This is the exact plan I follow when I make my investments. It is the plan I use when teaching several hundred students, and it is the plan I follow when I teach Real Estate Agents how to work in with Investors. It is a good plan.
- First, we will have a telephone conversation to establish your investment goals. At this point, you need to have available cash or credit to continue.
- Send your name, email address, and phone number to me at firstname.lastname@example.org
- Set up your search criteria on the MLS system.
- Initially, you will get an email with a link to the MLS system. The first property matching the search criteria will be shown with a drop-down box at the bottom left allows you to scan forward to other listings. You will receive the “FULL” listings. This first email will consist of several hundred listings.
- Next, you will separate the good from the bad. Your objective is to narrow the list down to about 30 properties.
Compare the list price to the market values for the area. The list price should be below the market value. Look at the photograph(s) of the property, the lot size, room sizes, and other characteristics. This will take a few passes. As you narrow the list also use the county website for further research. This is a process that you will get better at with experience.
For multi-units, experience in my market area shows I should get $400-500 for 1-bedroom apartments, $450-650 for 2-bedroom apartments, $600-750 for 3-bedroom apartments. Tax costs can be obtained from the listing. Insurance should be 0.5% of value annually (on a $100,000 property that would be $500 per year).
I try to keep the price-per-unit to $35,000 or less per 3-bedroom unit, $30,000 or less per 2- bedroom units, and $25,000 or less per 1-bedroom unit.
*NOTE: different areas will have vastly different pricing models. Study your area and make adjustments accordingly.*
Other variables include the condition of the property (Turn Key versus Rehab). Trust your instincts and focus on what you think is the best deals. Eliminate the rest. You will get better with experience.
- The resulting list of 30 or so properties is your drive-by list. Now you will drive by the properties to further narrow your search down to 10-15 properties.
- At this point, you will email me the remaining properties. Send the MLS numbers in a comma-separated list. I will review your homework, making notes, and help you narrow the list down further. This will typically result in 7 final properties.
- Now we will schedule an appointment to go see the properties.
- After viewing the properties, you should have a list of 4 or more that you will fill out the MAO, Cash Flow, and Cost Sheets for.
- I will review your list with you and help you decide which properties to make offers on.
- Fill out the “Offer to Purchase,” make a photocopy of your hand money check, and provide both with proof of funds to me.
- Now you make the offer(s)!
Forms to Use
Always use Association of Realtors Forms when making offers. Always remember that when you are making an offer on a rental property to always make the offer contingent on seeing the current owner’s financials on the property including all income and expense data for the last three years. No exceptions!
The only time you can’t do this is when you are buying a foreclosure property. You also want to see current leases, any contracts the current owner has for services like pest control, property management, laundry, etc. You also want a contingency on seeing every single unit in the building you are buying. This is especially important if you didn’t get to see all the units before you made the offer.
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