Step By Step Guide to Owning Your First Rental Property!

Hey guys welcome to my very first youtube video where I am so excited to be talking to you about How to Buy Your very First Rental Property my name is Tejas Jani I am an Investor and I kind of got started out on this journey this year about six months ago and now I have five rental properties of my own and I wanted to take you guys to step-by-step process of acquiring that or how to go about acquiring your very first rental property because I was fortunate enough to have a friend and a mentor who kind of guided me through this process who helped me understand some of ins and out I personally did a lot of research a lot of reading a lot of just learning about the process of Webbys it take to have a to own and acquire your very first rental property and I know that I had a lot of questions in the process of going through this journey and I can only imagine how many people who are out there who would have dissimilar questions or more questions that I would hope that you would put down in the comments below and hopefully I can help answer some of those ways on my experiences in my journey and if I can be a part of your journey in the process of providing you with some of the information that hopefully you won’t have to spend a lot of time digging through kind of like I had to do some of those things I would I would consider myself a helping hand a tool or a bridge that will connect you from your present self to the future self that is working towards your own very personal financial freedom let’s get started set number one or call it step number zero because without having some sort of savings put aside your you’re wasting your time right so first things that number one is having at least two twenty twenty to twenty-five percent off a downpayment saved up now you’re gonna need to do that because if you’re going to be buying a property that’s going to be a rental investment property your lender is gonna wanna have at least 25% especially if you’re going to put it through LLC there are multiple ways that I will I will be creating a separate video for that just to talk about what it takes what’s the process in different states to have your own LLC what are the benefits of it what are the pros and cons what have you so with that being said you want to have decent amount of money saved up otherwise don’t even be watching rest of the video let me save you time and look up what it will take to save up money and how to put yourself on a budget and all of the above correct so I’m not going to spend a lot of time here for that second thing if you haven’t already done this please like my video and subscribe to my channel I’ll be sharing videos once a week and so step number one having enough down payment 20 to 25 percent minimum step number two right step number two having a good credit if you don’t have a good credit no lender will talk to you as you already know if you already have not been doing this where you’re constantly looking at credit score you’re looking at making sure that your accounts are clean your all of your bills are paid off and you’re keeping up to date on that if you haven’t done this and Credit Karma does not give me any sponsorship or anything they haven’t paid me any money for that but Craig Erma if you’re watching this I invite you to sponsor this video as of course I would love to do that but I personally love Credit Karma I’ve been using that for forever now and that has really helped me shake my credit and making sure that I have a decent credit score the credit score that a lot of Landers will look for is at least at least 740 or above right then if you don’t have that stop watching this video right now it’s step number two before you go any further wasting your time and download that app there’s an app for it Android iPhones and then also online you can you can go ahead and do Craig for mother calm and I’ll post a link below in the description so make sure you do that step number three step number three which is also very important is you’re talking to your lender and the reason why I put this as a step number three is because without talking to your lender what’s gonna happen is let’s say you get super excited and you want to go up and you want to start looking at companies and you fall in love with property which as an investor you should never never fall in love with the property but let’s say if you start looking at the properties and you love that house that you’re like oh yes I could see myself and then you find out and you go up to you and talk to your bank and then you come to learn that you cannot afford that house you’re going to be very sad so for your sanity for your happiness and for your literally for your peace of mind just go and find the local lender in fact they’ll free to shop for them because multiple banks will have different benefits different pros and cons please compare it do your homework do your research and establish an ongoing relationship with your with your lender once you’ve done that provide them with your last three to five years of tax returns your bank statements for anywhere from last three to six months off your bank statement so that they can review it they can take a look and see that okay well you are not only good on paper but you’re also paying your bills on time and then make sure that you can either give them you know if you’re doing this the right way which is how high have done it and it has benefited me which is making sure that your credit score is in the ballpark of having a decent credit so anything 740 or above making sure that you have done that and then just let your lender know what your credit score is without having them actually running or having a hard hit on your credit report so that will save you extra hit on your report if you need to work on that is something that you can keep in mind while you’re looking at and talking to your lender now step number four is going to be you looking at the properties which is a lot more fun once you get out there I want you to look at as many properties as possibly as you possibly can because the more you learn about your properties the more you walk into a home and then you start looking at structure the water the shoes if there is anything if there are basement problems so if there is an electrical outlet having issues or structural problems I want you guys to be thinking about all of that as you operate look at the roof look at the garage doors are they functional make sure you can turn the water faucets on and off make sure all this basic stuff is covered right but don’t do that just for like sake you looked at five houses or five properties and then you found the six one being your dream rental