One of the most important elements of real estate investing is knowing how to properly analyze a deal. This one task is what holds a lot of people back and what causes many to succumb to “analysis paralysis”.
To get comfortable with analyzing properties, set a goal to analyze a certain number per week. A good way to do this is to simply go to a website like Realtor.com or Zillow.com, type in the area where you would like to look for rental properties, and pick a few to start with. Once you go through this process for a few weeks, you’ll be able to scan through a listing and almost instantly know if it’s a good deal or not. Of course, whether it’s a good deal pertains to the location in which you are looking and certain market factors based on that location, but what I will describe here can be used as a general rule or metric to strive for.
I will note that I invest for cash flow and don’t really incorporate potential appreciation into my considerations. Although it would be nice if the property appreciates, I count it solely as a bonus, not as a deciding factor when purchasing real estate.
It has officially been 1 year since we rented out our first rental house! I can’t decide if we’ve just been lucky by not having any issues *knock on wood* or if my diligent screening process has really paid off.
For the entire year, these tenants were never late with the rent check and only called me once. Zero 2am toilet calls. I’m not just going to assume this is how it will be forever because something is bound to go wrong in a house that’s 60+ years old.
5 months ago, we increased our rental portfolio buy purchasing a duplex. One unit was vacant and we inherited the tenant in the other unit. The rent was definitely below market value but I didn’t want to upset the tenant and risk her leaving by raising it. She keeps the place in pristine condition and pays like clockwork. I think it’s fine that I’m forgoing a bit of extra money to not have to risk finding another high quality tenant.
Okay, now what you’ve been waiting for: The numbers!
You seem to always hear about a landlord talking about their “nightmare tenant”.
I have an acquaintance who is a landlord and is constantly telling me the latest tenant horror story.
Tenant in jail for cutting a woman’s head with a machete, drugs being made in the house, dealing with evictions; it seems to be never-ending. All of these stories are followed up with, “see what you have to look forward to?”
We have officially been landlords for about one year now and do not yet have our horror story and I hope that we will never have one. So far we’ve gone through the tenant selection process with 2 units and have 1 unit that was an inherited tenant.
I think a major part of us having good luck so far was the selection process I went through to find the tenants. I didn’t just welcome in the first person to inquire about the property.
1. Diversify your advertising sources
In order for more people to see that you have a property for rent, you need to use a variety of advertising sources. I’ve had the most luck with Craigslist and yard signs.
I’ve also used Facebook groups and Zillow. Facebook definitely had a lot more views and inquiries but nothing that really led to anything promising.
The more serious people seemed to be on Craigslist and calling my phone from seeing the yard sign.
I considered using a newspaper if the vacancy lasted too long but it was more like a last resort type thing since it seemed pretty expensive.
The yard sign is great because a lot of times older people won’t have access to the internet and the only way they find out about it is seeing it from the road.
So, how exactly did I buy a rental property when I was just 22 years old?
“Success occurs when opportunity and preparation meet.”
“Whatever the mind can conceive and believe, the mind can achieve.”
Acquiring the Property
Rental property was almost all that was on my mind for nearly a year. I really got inspired and kicked it into high gear after reading Robert Kiyosaki’s book, Rich Dad Poor Dad. Any spare moment I had was spent researching, reading books, listening to podcasts, and setting up meetings with mentors. In conjunction with all this research, I was also saving very aggressively. This was the preparation stage.
Now I just had to wait for the right opportunity. That opportunity came in November, 2016. I found a foreclosed house about 2 miles from where I live. I called my realtor so he could show me the inside. The next day I made an offer. This started the long, complicated process of buying a foreclosed home. The listing agent was semi-retired and seemed to think he could communicate whenever he felt like it. The bank that owned the property was halfway across the country and also unresponsive. After everything from not getting signatures in time to the water line breaking, the closing finally happened about 3 months after my initial offer.