Buying my first rental property — Part 1
Let me start with saying I am not a millionaire, in fact, I’m not even a hundred thousandaire. I’ve done a lot of research, but at the end of the day, I don’t have any practical experience in buying property. Yet.
There are a lot of blogs and podcasts out there that written by people that DO know what they are doing, they’ve already been successful, and have a lot of advice about how to do things right, but at the end of the day you still have to do the work yourself. So what I’m going to do is give periodic updates on my own journey to owning rental property and building my assets.
- Begin building my personal assets in a way that is sustainable.
- Earn a passive income, allowing me to be increasingly financially independent.
- In writing this I hope to a) keep a record of my journey so I remember what I learn and b) provide anyone else with an in the moment look at going through the process of buying investment real estate for the first time.
I live in the San Francisco Bay Area, it’s expensive. Very expensive. Like I said, I am not a millionaire, and even if I were, the cost of housing is not such that it would actually earn me money through renting. I suspect the housing bubble will pop at some point, so I don’t foresee much long term growth either. As a result, I am looking at properties out of state. In Columbus Ohio to be exact.
In late 2016 I was already mulling around the idea of buying property, and had even already been thinking about Columbus. The cost of buying a house has not changed much over the last few years in the housing recovery, and it seemed like the perfect opportunity to get in early at a market where young people are moving in and the cost is still attainable. This was validated for the first time when a Forbes posted an article listing Columbus as somewhere to invest in housing in 2017.
I was never planning on buying in 2017, always 2018, but seeing that I was not the only person — especially my still being fresh meat on the Rental Market — who thinks Columbus is a good investment opportunity was huge.
I am a millennial. Just like millions of other millennials in the US, I have packed up my things from my parents suburban house and moved to a tiny apartment in the city that I rent and have no desire to own. It’s not just big cities like New York, LA, San Francisco that we’re moving to either. We’re filling out cities that no one thinks about and I’m ready to capitalize on that.
What I’m Looking For
I’m searching for a 3 to 4 bedroom single family home that is not a fixer upper in an area where I can rent it out for 1% of the total cost of the house. That seems to be the rule of thumb, 1%. I may wind up closer to .85% to start, but I’m not ready to give in yet. I am not looking in student neighborhoods because I would like longer term residents.
Eventually I will also be looking for a real estate manager, because I do not live in Columbus, and hiring someone to manage the property in place will likely be the most successful and cost effective way to go about out of state investing.
How far along I am
So far I have spoken with 2 real estate agents from different agencies. The first I spoke with has not yet been terribly helpful, but we’re just getting out of the holiday season, so I’ll pester him in a few days. The second I only spoke with a few days ago, and I see some promise. I’ve never really spoken with a real estate agent before, so I don’t know what questions to ask, or whose court the ball is in regarding communication.
What I know I don’t Know
- How exactly to get a mortgage. There are 192 thousand places I can go to find that information out, I just haven’t done it yet.
- How large of a loan I can get approved for. Now, I have absolutely zero intention to come anywhere close to the amount that I can spend. This is an investment after all, not a gamble. But I have not yet spoken to a bank to get pre-approved, I’ll probably do USAA.
- What to look for in a property manager. My parents own and rent out a condo in Norfolk Virginia (not a hopping real estate market by the way), and so I asked them how the picked a property manager. Their response?
We just went with the company that sold us the property.
I’ll definitely be doing a bit more research than that.
In college someone said… or maybe I read it somewhere… that when you are going to write a story, you should start the story at the latest possible point in the timeline for you to convey the tale you are trying to tell while also keeping it interesting.
Well, right now I am standing at the edge of the deep end, looking into the depths and ready to plunge in. My goal is to buy a property by the end of March, and ideally rent it as soon as possible.
I’ll periodically write updates on things that I’ve learned, the trials and tribulations of taking a big risk. I hope you will join me on my journey.