property right don’t stop at six okay that’s what I’m telling you and what I’d like for you to do at that point is that after looking with as many properties as you can as you have because we’re that best for you as you walk through these different properties and looking at them talking to different people you get in the mindset or the rhythm off just looking at properties and the more familiar you get with that process the easier it will be for you to walk in to just about any property and be able to do your assessment right and so we’re looking at it as as landlord but what kind of flooring does it have what kind of is it carpet well is a carpet dirty if the carpet is dirty think about the cost that it will take for you to be updating that carpet or that flooring of what kind of paint problems over there what kind of reef there is just thinking about all of these things and thinking about it from a dollar figure standpoint you want to be mentally ready as to do you want to take on this property or this liability or this asset so to speak in this case is it with it right so be thinking about those things I just want you to get familiarized with the process so much so that when you look at that right property that like home you know that that’s the right one now consider there’s a for a step step number four point one you will what kind of property right when we’re looking at properties as an investor what kind of properties are good for you the answer changes from person to person what are you in business for what are you trying to get out of it are you trying to have a property that you want to buy and have it forever and ever and pass it on to your children or whatever the cases or are you thinking about just buying a property flipping it and then selling it with the profit there are multiple ways to go about this and and and you can you can look at it however I’m saying I’m thinking about it from the standpoint off you want to buy it and you want to keep it as a as a rental property and building your net worth in the process obviously but you want to keep it for a long term and when I say long term in these 15 years or so right 10 to 15 years and and and every in every investor should have an exit strategy when you walk into a property or a deal that you’re about to make you want to have an exit strategy or to be thinking about that exit strategy as to what what’s going to be my house if something goes sideways if something goes wrong or even if something doesn’t go wrong but what is your end goal here so always begin with end in mind always be thinking about these things the only reason why I’m planning this out and putting it on you guys as radars is you’re thinking about being that first time investor is that these are the things that you want to be thinking about when you’re looking at your very first rental property or investment property I personally prefer duplexes or for plexes cinah family homes they’re small yet big enough where it can be easily be rented out they don’t have to be crazy twelve thousand twelve fifty thousand dollar homes they can be easily in anywhere from a hundred even below hundred ranges where you can easily rent those out to two different demographics it could be if it’s a small enough that’s one two three home you could have a young young family a young couple living in there even with a child or multiple children as your tenant so I’ll be thinking about those kind of things but personally we’re not going too deep into the details of it just what type of a property you want to be considering or to be thinking about is duplexes in a and what kind of location right location location location that matters and and you want to have it somewhere where obviously it’s not right off the street or Main streets where you’re gonna have a lot of traffic there’s chances you know low crime areas just the basic stop and I’m sure there are ton of it is out there that kind of talk to you about what kind of home or property that that you want to buy and if you want me to talk more about that and how I select my properties have you had to do a video please post a comment in the description below and provide your thoughts I’d love to make videos that you guys are wanting to see specifically around this topic 4.2 being the case that you want to be thinking about your cost right I just mentioned the maintenance cost that’s one of it but before way before you even get to the maintenance part you got to be think you have got to be thinking about your cost of acquisition cost right so let’s say you’re looking at a $200,000 home or a property that you’re you you look at all these properties 10 15 20 properties you you have finally decided that this is it right so two hundred twenty percent down that’s close to thirty six thousand eight hundred I’ll say give or take right and so once you have that figure obviously say cash revenue that you’re gonna have I’m just gonna vote a 20% down on this one okay so the remainder off the amount you want to be considering and be thinking about okay that’s going to be your that’s going to be your mortgage amount at current rates or anywhere close to three point nine maybe four percent is what what you’re looking at thirty year loan you’re just I mean you’re going to do conventional there are multiple ways that I’m sure your land okay walk you through it talk to them depending upon your credit depending upon all these other variables that we have just talked about that will impact your overall mortgage payments and and in please use those online mortgage calculators right so right from the get-go you want to be able to go ahead and pinch those numbers in so you know exactly what you’re working with let’s say it’s a two hundred thousand dollar property and you’re going to be looking at close to forty thousand dollars as a down payment closing cost etc and then the next thing you want to be considering is what is the real estate taxes in the area that you’re purchasing this property yet so add that on to your monthly expenses or take that annual and then you can always divide it up twelve that’s well you the method simple then the next thing you want to be thinking about is your insurance costs I have had such an immense success just working with my insurance agents I love my cell phone agents and they’re fantastic I would recommend I will put a link below if you want to get a quote from safe um calm against a film is not sponsoring this video but if they wish to I’d be happy policyholder service work with your agent insurance agent get that quick give them I usually send them the address and they are very quick very good at putting back to me and saying hey hey just this is what you’re looking at on a yearly basis for your for your