"Find a Property to Buy with this Easy 5-Step Framework"
Buying a property can be time consuming. When I first tried to find a property to buy, I literally drove by more than 100
multi family houses, and physically inspected maybe 30 or so with my agent over the course of a year, before I made my first bid. And I bid on 3 or 4 different properties before I had one under contract. The bottom line is that buying investment property is definitely a "numbers game."
If you're totally new to all of this, you're probably wondering how to dive in to the wonderful world of buying a property. I'll share with you what worked for me, and it involves 5 specific steps to find a property:
- Find a good real estate agent
- Practice running the numbers
- Conduct physical inspections (drive-bys + showings)
- Make an offer & negotiate
- Manage the contract & escrow process
STEP #1: FIND A GOOD REAL ESTATE AGENT
Eventually, you will need your own "team," including a real estate agent, mortgage broker, insurance broker, title company, attorney, home inspector, and a handful of trustworthy contractors.
But with the exception of a real estate agent, your team does not need to be assembled right out of the gate. You will gradually assemble it as you go. Click for an overview of how to find your ideal rental property agent.
STEP #2: PRACTICE RUNNING THE NUMBERS
Ask your new agent to send you all the active 2-4 unit multifamily rental property listings in your target area, and practice running the numbers to identify the most promising ones. Visit my
property valuation page
to learn how to do this. There you will also find a spreadsheet model that you can use to do rapid-fire "back of the envelope" calculations to quickly screen properties for financial viability.
STEP #3: CONDUCT PHYSICAL INSPECTIONS
Once you have a short list of financially viable multifamily rental properties, take some time to do drive-bys. This is a critical aspect of your ability to find a property that makes sense. Whether the numbers work or not, you do not want to purchase any property in an especially bad area (in fact, you'll find that the numbers usually work best in such areas...you get what you pay for!). Plus, while not a perfect science, if the outside looks like it's falling apart you may want to pass.
After this process, you will have a list of maybe 3 or 4 properties to look at with your agent, instead of, say, 10 or 15. Have your agent schedule weekly showings, and bring a notebook to jot down notes so you can later use this info to adjust your bid amount. Click
for a free Property Acquisition Checklist to help facilitate this process (you'll need Adobe Reader...to download a copy, click here).
Keep physically inspecting properties with your agent in this manner every week and do not get discouraged. The majority of rental properties you come across will be poorly maintained and/or overpriced. Tenants beat them up, and many, many landlords could care less about maintaining their investment.
So, buying a property takes time. All I can say is be patient, and remember that the more properties you inspect, the better deal you are likely to get when you finally pull the trigger.
STEP #4: MAKE AN OFFER & NEGOTIATE
Ok, so you've run a bunch of initial numbers, did a bunch of drive-bys, and physically inspected a bunch of hot prospects with your agent. Finally, you've found a 2-4 unit multifamily rental property you’d like to purchase. Now it's time to coordinate the escrow process, and let the
real estate negotiating begin!
STEP #5: MANAGE THE CONTRACT PROCESS
Yippee, your offer was accepted! So now what? Well, there are various steps that round out the process of buying rental property:
The process to find a property may seem complicated if you happen to be new to all of this, but it's really not. After you go through the entire process once, you'll find that buying a property is really not difficult...as long as you know what you're doing!
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