6 Steps To Buy Your First Rental
Table of Contents
Introduction To Buying Your First Rental
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Hey, and welcome back to the real estate marketing podcast. This is Austin Glanzer. And today I am going to be talking specifically about how you can buy your first rental. But before I jump into that, I have a couple updates for you – first of all I just want to say thank you so much for listening to this, we’ve already had over 500 people listen to our podcast. And to be honest with you, I was not expecting that many people to listen and chime in. So thank you. I’ve been getting a lot of DM’s on Instagram, on Facebook and on other social media, LinkedIn. It’s been really cool to just get encouraging text messages from people who are saying, “Hey, man. This has really been helpful,” and whatnot. So first of all, thank you guys so much for listening to this and just for the encouragement to keep them going.
Now because of all the messages, I’m acting like I’m super popular, but it’s not a crazy ton but it’s a decent amount of people who have reached out with questions, I thought, “You know what? I probably should start providing more content about how you guys can get started in real estate.”
So Adam and I, we talked about this, and what we’re going to be doing moving forward is Adam and I are going to do kind of a staple show once a week where we’re either going to interview somebody or talk about a specific real estate marketing tip, right? So we’ll spend more time on that episode providing heavy content. We have an episode that’s going to be coming out next week specifically about how you can reach your customers where they’re at. So it’s a really great episode. Adam and I already recorded it. Adam has been using this for his business and it helped him grow like crazy.
So I’m really excited actually to provide that. And by the end of the episode I was telling Adam, “You know what? This was really good for me to listen to personally in my business.” So I know whenever I can provide content that I personally will use it gets really exciting for me.
But, so anyways, today I want to jump right into six steps that you can do to buy your first rental property. So whether you’re just brand-new, you’re newly married, you’re friends with me and you’re listening to this out of obligation because I forced you to, it doesn’t really matter – these are the six steps that I personally took whenever I was looking to buy my first rental property, my first triplex.
Find a Mentor
So the first thing that I did, and I’ll put this in the show notes as well, the first thing I did to buy my first rental property is I met with somebody who’s been doing it before, right? So if you’re listening to this and you’re like, “I really want to buy my first rental property,” I challenge you to take somebody out for coffee or meet with somebody. I guess it is, I’m recording this in the middle of Covid-19, you might not want to go for coffee, maybe you should go to the park, sit at a bench on opposite sides of the bench and ask them about how the rental process has been.
So that’s the first thing – go and meet with somebody. Ask them these questions, ask them what do they wish that they would have known a long time ago that they know now. Ask them some of the hardest things they’ve been through. Ask them how good it’s been, ask them how they increase the rent, ask them how they’ve evicting people. Ask them a lot of questions, the tough questions. So find someone that you know and trust that has a rental property and ask them the questions that you wish you knew. So that’s step number one.
Start Saving Money
Step number two is you are going to set money aside. So start saving, right? Maybe you already have money saved up, but my suggestion to you is if you’re getting started you can do this with an FHA loan where you only have to put 3.5% down to purchase a property. So for example, if the property is $100,000 you only need to put $3,500 down to buy that property. Well, yeah, it sounds really good on paper but you have taxes you have to pay, you have insurance you do, you might want to get an inspection.
Then you buy the home and you want to have a buffer for things to go wrong. I just had a hot water heater go out, so that type of stuff happens all the time. So I would make sure maybe I would have like $15,000 set aside to buy a modest rental property. So I would really start setting money aside, get rid of debt so you have a low debt to income ratio so you can get more bang for your buck on the property from a loan officer.
Now, so the first one was meet with somebody, the second one is set money aside.
Figure Out Your Strategy
And the third thing is what type of investing – define the type of investing that you want to do. And I’ve kind of established four here that you could do to get started. The first one is house hack. So you can live in a multi-unit, one to four units, get an FHA loan so you only have to put 3.5% down and live in one unit and rent out the rest to cover your expenses so you can live completely for free.
So I would just go on the MLS or go on Zillow, find a multi-unit, a duplex and find one that you can live in one unit and rent out the other. I did this personally and I’m doing it currently actually. Liz and I, we live in a duplex and we live on the top unit, we rent out the bottom floor. It helps us cover our mortgage and we essentially live for free.
The second thing is maybe you just want to buy a single-family home and rent it out. That’s very simple, there’s a lot more out there to buy. So maybe you could find a good deal on a single-family home and just rent it out. Maybe you’re a single person that just graduated college, something you could do is buy a single-family home and maybe four bedrooms or something like that, rent out three bedrooms to your friends, cover your mortgage and live in one room and you can live for free and have your friends pay you rent. So maybe you just want to go into a single family.
Maybe you have more money, you have a little bit more experience – I would suggest just buying a larger multi-unit. Buy like a small apartment building, right? Those are hard to come by especially in our area, but I’ve noticed in the Midwest, if you’re listening to this in the Midwest, there’s a good opportunity to buy eight units to ten units just like one-bedroom apartments. I think there’s a good opportunity there to get a commercial loan and then actually get a nice return on your investment there. So maybe you have more money, you want to just go straight into multi units.
