Author Topic: Looking to Buy my First Rental Property. Help?  (Read 4416 times)

S0VERE1GN

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Looking to Buy my First Rental Property. Help?
« on: July 23, 2014, 08:17:23 AM »
good morning all. I'm looking to buy my first rental property and I would like some help.

I just moved into a really nice neighborhood in western mass, and there are actually 2 properties I think might be good options.

1) at the end of my street (end of a dead end street) there is a 2 family with an all new exterior (siding, roof, windows, doors) and from what I can tell, 2 tenants that ruined both sides. (I've seen the current owner inside with a gas mask cleaning it out) It has been on the market for months, nobody has touched it, and now its been taken back off. I've put a note on his door about a week ago with my phone number and address saying I'm interested.

2) there's a single family the next street over, and the old couple that lived there has passed away. the son is currently cleaning it out and will probably look to sell. I left a note for him as well.


that's about as far as I've gotten. essentially what I'm looking for is a good deal on either a single family or a decent deal on a multi. These homes are probably in the range of 90k-150k depending on interior condition which I haven't seen. I'm buying strictly based on neighborhood (lots of new construction in neighborhood, lots of affluent young couples moving in etc)
 

My wife and I have the liquid cash to give up a small down payment (sub 20%) but I would honestly be more interested in a loan assumption or seller financing at first. My wife just purchased our house strictly on her credit so I could use mine for our next purchase, though.

This neighborhood is a suburb of Pittsfield, the largest city in Berkshire county. any ideas on where I should look next? good  places to find more leads? etc. alos how to close a seller financed deal or a loan assumption deal.

thanks!

waltworks

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Re: Looking to Buy my First Rental Property. Help?
« Reply #1 on: July 23, 2014, 11:26:53 AM »
Western Mass + gas mask = meth. You do not want to go there.

You will want a significant oh-shit fund for when expensive things break, so if you don't have enough for a 20% DP, you might want to wait until you do.

-W

S0VERE1GN

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Re: Looking to Buy my First Rental Property. Help?
« Reply #2 on: July 24, 2014, 07:32:21 AM »
Noted, and probably true. insofar as the meth.

we're aggressively saving so I'm really in the "starting to look" phase now, hopefully I'll close on something this time next year. and liquid cash are not thee only assets we have (investments etc)


escolegrove

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Re: Looking to Buy my First Rental Property. Help?
« Reply #3 on: July 25, 2014, 10:51:41 PM »
Are you going to buy the house as an investment or live in it? If it is an investment you need 20%. If you are going to live in it you only need 5% or less. I personally am a fan of personal properties conventional 5% down. I like self managing. I buy in great neighborhoods with professionals. I keep control of my expenses and we do a lot of the work ourselves. Best of luck!

S0VERE1GN

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Re: Looking to Buy my First Rental Property. Help?
« Reply #4 on: July 29, 2014, 01:18:04 PM »
Are you going to buy the house as an investment or live in it? If it is an investment you need 20%. If you are going to live in it you only need 5% or less. I personally am a fan of personal properties conventional 5% down. I like self managing. I buy in great neighborhoods with professionals. I keep control of my expenses and we do a lot of the work ourselves. Best of luck!

right. I'm not planning on doing "conventional" financing. per se. I've read most of the books arblespy recommended, and I'm shooting more for a OWC (owner will carry) agreement on some current rental properties or someone who is under some distress (preforeclosure, looking to move etc). It seems to be the best way to create real cash profit sooner, especially an aggressive cash on cash return, as opposed to traditional bank mortgage financing.

so, I suppose I should have been more clear: has anyone done something similar to above (OWC agreements, loan assumptions, liability buyouts etc) any positive or negative outcomes?

waltworks

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Re: Looking to Buy my First Rental Property. Help?
« Reply #5 on: July 29, 2014, 01:41:57 PM »
I've looked for this sort of situation (just in my local area) and ran into 2 problems:
1: By the time I was looking (2012 or so) the market had picked up enough that desperation was waning. That's undoubtedly even more the case now in most of the US.
2: The few circumstances I did find were just... morally unacceptable to me. Essentially the only person I found who was interested in selling below market/in distress was senile and alone. She needed real help (in fact I referred a trustworthy realtor to her) to get into a better situation and me buying her house for 50% of market value was just profiting from her helplessness. I wasn't ok with that and in fact the whole experience left me so upset that I pretty much stopped doing pursuing this sort of deal. I'm ok renting houses to people who make mediocre decisions and hence can't buy one. I'm not ok taking advantage of the elderly/mentally ill/life emergency folks.

Now, I can imagine situations where it's win-win... but I have yet to find one. Maybe you'll have better luck. Looking outside your immediate area may help.

-W



Are you going to buy the house as an investment or live in it? If it is an investment you need 20%. If you are going to live in it you only need 5% or less. I personally am a fan of personal properties conventional 5% down. I like self managing. I buy in great neighborhoods with professionals. I keep control of my expenses and we do a lot of the work ourselves. Best of luck!

right. I'm not planning on doing "conventional" financing. per se. I've read most of the books arblespy recommended, and I'm shooting more for a OWC (owner will carry) agreement on some current rental properties or someone who is under some distress (preforeclosure, looking to move etc). It seems to be the best way to create real cash profit sooner, especially an aggressive cash on cash return, as opposed to traditional bank mortgage financing.

so, I suppose I should have been more clear: has anyone done something similar to above (OWC agreements, loan assumptions, liability buyouts etc) any positive or negative outcomes?

escolegrove

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Re: Looking to Buy my First Rental Property. Help?
« Reply #6 on: July 29, 2014, 02:55:48 PM »
I agree with waltworks and am in the same boat. While some people have been super successful at that, those situations do not morally appeal to me.

S0VERE1GN

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Re: Looking to Buy my First Rental Property. Help?
« Reply #7 on: July 30, 2014, 12:55:39 PM »
I agree with waltworks and am in the same boat. While some people have been super successful at that, those situations do not morally appeal to me.

noted. thanks to both of you for the insight. I've gotten the feeling from the books I've read, and now from you two, that finding real deals where an OWC or loan assumption can work are  a one in one hundred shot.  I've been combing the streets in my neighborhood and doing my homework to find some, basically.  The ideal situation I'm looking for is an older land lord with a few units who is ready to get out of the business, do an OWN with him based on the pitch of "i'll pay you at 5% APR, you cant get that in a money market or in bonds!" and start from there.

The house my wife and I just  bought as our primary residence was essentially a "distressed sale" the owners had to front 50k in cash to buy out the bank, still had to cover the balance with a short sale, and we bought the house at a steep discount from market value because they were already in preforeclosure.

we've had them over for dinner since, and they were extremely happy with the deal as it got them out of a real pickle and let them move on with their lives.  I suppose it depends?

waltworks

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Re: Looking to Buy my First Rental Property. Help?
« Reply #8 on: July 30, 2014, 04:37:42 PM »
This is a quibble, but if the bank signed off - you paid basically market value for your house.

I think that it will be hard to find awesome deals, but there is no harm in trying. The time to buy real estate in the US was really the last 5 years - at least where I live, the deals are long gone. In fact I'm looking to unload my last 2 rentals next year - they're worth way too much at current market price/rent.

-W

S0VERE1GN

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Re: Looking to Buy my First Rental Property. Help?
« Reply #9 on: July 31, 2014, 10:16:18 AM »
I thought the draw of real estate as an investment revolves around the idea that there are always below market value deals? that's doubly possible in real estate because 1) real estate is not a liquid asset and 2) its usually purchased using leverage, meaning bad deals on the financing side can create opportunities on the purchase and sale side.

as a straight commodity the market is starting to level out, but the illiquidity of housing paired with poor lending and financing decisions will always create opportunity....

waltworks

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Re: Looking to Buy my First Rental Property. Help?
« Reply #10 on: July 31, 2014, 10:26:17 AM »
Sure, there are good deals in real estate - but you don't get them through the MLS or a bank. Because as soon as there are lots of people looking at a place (especially professionals), the price will end up reflecting the real value pretty closely.

Realistically, the thing that is advantageous about RE for small investors is the easy (gov't cheese!) leverage and fixed rates. Plus the MI deduction for homeowners. If you could invest in the stock market by borrowing on a 30 year fixed note at 4%, you'd make way more money than you will in RE.

Most people do horribly "investing" in real estate. Just hang around and read some of the horror story rental threads where people insist on hanging onto houses that only make 1/4% of their cost per month and such. People are gung-ho about it right now because prices have risen a bunch and everyone feels like a genius.

-W

I thought the draw of real estate as an investment revolves around the idea that there are always below market value deals? that's doubly possible in real estate because 1) real estate is not a liquid asset and 2) its usually purchased using leverage, meaning bad deals on the financing side can create opportunities on the purchase and sale side.

as a straight commodity the market is starting to level out, but the illiquidity of housing paired with poor lending and financing decisions will always create opportunity....

S0VERE1GN

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Re: Looking to Buy my First Rental Property. Help?
« Reply #11 on: July 31, 2014, 03:24:55 PM »
Sure, there are good deals in real estate - but you don't get them through the MLS or a bank. Because as soon as there are lots of people looking at a place (especially professionals), the price will end up reflecting the real value pretty closely.

Realistically, the thing that is advantageous about RE for small investors is the easy (gov't cheese!) leverage and fixed rates. Plus the MI deduction for homeowners. If you could invest in the stock market by borrowing on a 30 year fixed note at 4%, you'd make way more money than you will in RE.

Most people do horribly "investing" in real estate. Just hang around and read some of the horror story rental threads where people insist on hanging onto houses that only make 1/4% of their cost per month and such. People are gung-ho about it right now because prices have risen a bunch and everyone feels like a genius.

-W



yes.



now my original question was more along the lines of "those of you who have searched for, pounded the pavement, sought out, and FOUND good deals in real estate, how did you do it, and what tips do you have?"

well aware its not easy pickins. my wife and I looked for our current home for 3 years because none of the other deals made sense, and we bought it before it hit MLS.

waltworks

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Re: Looking to Buy my First Rental Property. Help?
« Reply #12 on: July 31, 2014, 03:50:24 PM »
I think that a lot of people *recently* didn't do much pavement pounding/work at all because everything was crazy cheap. In 2009 or so you could pretty much buy any cheap house in the entire western US and get a good deal on a place to use as a rental (ok, exaggerating a little...)

If you want to find deals now, I would probably do the direct mail/spam route. Wandering around your own neighborhood and just keeping your eyes open is good too, but I wouldn't make a special effort to just constantly wander around hoping to find something. Making connections with other RE folks is good, too, because deals will show up under the radar/through the grapevine and you may have a chance at something just because someone is out of town who would otherwise jump on it, or someone is overleveraged and can't make it happen but remembers you buying them a beer, or whatever.

-W

arebelspy

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Re: Looking to Buy my First Rental Property. Help?
« Reply #13 on: August 23, 2014, 08:24:56 PM »
Either of these two potentials go anywhere Sovereign?
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.