Well Rounded Investor

My journey of becoming financial independence by 35 years old

6 Steps on How to Successfully Buying an Investment Property

6 Steps on How to Successfully Buying an Investment Property

Alright, you’re making a middle class income, but want to retire early after you read a bunch of blogs and news on how people retire early on investment property, passive in come and want to try it out for yourself. I bought a 4-plex and a duplex and I followed these 6 steps and increase my asset to 7-figure, and improved my cash flow by 20%.

Step 1 – Finding a mortgage company to get a pre-approval. Please shop and shop check out their rate, check out their limitation. I know wellsfargo.com and bankofamerica.com would do a 4-plex loan (or more than a 2-unit). I normally go through a small company that I didn’t have to pay closing costs, but they wouldn’t do a 4-plex loan. I was lucky that I went through the pre-approval process with 3 different ones. So when crunch time, I just pick one (I spend $50/company for application, but it was worth it.

This pre-approval is the key, because you can find out the maximum amount that you can afford. That way you can start the home shopping process, and look at your price range. It wouldn’t make any sense to buy a house that you can’t borrow the money to buy.

During this process, quickly obtain your 2 years of W2, 2 years of taxes, 2 pays stuffs, if you count your rental income, then include the contracts, 2 bank statements. If you get all of these ready, when the loan officer and the underwritter wants them, you can send to them very quickly.

Remember investment property conventional loan, you must come up with 25% or you pay higher rate and such

Step 2 – Finding a house – Work with a Realtor, but also do your own research. Check out the comps, do the home work, it is best to have a contractor walking with you when you see the house that you like the 2nd time to estimate the repair, so you can make the appropriate bid. Check the ROI – return on investment to make sure whether the current house is good to go. Generally you should go for anything above 10%, anything less than that you can be treading the water, considering the time you’ll be involve managing. I also suggest buying an investment property near where you live, at least in the same city of you can keep an eye on it even if you decide to go with a managing company.

Step 3 – Make a bid – There are different strategies, my strategy was make a low bid, then they come back with a small decrease, then make your real bid, saying you want to cut all the craps of back and forth, and they went for it.

Step 4 – Home inspection – When you walk around shopping for the house, if you didn’t walk around with a contractor before, it’s time to invite them. Don’t pay for high price home inspection, it’s a waste of $300-800 to tell you thing you’ve already know, and look obvious. Experience contractors can also tell you something is wrong, and not up to code (the guy I hire, spent literally 1 hour, and he charge $800 for all the thing I’ve already known and wanted to fix anyway). Shop for a home inspector as the mortgage company want a report. Spend a good day on it for a good price.

Usually if it an investment property, the previous owner will not make any repair, so you might be able to renegotiate a little bit, in my case, they didn’t back down. I bought it anyway.

Step 5 – Home insurance shopping – Ooooooh joy!! I took two days off, I repeat, I took 2 days off to shop for insurance. Because a regular home insurance company wouldn’t insure a rental property that has more than 2 units. So, I ended up calling at least 20 companies. Some of which give me sky rocket quotes. I found 4 or 5 companies that the price is good. I was also trying different packages include home, car, rental. Or just home + car, and rental is separated. But do you diligent, because the different is $1000-$3000 insurance. Time literally means money!!

Step 6 – Shop for closing lawyer – If  you want a LLC, then go register one quick, but it’s required a different loan. If not then it is recommended that you buy liability insurance so that in case of a lawsuit, they won’t seize your assets (hopefully) the amount doesn’t exceed. Follow up with the lawyer office, making sure the title is clear. And there is nothing stopping the closing on time, because delaying closing will cost you money. If it’s summer time, people would take vacation, and communication was stopped, and you’d be the one who’s responsible for your money, take charge!!

Show up for the closing, and that’s it! If you are well-prepare, small issues here and there won’t stress you out, and the process can be as painless as possible. Goodluck!

Advertisements

One comment on “6 Steps on How to Successfully Buying an Investment Property

  1. Pingback: How I increase my asset by to a 7-figure by buying an investment property? | Well Rounded Investor

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Information

This entry was posted on January 21, 2015 by in Best post and tagged , , , .

Recent Posts: No Nonsense Landlord

We cannot load blog data at this time.

January 2015
M T W T F S S
« Dec   Feb »
 1234
567891011
12131415161718
19202122232425
262728293031  

calendar

January 2015
M T W T F S S
« Dec   Feb »
 1234
567891011
12131415161718
19202122232425
262728293031  

It looks like the WordPress site URL is incorrectly configured. Please check it in your widget settings.

%d bloggers like this: