I learned A TON going through my first purchase of a small multi-family property (duplex). No matter how much education, reading, and learning you do, you'll never be completely prepared for the journey. Experience is the most valuable tool out there. Here are the biggest lessons I learned from My Third Property that will hopefully help you along the way!
1. There are a lot of investing strategies out there. Before purchasing My Third Property, I considered: index funds, note investing, lending on rehab projects, buying another single family home, or just keeping my cash safe in a savings account. Ultimately, I didn't go for any of those strategies! I went for a small multi-family! Which shows...investing strategies CAN change and WILL change.
2. Finding and getting a property under contract that meets your investing criteria takes hard work, determination, and the right attitude to push through challenges. I found and offered on multiple properties before finally getting an accepted offer. It's really frustrating to lose a property, but that's the game investors play. Stay firm on your numbers, don't compromise, and MOVE ON to the next one if you lose out.
3. There's immense value in partnerships. I used to think doing it alone was the best strategy. I'm now understanding that two heads are better than one :) if you can BOTH bring value to the partnership.
4. Dial in your focus and don't spread yourself thin.
5. First impressions aren't everything. My Third Property was not appealing to me initially, but after running the numbers and better understanding the neighborhood, I liked it. I liked it A LOT.
6. MASTER the art of analyzing properties on paper quickly. Running a quick analysis is key to securing a good investment.
7. Having STRONG and trusting relationships "on the ground" in your market is crucial. Take the time and effort and invest in your relationships. They'll pay off in the long-run. The fact that I could email my agent on a random weekend afternoon and submit an offer within a couple hours may have been the reason I got this property. My agent could have waited a day or two to respond...and by that time...the property may have already been under contract. Who knows?
8. Just because you have a property under contract doesn't mean your work is done. It's just begun! Due diligence is it's own animal!
9. The second you get a property under contract, get to work RIGHT AWAY on proper due diligence. In fact, if you think you're even close to getting a property under contract, I'd recommend you give your inspector a heads up immediately.
10. If there are tenants in the property, check their leases right away. Have the owner confirm their payment habits (do they pay on time or late??).
11. Extend your Inspection Period if needed. Make sure that clause is built into the initial contract if you think you'll need it.
12. After assessing repairs, decide on if you want credit at closing or a reduced purchase price. But, I'll note: if you already have your financing locked up, it might cause a delay if you were to change the purchase price. Credit at closing can be an easier process, and saves you cash up front.
13. Regarding a renovation: realize that you're asking a team thousands of miles away to repair and oversee a renovation project. If you're paying an extra $3 for an item, I believe there's no need to call them out for that. Trust them, create a strong relationship, and they'll treat you right.
14. Get specific renovation timelines. Know exactly when work is to be started and when it's to be completed. Always get pictures of all work done.
15. Protect yourself and don't pay for full renovations up-front. Make an arrangement with your Property Manager and contractor that full payment won't occur until work is 100% complete and up to your standards.
16. It's generally a tough time to find tenants in the Winter. I strongly recommend trying to avoid a vacant property in the Winter at all costs! Lay out your property acquisition plan, renovation plan, and assess when you'll have to market the property. That could be a major factor in your investing plan.
17. If your unit is sitting on the market for an extended period of time, it's most likely due to demand and price. Evaluate the price and gauge if it's worth it to lower the rent.
18. An occupied unit is better than a vacant unit, even if it's demanding less rent. You want your tenant paying your mortgage, NOT YOU.
19. Make sure you understand all the fees your property manager charges. It's pretty typical that a property manager charges for any new or renewed leases. So, even when you get a new tenant in your property, you're probably not seeing any of the rental income for at least another month after they've moved in.