Today is the final post in my four part series discussing the steps necessary to begin a venture into the real estate investing game. In step one I discussed the necessity of gaining a solid educational foundation before doing any investing. In step two I explained the process for formulating an investment plan that will free you from the evils of the 9-5 rat race. In step three I discussed why choosing to invest with a small multifamily property makes the best first investment. Finally, today we are going to look at the nuts and bolts in actually purchasing your first property.
Meet With a Mortgage Professional:
Before searching for the exact property you want, you need to know what you will be able to afford. A mortgage lender will help you determine exactly what you can expect in terms of financing. However, while most financial institutions abide by the same lending standards and rules, all lenders are not created equal. You need to find a lender who is punctual, professional, and resourceful. The best way to do this? Call up several local real estate agents and ask them for their recommendations for who can close a loan the best in your town/county. Real Estate agents rely on good lenders to get loans through to closing, so you can usually trust that the best lenders consistently get the best referrals from agents.
Once you are confident in a lender, have a sit down meeting with them. The meeting is free and painless, and you will leave with a much greater understanding of where to go next and what you can afford. Remember that the best lenders are also usually the busiest, so be punctual and prepared. Find out what they need you to bring to the meeting and be as organized as possible.
Meet with a Real Estate Agent:
A Real Estate Agent should be your best friend when deciding what property to buy, and the best part – they are generally paid by the house seller – which means, for you, they are free! They will help you sort through the thousands of listing and (hopefully) find you a property that fits perfectly with your needs. To find a good agent, ask around for referrals and then actually interview the agents. Find out if you click well with their personality, learn how many properties they have helped buyers purchase in the past, what kind of investing they do, what kind of schedule they work during, etc. Meet with at least three agents and choose one that you think will best suit your needs.
The agent will guide you through to the end of the process. A good agent will:
- Take you on a personal tour of any home that is for sale.
- Prepare detailed analysis’ of homes that have been listed, sold, or pending.
- Not be pushy or try to sell you something you don’t want/need.
- Draft and submit offers for you when you find the perfect property.
- Be willing to submit many offers, knowing most will be rejected for being too low.
- Help you negotiate with the seller to get you the best price.
- Walk you through to closing and handle any hiccups that might occur.
- Get you connected with the Title and Escrow Closing Company or Lawyer (depending on your state’s process).
While your agent is your best friend in finding a house, there is one more buddy that is just as important – the internet. Once you have your criteria in place and know how much you can afford, you can spend all the time you’d like searching for your new home online. Sites like Realtor.com and Redfin.com are excellent sites that will help sort through the glut of homes and find ones that might be good possibilities. Then, call your agent with the list of homes you have compiled and have them arrange tours. It really is as simple as that.
Close the Deal
After your offer has been accepted by the seller, you will have usually 4-6 weeks until “closing”. During this time you will perform your “due diligence” (inspections, solidifying financing, checking out the properties financial records, etc) and the closing agent will prepare the legal documents necessary to close. Depending on what state you live in, a lawyer may perform these tasks or a Title and Escrow company may perform them. Either way, the process is similar. Once the wait is over, financing in place, signatures signed, and the title recorded at the county – you will collect the keys, collect the security deposits (if tenants currently rent) and begin collecting the rent. Congratulations! You have now begun your new career as a real estate investor. You are now one step closer to financial freedom and living the life you want to live.
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I am currently in the process of buying a house and this article has a lot of great information. I think that it gave a great overview of the process of buying a home. Thanks for sharing this!