home insurance but you will have to count that cost and to add that in then think about the maintenance costs right so you’re gonna have a lawn care that’s known in the world all the other stuff that could come up or could go wrong that you didn’t be you didn’t think about it could be the stove ran out or dishwasher broke you have to be thinking about all of these costs and factor that in or save that money towards your at the end of the year be prepared for it and if nothing nothing else goes wrong at least you all got that money saved up so these are the things that I want you to be thinking about alright so step number five seven over five is I would call it a 1% rule one percent rule is that now that you have done all your math and step number four that we just talked about you want to have your 1% rule stand correctly what is 1% rule it’s very simple 1 percent real says that the 1% of the purchase price of the property if you cannot render that that 1% rate you are not going to be making any success or you’re not going to be making any money on that investment since I’m at think about it this way it’s a $200,000 property if you can’t make in event $2,000 1% of that that that deal is no good no beer no walk away that 1% should include not only your mortgage costs your real estate taxes your insurance your maintenance costs or if there’s an atria the case may be or other expenses may be on top of all of that you should have some money left over for any accidental stuff that any incidental stuff that comes up that you didn’t even think about and so I want you to be thinking about that 1% rule at that point at the end of that you should have some money left ok that is what I would like to not only purchase my properties at but also make sure that I can either minimum rent it out at 1 percent or higher if that’s anything below walk away if you are going to be charging a $1,500 rent on a $200,000 property you’re not going to be making any profit and the hassle of going through the real estate in the taxes and the bring the money and doing the investment doing the maintenance is not worth it okay so at that point walk away move on to the next property I don’t care how much how much you fell in love with that last property that you liked for the two or a thousand but if you can’t charge the rent for that one percent rule you’re wasting time Hey all right step number six step number six is very exciting because at this point you’ve done all your math you have talked to your lender you’ve already liked the property that you know and you can foresee you can actually envision you shaking hands with your tenants and and renting it out okay so now it’s about it’s time that you’re going to make an offer so work with Realtors your listing agents are going to be your best friends in this case work with them and and make sure you interview a few real estate agents because they do a lot of really really good real estate agents in there and that’s so good real estate agents as well and so make sure that you have real estate agent working for you not only helping you through this process but also you are building a relationship with your real estate agent so that I’m hoping that this isn’t your first property that you’re going to buy and just kind of stay with it and then be done with it I’m hoping that you’re going to add more to a portfolio and it is really really important to have seven key players on your team off this adventure that you’re embarking on and so real territorial said agent is one of those key players they are the ones we’re going to bring you a deal maybe once we know that you’re an investor that you are going to be the ones that’s going to be working very closely with your Realtor and and and so and so forth so make sure number one that you are interviewing so to speak we’re vetting out the good and finding the right real estate agent that is going to be not only representing you but so your best interest and also going to be ringing your deals or the properties that actually fits what your needs are okay so work with them and then draft up a good offer that will that will be accepted to a point where you are going to walk away on topic okay step number seven step number seven is inspections after you have done your offer let’s say your offer is accepted and now it’s time for you to make sure that what you’re putting your money on or what are you investing your money on in this case is a valid it’s a good property that there are any hidden stuff the thing tricky thing about properties in the homes is that you’re going to run into issues you’re gonna have stuff that you can’t see it with your with your just direct open wide eyes you’re gonna have to get it inspected so do your due diligence and get it inspected make sure all the electrical outlets and electrical stuff is properly done start always done with your structural stuff make sure if there are basements in this properties make sure there are any crazy problems with like whether it be was the basement flooded before was the problem that you don’t know about the other trees around this property if there are trees around these properties sure enough their needs are digging into your structural side of the house make sure your your plumbing the water line or pipeline or the sewer all of that is in pristine condition before you go through this process of acquiring this property think about the roof okay a lot of times roof is a major expense think about and take a look just have a glance at it you will be able to tell if the roof is in a decent condition ask where the sellers how old is due if you usually there’s a there’s a life span up that’s some sort of warranty on it just understand what you’re getting yourself into your HVAC your heating and air conditioning units these are so or or your water heater these are some of the major expenses that you could run into if you made the wrong turn in investing in a property that has dog nose he aspects the key elements off the property or either towards the end of their lives or about it fall apart so just make sure you do your part and do your due diligence of inspecting all of these different elements all these different variables before you go further in the process make sure that you are doing the radon test a lot of times people don’t think about radon test but that is by law you want to be able to make sure that that property that you’re purchasing to be rented out can be inhibited by humans of course and so make sure you’re doing your part of inspecting your property step number eight alright step number eight is your closing costs all right you want to be able to understand what your closing costs are you also want to be able to understand and calculate and count