Or you can get an REIT, and that stands for real estate investment trusts. So let’s say you just want to put some money into real estate and you don’t want to do any work with it, right? You can just put money into an REIT, which is kind of like a mutual fund, where you just put money in, a bunch of he goes in and then you guys can all put your money towards a larger project. So something you could use is fundrise.com. And I actually do this personally, I put some money into it and my small amount got put into a larger pool, and then my money is being used in a large investment property in Los Angeles. So it’s actually a good opportunity. You don’t make as much money on it, but it is a way to put your money to work.
So those are the things. What type of investing do you want to do? Define that.
Build a Team Around You
The fourth thing is to build a team. So what do I mean by build a team? You don’t have a business, you don’t need to get employees, like, “I’m brand new. Why, Austin, are you telling me to build a team?” Well, what I mean is you’re going to build a circle of influence that can help you. So there are some people that I think you should get a good relationship with now so you can go to them when problems come.
The first thing is you want to meet an agent. Maybe you already have an agent, maybe you are an agent. So get an agent that you can trust, that you can go to, to ask questions. And that will be super helpful to have a person you can constantly go to.
Now you don’t have to do this, and especially if you’re brand new I don’t suggest you do this, but you could get a property manager, right? Meet some property managers because maybe you don’t want to even touch the property, you just want to put money aside, have someone else manage it for you. Look at the best property managers in your area and build a relationship with them. If you’re brand new you can manage the property yourself. It’s a little bit extra work but you do save money. And I manage mine personally. I am looking for a property manager, but so far I’ve done my own management of the property.
You also want to find a lender. So a lot of times your agent will help you and connect you with a lender, but you can kind of shop around lenders, you don’t have to just do whatever everybody tells you to do. So find a lender that you trust and kind of compare prices with interest rates on a property. Right now you can get a good interest rate and save a lot of money long term, so find a lender.
You also want to find someone who can provide you insurance. You can shop that around too, you don’t have to just do what everybody tells you to do. You can find someone who can save you money on insurance. Now I don’t even think you can buy a property without insurance, but it is very important that you get a good policy. My friend and I, we’re flipping a house, it caught on fire, and we have insurance. We would be in the hole so, so bad if we did not have insurance on that property. So get insurance.
Then you want to also have an attorney on call. Now you don’t necessarily have to like have a great relationship with the attorney to get started, but things happen, right? So just have a relationship with somebody who’s an attorney.
So building your team would be find an agent, a property manager, a lender, someone who can get you insurance and an attorney. If you have those people kind of like a board around you, like on a business, it will really help you by having the team that you can go to when you have a problem.
Start Making Offers
The fifth thing is make offers, right? So once you have your team set up, you have money set aside, you’re ready to go, you’re pre-approved for a loan – start making offers. Don’t be afraid to make a low offer. I’ve one time heard it said, “If you’re not embarrassed about your first offer, you offer too high.”
Now if you’re in a hot market you’re going to have to offer close to asking price because other people are out there offering. But if you find a good property, don’t be afraid to just make a bunch of offers a little bit less and just keep it going. Michael Jordan said, “You miss a hundred percent of the shots you don’t take.” Actually I think that was Wayne Gretzky. One of those two guys who are really good said that quote. And you’re going to miss a hundred percent of the offers that you don’t make. So you can quote me on that, I just said that.
But make offers, so that’s the fifth step.
Close the Deal
The sixth step is closed the deal. Get settlement date down, make the deal happen, work with your agent to make this deal go all the way through. Get an inspection on the property if you’re brand new and you’re nervous about it. Have all that go through, you have maybe 40 days, typically it’s 30 to 40 days between signing a contract and going to settlement to own the property. But make the deal happen, do whatever you need if you have a great deal.
I have random things that happen on these properties like one guy I talked to, the thing that got the deal over the hump was because he wanted to keep his stove. So he was like, “Hey, can I keep my stove?” And that was like a big deal to him so I said, “Yeah, sure,” like I can work out a stove for myself, so he got a truck and he kept his stove and that was what the big thing was. So there’s just kind of weird stuff that people want in a property. So close the deal.
Now I’m just going to recap this really, really quickly.
The first thing is meet with people who have done it before, start asking questions. I challenge you to do that, maybe make a phone call right after this.
The second thing is start saving your money – have a good backup for things to go wrong.
Third is define the type of investing you want to do. That could be house hacking, that could be a single-family home, buying a larger multi-unit or an REIT like Fundrise where you can just put your money to use.
The fourth thing is build your team, and that’s an agent, a manager, a property manager, a lender, someone who can give you insurance and an attorney.
The fifth thing is make offers – don’t be afraid to get turned down.
And the last thing is close the deal.
So those are the six steps that I personally did to help me buy properties. They are something that you guys can do as well just to get started by meeting with somebody, taking action so you can own a rental property.
All right, guys, I hope to be providing more content like this, just simple quick tips for you guys throughout the week, maybe two or three times a week, and then Adam and I will do kind of a larger episode where we either interview or provide a good marketing tip for you. So thank you guys so much. Please consider liking this. Leave a review for me, I look at all of them because I have I think nine right now so it’s not very hard to go through them, but I do look at them and I do look at messages that people send me. So let me know if you have any questions there. And we’ll talk to you guys later. See you.
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