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So you want to get started as a real estate investor, but you live in an area where the market is hot.
You’ve researched about the benefits of real estate investing and want to take the house hacking route. House hacking is when you buy a multi-family home, live in one unit, and rent the other unit, is one great method to start off in your real estate investing career. In some cases, investors pay little to no rent with this method.
You run with the house hacking idea, and start looking at multi-family houses. But the multi-family homes you’re looking at are:
- Not in the best neighborhoods.
- The houses are ancient like over a century years old, and the amount of repairs you’re going to face in the long run is not worth the initial investment.
- The newer modeled multi-family homes are way out of your budget because you’re a new investor and you probably don’t have a lot of cash on you.
- The few multi-family homes that do fit your criteria are leaving the market so fast before you even have a chance to see the place.
This is the exact scenario my boyfriend, and I went through when we were looking for our first property. In this case, we had to change our approach, and be flexible. We decided to look at single-family homes. I believed it would be easier to find an investment property going this route, but I was wrong. It was crazy competitive. I would search for homes on the MLS every second that I got.
Once we found a property, we both liked we would contact our realtor for a house show. But unfortunately, there were many instances where an offer was accepted before we even got there. Or there would be too many offers on the house that the seller wasn’t taking any more.
At one point a property that we submitted an offer on had 29 other offers! We were in the top three but still didn’t get our offer chosen. After a few more offers I finally got an offer on a home accepted, and have my first property. We didn’t allow the competition or the rejections stop us. We kept going until we got a yes.
You can find your first investment property as well if you don’t give up and you’re willing to adjust your strategies to reach your goal. I’m going to share some of the strategies we implemented to get our first investment property.
Practice analyzing investment deals.
Find random deals online and practice analyzing them. When you practice analyzing deals, you will start to recognize bad deals and good deals.
With this practice you can also figure out the best property price you will pay for and even figure out the highest number you are willing to go to acquire a property. An amount that will:
- Not be too much out of your comfort zone that you will be able to afford the mortgage when the property is vacant.
- Still be competitive if there are multiple offers on the property you’re looking at.
Find the right real estate agent.
Not all real estate agents are the same. Sometimes certain agents are not a good match for you or understand your housing goals.
Find a real estate agent that works with investors or invests in real estate themselves. It takes a different mindset when you’re looking for properties as an investment than as a dwelling. The numbers are an essential factor, and also the ROI of an investment property is important.
The agent will understand your goals and also give you advice on what to look for when you’re purchasing an investment property.
You don’t want to hire an agent that mostly caters to families moving in, because they will be working on a different set of criteria. They may find you an excellent property for a young family, but it may not be great as an investment property.
Be willing to change tactics.
Your goal is to purchase an investment property, and you can get to that goal on different paths. Like I mentioned earlier in the anecdote. If you’re like me, and you wanted to take the house hacking route, but it didn’t work out. Try looking at single-family homes. Live in it for a year or two, move out, and rent it out. Or if you have a basement that can house another tenant the person can live in the basement, and you can collect rent from them.
Be willing to look at distressed houses.
Now I know this may be an automatic turn off for some of you but hear me out. With this tactic you just need to be strategic. Look for distressed homes in growing neighborhoods. Sometimes homeowners neglect their homes over time, and they don’t get around to making updates or fixing things. Usually, these houses are priced lower than the houses selling around them because the cost of upgrade and repair is taken into consideration.
This is an excellent opportunity to add value to your home and increase it’s worth. In your offer, you can add that you will take the property as is which will give you an advantage over another buyer who has certain conditions before agreeing to purchase. But make sure in your analysis you add in the cost of repair. If it will take $20,000 to update the home in may not be worth making an offer, compared to a repair cost of $5,000 or even 10,000 dollars to upgrade the house.
Do a home inspection before making an offer.
Doing an inspection before making an offer can put you at an advantage over other buyers. The inspection is usually done during a house show. You have an appointment to go look at a house, and you can bring your inspector along. If the home is in good condition, you can put your best foot forward and make a substantial offer. And it will show the seller that you’re really interested in their home.
What I mean by good condition is that there is no major repair or hazards inside the home and it’s ready to move in. For example, a house furnace that is 40 years old would need to be replaced much sooner than a 20-year old furnace. A furnace is definitely a considerable expense.
A seller will be more open to your offer because then there won’t be a need for a home inspection contingency and your offer price won’t go down.
Write a letter to the seller.
This should be a brief half a page letter introducing yourself and why this home will be a perfect fit for you. You can talk about something you and the seller may have in common. Usually, personal information about the seller is not allowed to be given out, but sometimes when you’re going through a house showing there may be something that you saw in the house that you may have in common with the seller.
The point is to connect with the seller. Sometimes sellers want to feel like that chapter in their life has been closed and knowing that their house is in good hands and that they don’t have to deal with it anymore is reassuring. Again this doesn’t have to be extensive it should be short.
Here is an example:
123 main avenue street N. United States, NA 33335
Dear Lizzy,
We are thrilled to present this purchase offer for your home! My husband and I graduated from college a few years ago, and we are first time home buyers. As soon as we saw this property, we saw its potential and got excited.
What grabbed our attention was the inside layout and floor plan. The house has a lot of room and space that can be used for a bedroom, office, and family space. The living room with a fireplace will be put to great use in the colder months.
The backyard has great space which will be perfect for hosting guests during the summer months. My husband sees himself writing out on the deck during the early, quiet, weekend mornings. We see ourselves living in this home for a long time.
If you accept my offer, this house will be in good hands. I hope we can personally connect and perhaps help one another with this transition.
If you have any questions for me, please have your agent contact my agent (agent’s name) at (555)-555-5555. Thank you for your attention to this offer, and best wishes.
Yours truly,
Your name.
You don’t have to copy this exact letter it’s only an example tailor it to how you like. The letter won’t guarantee you will get picked, but it will help you stand out in the slush pile of offers.
Vivian Otoo is a creative writer, blogger, and real estate freelance writer. She is a real estate investor experienced in home improvement. You can learn more about her here: https://otoorealestatewriter.com/