for that in your additional expenses because it was just count for year say hey 20% down payment I’ve got that in the savings account I’ve got the basic stuff covered but a lot of times people forget about York their closing costs so you’re still responsible for that cost and you want to be counting that into your ultimate expense formula that you are putting in for acquisition costs all right on an average you’re looking at anywhere from one to two percent closing costs off your purchase price okay so if you’re looking at purchasing a property that’s two hundred thousand dollars be mindful that you’re probably going to be paying anywhere from two to four thousand dollars depending on the lender you’re working with your credit score and and those are other figures and and and the costs that go in with that so just make sure that you are aware of that also if you are going with a conventional loan but you’re putting less than twenty percent down you are going to be responsible for PMI or private mortgage insurance so be mindful of that as well that that cost is going to be added on to your monthly payments so it’s just a lot of variables there’s a lot that goes in it there’s settlement sheet that comes out that you need to be looking at that will kind of show you know on both sides what both of the parties they’re going to be paying whether it’s some of the credits and the debits that’s going to be happening on each account so just be looking at that look at a review it and review it with your lender if you have any questions some of the figures are the numbers they don’t make sense sit down with your lender have them explain it to you because you need to understand the cost that you’re going to be adding on into your acquisition costs as you take on your very first rental property okay okay step number nine step number nine is very exciting part of this journey its closing this is the part where you actually sit down with all different parties that have been part of this journey your sellers your lender and couple other people attorneys to sit down and go through and sign all these paperwork that you have to sign for this is when you essentially sign your soul away and say that I am going to do whatever I can to make sure that all of these payments are made in time and in full okay so make sure that you have at this point you should have already interviewed what you’re looking at your your expenses are going to be you already know what acquisition costs are going to be yeah we know what your mortgage payment and all of that is going to be at this point you should also have an idea on the fact that you will be and you have to be able to rent it out at a work of one percent rule which is one percent off your purchase price is what you’re supposed to be cash flowing okay so these are some of the key aspects you should have all figured out by this time this is the time for you to sign the papers and at the end of this process you should be walking away with your keys to the very first rental property okay so congratulations we have made it this far step number ten congratulations at this point you have the keys to your very first properties you have done your closing you have thought about everything aspect and now you have that property so now is the time to look at renovations this is your moment before you rent it out this is your moment to start looking at what kind of innovations that you thought about when you were looking at this property that you needed to get done whether it be updating the countertops to more durable once pretty much a renter proofing your property you want to make sure that if there’s carpet try to stay away away from carpet carpeting is it’s meant to get dirty if your tenants are gonna if you’re going to allow them to have pets you know that’s going to get into that so notice more durable don’t don’t do and don’t install very expensive hardwood floors or anything of that nature no granite countertops and all of that just go with something that’s more durable there’s a lot of lot of products out there that you can look from look at and purchase and install it in your place so those are your innovations right now and this is a perfect time to go through that so that this point is the time you rent it out you are ready to rent your property so there are a few things and they’re a few different ways you can go about it right there and there will be step number ten point one and ten point two that I’ll cover but the key aspect is you take your pictures take don’t if you’re not good at taking photos though if your properties hire someone let some other professional handle that okay so when you are taking pictures and posting it online you are doing your part of at least presenting a good view off your property to your future potential tenants because every click that you get will get you closer to renting it out and rule number one or one off your landlord in 101 or whatever you want to call it never leave your properties empty sitting empty properties they’re not going to make you any money so you definitely want to get them rented out ASAP alright so take good photos look at what’s out there and what are some of the avenues that you can run it out from to so 10.11 or different platforms such as Zillow is it Craigslist is it Trulia is it hotbed so whatever different avenues there are what are some of the ways that you can push your property out or the listing out so that it can be marketed properly and can reach the general audience that potential tenants in the rental community okay and then point to is the is the budding process off your tenants so there are multiple ways you can go about it and I can create a separate video leave a comment below and let me know if you would like me to create a separate video just to talk about what are some of the betting process that I use personally but then if some of the options are available out there so do your part of you know figuring out what your application fees are going to be what’s going to be the basic credit score that you’re going to be looking at for the runners your tenants what kind of background check are you gonna be doing the criminal the local that would have all of those different options you want to be thinking about that and then rent it out and congratulations now you have completed your very first journey of acquiring your very first rental investment property and that’s it for now for more to come next week when I talk to you then thank you for watching and listening if you haven’t already subscribed to my channel please do that give this a thumbs up if you enjoyed this video I really really appreciate it and thank you very much

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