How To Buy Your First Investment Property
Intro
This guide explains in-detail how to purchase your first investment property.
It is arranged in a multi-part series each covering topics seen in the menu to the left. Primarily, we'll be discussing the nuances of single-family real estate from the property's owners perspective.
I wanted to draw your attention to a few points (that will all be discussed more in-depth later on in this guide):
You need to start small. I can't emphasize enough that you ALWAYS need to start small. You'll need to invest a lot of time upfront for learning the necessary steps to have a successful real estate journey. Not only education and time investment, but you'll need to invest a some money to get going.
Expect to make mistakes. As a beginner, it is likely that you'll face problems that you haven't encountered before. Everyone does when starting new! But you'll need to realize that this is part of the learning experience, and it is much better to learn these now while the stakes are smaller. Making mistakes on $50K rental homes are much easier to bear than $500K rental homes.
You must be in it for the long run. We always hear about investing for the long term. But for real estate, it becomes especially important because of amortization, which means you pay more interest on your mortgage upfront. That, combined with capital gains and rental income growth become levers that change over time.
Be willing to purchase rundown properties. In order to have a properly cash-flowing property, it is easiest to start with a rundown property (also known as a distressed property). They come at a much cheaper cost and renovations ensure that maintenance needs are kept minimal. This sometimes overwhelms beginner real estate investors, but having a good, trustworthy general contractor network will make this a breeze.
Be ready for setbacks and be able to afford your rental income. Even as the awesome property owner that you could be, you'll likely face a resident vacancy at some point. You'll want to know if you can afford your rental home in the case of a problem. For example, you will want to have a safety net in case of resident vacancy. You might also want to have a budget set aside for maintenance issues.
Who Should Read This
If you're a DIYer and love to get your hands dirty in investing or someone who understands the process to invest in real estate yourself, this may be the guide for you! If you're not, feel free to skip to the Doorvest process towards the end that makes it easier!
Doorvest helps you identify, purchase, and own your first (or 10th) rental home for as little as $35K.
Below, you'll find an introduction to each chapter of this guide as well as a link to the full chapter. While the guide is written in the order we think is most sensible, skipping around from chapter to chapter to what fits your situation best may be better for you!
Real Estate and Wealth — Setting Goals
The obvious reason to own investment real estate is to build wealth. 90% of the world’s millionaires have attributed their wealth to real estate investing and yet homeownership rates have gradually declined to all-time lows.
First, we'll be discussing the many different ways to make money in real estate (there's a ton!). Then, we'll discuss the goals you have, the time commitment you want to have, and choosing the right path in real estate.
This chapter focuses on breaking down different types of real estate, real estate income sources, and the commitment necessary to make them work.
Chapter 1: How Real Estate Builds Wealth and Setting Real Estate Goals →
How To Find Properties
By this chapter, you'll know your goals for investing in real estate and how real estate builds wealth. But how do you even start?
First, you must find a property you like. It's easiest to find properties in areas you are familiar with, but many people will also invest across state borders (which is much more difficult).
This chapter is focused on how to find properties. Many successful real estate companies and people have large networks that give them access to the best deals. This takes time to grow and we'll talk about how you can grow a network for the future and how to find properties now.
Chapter 2: How To Find Properties →
What's A Good Deal Versus a Bad Deal?
Okay, at this point, you found your desired property or properties. But how can you really tell that it's a good deal (or a bad one)?
You'll need do do your due diligence to research the property, potential renovation costs, and more to ensure that the property will be able to achieve the goals you set out to do!
This chapter will be focused on the nitty-gritty. There'll be mathematical formulas and valuation theories baked in to give you exactly how you can systematically measure deals that you find.
Chapter 3: How To Tell If A Real Estate Deal Is Good Or Not →
How to make good and compelling offers
Great, at this point, you've identified a SOLID deal. But how do you make a compelling enough offer that the seller will actually sell it to you (and how can you beat out the competition)?
This chapter will be focused on negotiation in real estate, making offers, contingency plans, and doing your due diligence to ensure the property is 100% a good deal for your real estate goals.
Chapter 4: How to Make Good Real Estate Offers That Beats Out The Competition →
Getting your finances in order
You've made an offer AND you've got it under contract. You'll need to figure out how you're actually going to buy the home.
One of the greatest things we noted in Chapter 1 is leverage. Leverage allows you to use other people's money (OPM), AKA a mortgage, to purchase a home!
This chapter will be focused on talking to lenders, comparing rates, and getting all the paperwork necessary for you to actually get the best financing for your purchase.
Chapter 5: How To Finance a Real Estate Investment →
Closing Up A Deal
At this point, you've got your mortgage ready to go. And now you have to go through "settlement." Settlement is a stressful process to say the least. Both buyers and sellers scramble to sign piles of documents that only a lawyer would truly understand.
This chapter will be focused on what expectations you should set for settlement, documents that are commonly needed, tenant-specifics in regards to settlement, and a resource for any special requirements in your locale.
Chapter 6: How To Close a Real Estate Deal and Go Through Settlement →
Property Maintenance and Management
Congratulations! You own your first real estate investment AND you're a property owner. What this means is that you'll need to maintain the property AND deal with any issues when tenants need help.
But there's an easy fix if you don't want to do it all alone. There are companies that provide property management services that will help you maintain your property for a fee.
This chapter will break down what hiring a property management company looks like on average, the fee paid for service, and hidden fees that you will want to know.
Chapter 7: How To Hire a Property Management Company (or be a DIYer) →
The Doorvest Way — Making a Doorvestment
Did all of the above sound like a real pain in the butt? Introduce...Doorvest!
Doorvest helps you identify, purchase, and own your first (or 10th!) rental home for as little as $35k. We'll also help you generate passive income from day one.
This chapter will help you understand how Doorvest operates, what you can expect as a customer, and The Doorvest Advantage.
Chapter 8: Becoming a Doorvestor →
Recap and Cheat Sheet
This section will provide you a bullet point list of the key topics covered in this guide. You'll be able to enter your email to get the cheat sheet emailed to you so you can easily reference it in your inbox. You'll also get subscribed for more guides and insights from the Doorvest Team.