Search Criteria

We are still looking for a home.  The search parameters seem pretty rigid, but it seems they have to be. 

We put together a huge excel file so we can look at each of the properties we like on a side by side basis and make sure they meet our criteria.

First thing we do is look at our target area and make sure the home is in a good neighborhood and not near any future construction that could have a negative effect on future property values.  We set up a layer in Google Maps to pinpoint the good and not so good areas.

Then we look at the high school for the area and make sure that the school ratings meet or exceed standards.  We do this because the clients in good school areas will usually mean more value oriented tenants.  If the kids are doing well, the families are usually doing well.

We also categorize the time it will take to do the rehab work.  None of these categories are a deal breaker, but it gives us good data to help make our decision.  The time element categories are:

-        Red: Major Construction.  Need an RV to stay in during the process.

-        Orange: Regular Construction we can do with sub-contractors.

-         Yellow: Smaller projects.  Maybe sub-contractors.

-        Green: Minimal carpet and paint.

-        White: No work, only clean and rent.

Then there is the math.  We use excel and enter in the following values.:

-        Sales price,

-        Down payment,

-        What the value of the house actually is,

-        Tax rate for the home,

-        How much we think we can rent it for,

-        Home owner association fees,

-        Any cost for monthly pool service if applicable,

-        Estimate cost for the rehab work,

-        Cost per month for the property management,

-        Cost of home insurance,

-        Cost of flood insurance if applicable,

-        Bank fees,

-        Mortgage fees,

-        Leasing agent fees, and

-        Inspection fees. 

From here, we have the computer come up with the following:

-        Initial Equity

-        Income Tax Rate

-        Ernest Money (usually 3%)

-        Loan Balance

-        Down Payment (usually 25%)

-        Est. Closing costs

-        Taxes

-        Out of Pocket Expenses.

Then we have the computer calculate the Ongoing Costs on a monthly and yearly basis.  These costs are:

-        Mortgage

-        Taxes

-        Insurance

-        Property Management

-        Pool Service

-        Home Owners Association

-        Income Taxes

-        Maintenance Fund

When the computer does the math it shows us all the homes side-by-side and give us a big picture estimate of what our initial out-of-pocket expenses will be, how much time it will take to fix the home up, and how much (if any) profit there will be after all of the expenses.  Here is a photo of what that looks like.

Screen Shot

In the mean time, still looking.

The Mortgage Loan

This past week most of my time has been spent on looking for mortgages and examining the lenders. It’s amazing how much has changed in the lending industry since the economy started going downhill. The down payments for people that own more than one home are much higher than they used to be. No longer can you get a rehab loan unless you get one of those 203k Loans. And with those types of loans you need to use a 203k contractor. Normally, this wouldn’t be a problem, but 203k contractors are hard to find, and we have had such horrible luck with general contractors in the past. Every time we have used one we end up redoing the project ourselves. And quite honestly we usually do better job than they did. Plus, a bit of sweat equity would be a great cost saver and we can subcontract the things that would need to be certified and permitted. So no, the 203k Loan is out for us for now. 

After lots of looking, we decided to go with LendingTree.com. It just seems easier to do some one stop shopping and the rates are extremely competitive. Quicken Loans is very similar, but we choose LendingTree.com because they are clients of ours in our day-to-day jobs. 

We both have excellent credit, so getting that all important pre-approval letter was not hard at all. We just had to submit the paperwork required by the lender we choose. Then he e-mailed us our letter. We forwarded that on to our realtor to have on file for when we find the house we are looking for. 

So that is done. In the meantime, we are still looking for that one home that meets our criteria. It is way more important to us to find a home that meets all of our criteria than it is to rush into things. Since we are going to be long distance, it is better to make it right than to make a guess. There is no rush, so will just keep looking for the right one to appear.

Finding a Realtor

After a lot of talking and debate, we decided to get a realtor to help us with the search. We are doing the looking ourselves and can do the negotiations, but are finding that realtors only talk to realtors and won’t talk to buyers. It’s like this big no fly zone unless you have a local license. Getting a license for the area wouldn't be extremely hard, but we talked about it and decided to find a realtor that has more experience with our target area than we do. This gives us the freedom to do more of the fun stuff and less of the paperwork and arguing. Figured it would be kind of like a dentist doing his own dental work, they can, but why.  Plus it wouldn’t hurt to have some outside insight. 

But we need someone who was more than just a realtor; we need someone who is also a property manager. We have to find someone that understands not just real estate as in purchasing a house, but also someone that understands the whole world of rental and investment property. So we have been looking high and low. Reading every real estate agents blog, looked at every ad, every website, anything and everything we can find. And after all this searching, and researching, it looks like we may have found someone. They seem to have the least amount of negative reviews in the area. (I know, it sounds scary. And quite honestly it is. Realtors don’t seem to be getting a good rap where we are looking. Hope it doesn’t prove to be a symptom of another issue that may rear its ugly head later on.) They have two offices, one of which is in the target area and the other is several hundred miles from the first main office. Their background checks seem to be ok. They are answering all of our questions appropriately. So as of right now we seem to have found our realtor that will hopefully become our property manager as well. 

As for the house hunting, we are still looking. We look at every morning and every evening to see if anything comes up. Checking every real estate site like Zillow, Trulia, ZipRealty , and Hot Pads. Looking at every online newspapers we can find for the area. We are even going to try the seven day free trials for Foreclosure.com and RealtyTrac. Will let you know how that goes. Quick random thought, might even look at Home Exchange and HomeAway to see if anyone wants to get rid of their vacation rental. You never know. So far we have found a few almost homes that get close to meeting our criteria, but nothing yet. In the mean time, we still have to get pre-approved for our loan.

And so it begins.

We all have many facets of our lives.  We have our home and family life.  Our work life.  Our play life, like spending time with our friends.  Our hobby life, like playing softball on the weekends.  This is My Real Estate Life.

I have been involved in Real Estate, in one way or another, my entire life.  As a kid, my family was heavily involved with buying, selling, renting, and rehabbing.  I could both drywall and market a home before the age of 10 and know all of the good, the bad, and the ugly of real estate.  As I got older, I got away from the industry, went to school, got a job, and started a family, the usual stuff.  But somehow or another I found that I was always helping others with their real estate life along the way.

And then it happened.

My husband and I have been thinking of getting a motor home.  We both travel quite a bit for both fun and work and had been keeping our eye on the pricing of one of these homes on wheels for several months.  As we were heading out to visit a family member who lived several hundred miles away, we talking about how this would be the perfect time to use an RV.  We had a long discussion on what we wanted vs what was available and all the goods and bads of owning one.  I remember saying something to the effect of “Motor homes cost a fortune.  At those prices we could put a down payment on a house and have it make us money rather than watching it suck more money every month in gas and insurance.”  My husband looked at me and I knew I should have kept my mouth shut.  Do you ever wish you could hit a back space button on the last sentence?  I do.

And so the search begins.  We are now looking for an investment property out of state where the prices are reasonable.  We also need a Real Estate Agent in our preferred area as well as a property manager for emergencies.