Hey there readers! Thanks for stopping by our Rent to Retirement blog where we always strive to bring you the best of the best real estate investment info!
Today I want to discuss one of the top questions that gets asked – “What is my first step in investing in real estate with Rent to Retirement?” If you’ve clicked on this blog post well then you are probably wondering the same thing, so let’s jump into it.
First things first. I want to say that Rent to Retirement is here to help our investors build a long-term investment portfolio. We are not just here to sell you a home, make our money and send you on your way. We want to educate and mentor you through the beginning stages and really encourage you to plant some roots with us and grow. Let us help you meet your financial goals!
Ok so here comes the good stuff.
Step 1: Get Pre-Approved
Before you make any serious moves, you must decide on what your acquisition strategy is. If you are wanting to go the financing route (which we recommend), you’ll want to get pre-approved with a lender like you would with any home you are purchasing. You can do this through lenders that you have shopped around for or already use and trust. If you don’t want to have to find a lender on your own, R2R has several highly recommended lenders that we would be more than happy to send over to you. We like to recommend them to our investors because they are all licensed in all the areas that we operate in. You only need 1 pre-approval letter and you’re eligible to buy in any of our markets. We also recommend them because they offer the most competitive rates and fees and they are all investors themselves so they have been through this before themselves.
I could fill up endless pages on the topic of financing and everything that goes along with it but I will try to keep this short and sweet. If you do have questions on the topic please do not hesitate to reach out to one of our very insightful investment counselors and they would be happy to answer them! So here we go- FINANCING. There are many different investors with many different goals in mind but normally we do like to guide our new investors towards conventional loans or
as I like to call them, your Fannie Mae and Freddie Mac Loans. We do this because it’s the best bang for your buck. You are going to get the lowest interest rate (which are still historically low even considering the small, recent climb) and a low, down payment which will be around 20% of the purchase price.
Step 2: Let’s Talk Strategy
Once you’ve been pre-approved you want to send us your pre-approval letter. This will do a couple of things. This will let us know that you are VERY serious in purchasing since you’ve already gone ahead and taken the first step. It will also get you on our priorities list. This means that whenever we get new inventory, you will get an e-mail rather than having to sporadically check our website for updates and possibly having to miss out on inventory. Once we get your letter, we will schedule a follow up strategy call and go over exactly what you are looking to achieve with this property. What are you looking for in an investment property? What are your goals, timeline, criteria and resources? What location do you think you’re interested in? Would it make more sense to start with single family, multi-family, commercial or new build? From there we can narrow things down and get you exactly where you want to be to achieve your investment goals.
Step 3: Finding “The One”
So, you’re on our priority list. CONGRATS! You get an e-mail and see the perfect house. That’s it. That’s the one you have been waiting for. Send us an email as soon as you can. We like to keep it fair so these properties are on a first come first serve basis. The prices are non-negotiable and honestly with the way the market is right now you would rather have it like this, trust me. You don’t want to get into a bidding war with 27 other people and end up paying way over the market value. So, we keep it simple, benefitting us all.
Step 4: Inspections
Ok, so you’re the first one to e-mail about this property and you sign a purchase agreement. Now this does not mean that you are bound to this property and let me explain. It takes about 60 days to close once we go under contract. In that time, our team finishes the rehab if it is not complete already. Mind you, these properties get posted on our website about 2-3 weeks out from being completely rehabbed. Once the house is finished you hire a third-party inspector if you so choose (highly recommend) to come check out the property and give everything a go. Ok here is where this circles back to the investor not being bound to the property. Let’s say the house is finished and for some reason the finished product didn’t look like what you though it would or something comes up on the inspection. You can back out of the contract. The house goes back on our website and we find a house that is more fitting for you. This is what we refer to as your due diligence period.
Step 5: Appraisal and Closing
Let’s say the inspection is a go. The lender will then send an appraiser out to find out if the price we are selling the property to you at is at least at market value if not lower. Once it appraises and everything is checked off, we just wait for the clear to close from the lender which eats up the rest of the 60 days. By the time you close we like to have a tenant in place and if not, there will be one soon as high, tenant vacancy rates are just not a problem we are having. The average leasing time right now is 18-21 days, and average occupancy time is 3 to 4 years which allows us to consistently achieve between a 2-4% vacancy! When you close, we will get you under contract with a property management team as well to set up your account.
FINAL STEP: Growing That Portfolio
Although we like to think that there is no final step because even though that property has sold, we want to continue to stay engaged with you and take strategic steps to grow your portfolio over time. A lot of investors come to us thinking their safest bet is purchasing one investment property. We want to educate them that really, you’re at a much higher risk doing this. If you have one investment property and you have to end up making a large expense to fix something or for some reason the tenant leaves, that is most of or 100% of your cash flow. If you have 4 other properties, you still have all of that income to fall back on. So, at the end of our follow up strategy phone call, we really want you to understand that if you are comfortable doing so and have the capital to make it happen, starting out with an initial investment in 3-5 homes is much safer for you and at the end of the day you are making more income so it’s a win-win. Building a sustainable portfolio with multiple streams of income is key but our main point is to simply take action as quickly as possible and get you out of the perpetual analysis paralysis spiral that many beginner investors have.
So there ya go folks. Those are the short, sweet and simple steps to beginning your journey in real estate investing. I really hope that this post was useful to you and that you keep coming back for more. Thanks for stopping by and learning something about us today!