In our prequel post (part 1), we talked about how to get started in real estate investing and how easy it is to get overwhelmed—unless you have a checklist.
Whether you’re looking in Washington D.C. or building a portfolio on Maui like Loren Clive, here’s what to do after you’ve found a property to purchase:
1. Get an Inspection
Inspections cost about $400, but the possibility of the inspector finding more than $400 worth of fixes is high. If that happens, you can go back to the seller with this information. If the seller declines to make the fixes, and you still want the property, at least you know what you’re getting into.
2. Contact a Lender
Be proactive about getting financing for your rental property. Stay in constant communication with your lender to avoid surprises, such as being turned down for financing.
The lender will most likely want to see the following:
- Purchase contract
- Tax returns
- Pay stub
- Personal financial statement
These items are just a start with initial underwriting. I highly recommend having these items already completed and ready to turn in before you have a contract.
3. Make a Repair Budget
If you plan to buy a remodel and do a subject-to-completion appraisal, you should have a comprehensive list of the repairs you’ll make and a list of estimated expenses associated with those repairs and updates. The appraiser will need this list and the contract to give a proper appraisal.
Here are a few good budget repair templates:
- Rachel Rossi: Preparing a Budget for Your Next Remodel: Tips and Tools
- Google Docs Template – Home Improvement Spreadsheet
- House Flipping School – Repair Estimate Worksheet
4. Choose a Title Company
Most buyers and sellers don’t pay attention to the title company. This is a big mistake. Title insurance prices and fees can be drastically different depending on the title company. Additionally, turnaround times and overall service differ between title companies.
Price estimated closing costs from different title companies before you commit. This can save you several hundred dollars on each closing with only a couple of phone calls.
This is the fun part. You get to buy the property, assuming the title company, lender, and real estate agent have coordinated and followed proper procedures. Typically, both parties will meet at the title company’s office, and oversee the contract signing and transferring of funds.
6. Market the Property
After you’ve finished any remodeling, it’s time to clean up and start marketing your new place! There are many ways to do this well. I wrote an extensive post on marketing rental properties, and I will touch on the high points here. At the bare minimum, do the following:
Create a free account with Cozy
Cozy offers a seamless online process for marketing your property and receiving online applications.
With Cozy, you can create a listing of your rental property, and the viewer can get a snapshot of all the important details from the high-quality photos you add. This is useful when you are trying to find your next round of renters, because all you have to do is update the listing within your Cozy account and it updates everywhere.
Share on social media
Not all landlords share their listings on social media, but they should. I’ve found that whenever I get a tenant through one of my social media outlets, they tend to be great tenants. I also like to meet other landlords and people interested in real estate investing through social media.
Plus, social media is a free resource. And if you want to kick your marketing up a notch, you can use paid Facebook and Twitter ads to get tenants.
Craigslist, despite having an interface that I don’t think has ever been updated, continues to dominate rental listings and to drive a significant amount of traffic and leads for landlords.
Create a separate bank account
By having a separate bank account for your real estate business, it’s easier to do your bookkeeping and taxes. It’s also easier to see the monthly profit or loss from your rental properties.
*Bonus: Create a separate email address for your real estate business, and get a Google Voice number, a number tied to you, not your device.
The next time you feel stuck in your real estate business, you can come back to these two posts (part 1, part 2) and use them as a resource to get unstuck. Then you can enjoy real estate investing for the cash-flow and net-worth benefits.
Is there something I left out? Let me know in the comments!