. Educate yourself on your market. Once you've got a good idea of what houses should go for, you'll recognize deals all over the place.
I'd also encourage you to look for distressed properties and have a realtor run comps on them.
Learn about Subject to and Lease options. no cash or credit required. There are all kinds of 100% LTV loan programs out there for SFR's. Good Luck
Congratulations,
You have made the first step that most newbies fail to do. You've started a plan, and created your exit strategy (rent out).
Even with buy and hold, you still have to get the best price on your purchases. While resell is not as important, cash flow is, and your monthly income will be based on how much your mortgage payment is. So the lower the price you pay, the greater the monthly income.
With good credit, you can get 90-100% loans even on NOO properties. It does cost more, in interest rates and PMI, thereby cutting into your monthly return. If you find the right properties with enough equity, you can quickly refinance the properties for their appraised value, sometimes pulling cashout as well. Just make sure that it still cashflows.
Roger
hibby76 and roger,
thank you very much for your replies. love this site!! more questions...first, do you recommend a realtor to assist with first couple of acuisistions? second, should I have a solid "team"(lawyer, CPA, realtor, etc) in place prior to first purchase? third, what is a good website or resource to get all of the necessary CYA that goes along with landlording, so as to not get into legal trouble. Again, thank you for the help in advance.
Quote:
first, do you recommend a realtor to assist with first couple of acuisistions? I suggest that you do engage a buyer's representative for your first couple of purchases. A licensed real estate agent may be invaluable in helping you negotiate terms, in getting comps, in ordering a home inspection and termite inspection, and will know which lenders in your area work well with investors.
Quote:second, should I have a solid "team"(lawyer, CPA, realtor, etc) in place prior to first purchase?Don't pass on a good deal, waiting to assemble a "team". I personally don't put too much emphasis on having a complete team.
Personally I don't use a CPA. I pick a settlement attorney when I get a signed contract (I am in an attorney state, not a title company state). I get a list of "approved" settlement attorneys from my lender, and just pick one from their list. If you are in a title company state, your lender may have a preference for certain title companies, and may direct you in that direction.
If you have never landlorded before, hire a professional property manager. The property manager will know the landlord-tenant law, will know how to process an eviction, and will have processes in place for tenant screening, credit checks, and landlord reference checks. The property manager may also have established contacts with the building trades contractors, and may be able to get preferred service when an emergency repair needs to be made.
As far as the immediate "team" is concerned, I would start with a lender, a real estate agent. When you have identified a property to purchase, begin interviewing property managers to get rental comps and their management fee structure.
Pass on the lawyer, if you hire a property manager. The property manager should have their own legal representation to assist in almost any landlord-tenant dispute. You may only need a lawyer to conduct settlement.
Quote:third, what is a good website or resource to get all of the necessary CYA that goes along with landlording, so as to not get into legal trouble. Again, thank you for the help in advance. If you are planning to do your own property management, you can probably never know enough to avoid getting into legal trouble. I strongly suggest you use a professional property manager for your first rental.
In one area of the country where I have rental property, "Source of Income" is a protected class. This means that I can not refuse to rent to an applicant, that is otherwise qualified, solely on source of income. Translation: if a Section 8 applicant is otherwise qualified, I can not refuse the application just on the basis of Section 8 tenancy. If I did not have a good property manager looking out for me, I would have never learned about this recent local ordinance.
Hi,
Relatively new to REI's myself, but we have a plan for buy-hold and rent-out already established and growing.
My advice is to get a good realtor. Our realtor was not familiar at all about rentals, but she did a great job in advising us in future re-sale value of SFR's and market comp's. In other words, she helped us purchase a home as if we were going to live in it and wanted to be able to sell it for a nice profit someday as the market appreciates. Simultaneously, we were working with a property management company (we had previously "interviewed" three in person to get a feel for which company to go with) that have us (so far! ) sound advice on what type of property is easiest/best to rent. So, as we approached the purchase from a landlord's standpoint, and our realtor approached it from a long-term value of the home angle, we found a happy medium and we believe we have made wise investments thus far.
Good luck!
Sounds like professional management is the best way to go, but how big a bite (%) out of your cash flow does it take?
Thanks[ Edited by Len958 on Date 05/26/2003 ]
Depends where you are located, competition, and prevailing practice.
I have seen professional management fees ranging from 7% to 45%. Call a couple of professional property management companies in your local area and ask what their basic monthly fee is. Then ask if there is a leasing fee and a maintenance supervisory fee. Better yet, get a copy of their property management agreement and detail all the fees that would be charged to you.
"first, do you recommend a realtor to assist with first couple of acuisistions?"
--If there's a great deal on the MLS, 6% is going to be paid to a realtor...you might as well bring yours into the deal and have them split it. Will only help, not hurt. Non MLS listings, leave a realtor out of it. You may consider paying one $100 to help walk you through the process.
should I have a solid "team"(lawyer, CPA, realtor, etc) in place prior to first purchase? CPA, No. Lawyer...maybe if there is anything shaky, unusual, or complicated with the deal. Or if it's a big deal (say over $500K). Realtor...see above.
"what is a good website or resource to get all of the necessary CYA that goes along with landlording, so as to not get into legal trouble"
many areas have local groups for landlords. Find one and join. Respond to "for rent" signs and ask for rental applications. If it's something relativly small, (say fewer than 8 units) you'll learn it quickly. If you're investing in an area where you feel many people will try to sue, then you may want to use a mgmt company.
There are some tricks to landlording but it's not brain surgery. It's about cash flow management and being human and good to people. Screen your tenants, take care of problems, be reasonable, and you're 90% there.
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I'm not big on the whole "team" thing either, though I do think that you need a few key players. Not necessary before you first purchase, but I'd find a good landlord/property CPA to help you with your taxes and planning. Good means experience with landlords, maybe even have rentals themselves. IMO, a good CPA will save you more money in taxes than you ever will going it along. Also, they'll be there to help if you should ever be audited (and responsible too, since they sign the tax return).
I have a preferred lawyer, but I don't always use him to close my deals. He does keep copies of all my documents for me, and he does answer questions for me, usually for free since I send him business.
If you're going to own more the 2 rentals, go ahead and look for a mgmt company. Otherwise, you'll be too tied to your properties to find more.
It's good to learn the basics of everything you're involved in; Landlording, buying, taxes, real estate law, etc. just so you can detect BS when you hear it. However, I do believe that it is in your best interest to let someone experienced do the job for you, when the money is there.
Roger
I would also suggest managing the first few yourself assuming they do not have too many units and assuming they are local. SFRs and duplexes are not too difficult and you will learn quite a bit so that you will be better informed when you decide to go with a property management company. I do use property management companies for finding and screening tenants, but this is because I live a long way from my rentals and interviewing and showing would be difficult.
As for acquisitions, I almost always use realtors. Having a full-time job and a part time job leaves little time for chasing down properties. Cultivating relationships with them has paid off. I am almost always the first they call when they find a good deal.