Going into the search for My Second Property, my knowledge base, experience, and connections have all immensely improved over the past year. With that, my investment criteria and strategy also shifted. Key strategy differences in my current search: 1. I'm financing this next property as opposed to paying all cash. This requires getting a mortgage, which I've already been approved for, and allows me to purchase a higher priced property with less money out of pocket. 2. I'm now targeting a property in the $75,000 - $100,000 price range that rents for $1,000/month. If you remember, My First Property was purchased for $37,000. A higher priced property will get me in a better neighborhood, should have better tenants, have less repairs, and a higher rate of appreciation. I also now understand, when it comes to real estate investing, "the more risk, the more reward" is a valid expression. With me targeting a higher class neighborhood, I'm expecting my ROI to fall, but it should be a safer play with a stronger tenant and long-term returns. For example: I was getting a 14% ROI on My First Property with little stability, but now I'm estimating between 7%-10% on My Second Property with more stability. So, my first phone call to find property #2 was to an individual I connected with online. We had a couple great phone conversations and then eventually met in person in Indianapolis (he met me on a Saturday morning at 8:30am...LOVE the dude!). His company follows the Turnkey model: they purchase properties, renovate them, sell them to investors, and manage them. The biggest difference between his company and the one I worked with previously: their properties are in the $75,000 - $100,000 range. They DON'T TOUCH C-Class low-end inventory...something I'm very happy about. After a few weeks of back and forth conversation, and patiently (not really...) waiting to see their inventory, I was sent a package of 5 houses. Below are two that stood out to me. LEAD #1 This property is vacant and scheduled to be fully renovated. FIRST IMPRESSION OF LEAD #1: I like the curb appeal, brick exterior (great in the Indy weather), and 2 car garage. It's a large home with 4 bedrooms and 3 bathrooms, but having 3 bathrooms actually scares me a little...that means three times the toilets and plumbing to deal with. The acquisition price ($84,900) to rent ($950) ratio is great and exactly what I'm looking for from an investment standpoint. LEAD #2 This property is vacant and scheduled to be fully renovated. FIRST IMPRESSION OF LEAD #2: I also like the curb appeal, brick exterior, and garage. It has less square footage with 3 bedrooms and 2 bathrooms. But, as I mentioned before, I don't mind the smaller floorpan and one less bathroom. However, this house is about 20 years older than Lead #1. The acquisition price ($82,900) to rent ($925) ratio is great, but I would prefer rent a little closer to $1,000. So, I got right to work and dug into the numbers a little more! By now, analyzing properties has become a lot easier, and I now have processes and a strong system in place. I look back at analyzing My First Property before purchasing it, and I was quite foolish. I really did JUMP IN rather blindly. But, that's beside the point now. Thankfully, I've learned a ton and now initially look at these core questions: -Does it meet the 1% Rule? -Can I get it for under-market value? -Is it in a good neighborhood? -How are the schools? -Is it in a flood zone? -What's the zip code like? I then calculate all expenses and income. How? Well, you're in luck! Check out my post on How to Analyze Property. After a quick analysis, LEAD #2 came out on top! So I asked a few more questions (with answers in red) and got additional photos. 1. How old is the roof? - NOT SURE EXACTLY. OUR ROOFER ESTIMATED 8-10 YEARS OLD. 2. How old is the furnace? - INSTALLED NEW FURNACE. 3. How old is the water heater? - INSTALLED NEW WATER HEATER. 4. What condition are the windows in? - WE INSTALLED NEW VINYL WINDOWS AND SLIDER. The place looks nice!!! The numbers look great!! I'm excited! I'm pumped! Could this be my next investment??? Am I one step closer to Financial Independence?? Ok...now I'm a little nervous...I thought it'd be easier to pull the trigger on My Second Property. I've got more experience under my belt...right? Decisions...decisions.... Takeaways -Investment strategies change. A year ago, the properties I was targeting were completely different from the ones I am now looking at. That's the beauty of experience. You learn and grow. -I thought it would be a lot easier pulling the trigger on My Second Property. Yes, it's no longer "my first rodeo" but there's still challenges, questions, and doubts that creep into your brain. -Tyler
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