INvestors
If you made it here you are thinking about a purchasing an income property, also referred to as a multi-family residential property (2-4 units) or a commercial property (5+ units). They require a unique loan, and serve a different purpose. The reason to buy income property would be as an investment strategy. There are different ways to approach this with different measurements of success. Defining what is important to you is something we decide first.
FIRST STEPS:
Make sure you are prequalified with a Mortgage Broker/Lender. In order to be a competitive buyer, this needs to be in order. If you need a good recommendation I can help.
To have a stronger level of comfort in this process you should understand your financial situation and have an idea of how much you want to spend, how your loan will look and what your payments/taxes/insurance will look like after you find the property you want.
We meet, talk, plan and dream. Helping you to focus your search parameters and identify what is the right type of income property for you will help me find you that property. We identify the things you are really looking for and your price points, your ideal neighborhoods and deal breakers. Then I start sending you properties that match your needs.
Discussing your investment strategy is an important part of this process. Are you looking for a certain return on your investment? Are you looking for a place to park some cash for a while as in the case of a 1031 exchange? Are you looking for cash flow? Are you interested in living in the income property and using the additional income to offset your mortgage or is this strictly an investment? Clarifying what you want out of the property is key to finding the right one. Every property pencils out differently. Some properties work better depending on the end use.
I’ll send you properties I think fit your need profile but I encourage you to send me properties you love as well. It can work both ways. I love an engaged buyer. There are so many websites that help buyers find homes these days. Redfin, Zillow, and Trulia are just a few. If you find something you love, send me the address or link and I will dig into it, connect with the agent, give you the information you cannot see (yes, there is more information listed on the Agent’s MLS than is listed on public websites) and set up a showing if you would like.
Visiting income properties can be different than visiting single family homes. Often times there are people living in the units and viewing the units is on their schedule. Sometimes a seller does not want to bother their tenant until after an offer is accepted. Becoming comfortable with these different scenarios is key in being successful at finding an income property.
Make an offer.
a. Subject to Inspection: As stated above it might be necessary to include special terms into the offer such as “subject to inspection of all units”. This means it is quite possible that you are making an offer on a building you have not actually seen yet, however I always encourage a thorough drive by in this scenario. Understand that the risks are minimal in this situation. If your offer is accepted, the seller usually will want you to see the units before Escrow is officially opened. No one is interested in wasting time. Sometimes however a deposit is expected to be received before you are allowed on the property. You have the ability to back out if you do not like what you see. The “subject to inspection” line is like an added contingency. Yes, this can seem like a waste of time, however this is a different process. Investment properties are about the numbers at the end of the day. We can go through this in more detail and determine if properties requiring “Subject to inspection” offers are something you are comfortable with.
Be prepared to include a Proof of Funds with your offer. The seller wants to see you have the actual funds in an account in your name. Any legwork to transfer or receive those funds needs to really be done before you are putting offers in on homes. Because the buying climate in Los Angeles is competitive, if you cannot show you have the money at your immediate fingertips, you risk losing the deal.
THE OFFER:
Because you have done your homework with the lender, you know how much you can afford and how much you want to spend. Because we have discussed your short term and long term goals as a real estate investor, you will have an idea of the income you will be able to generate upon close of escrow and potential income through future rental growth.
We will strategize the offer price and timing based on the property. We can talk through the inspection and appraisal contingencies before we turn the offer in. In the case of investment properties, the personal letter is less important, it really depends on the seller. If the seller is a single person wanting to preserve the property, then you may have an angle. If the seller is all about business or a larger business entity, it may come down to speed, efficiency, and ability to perform.
Los Angeles is a competitive landscape for all buyers. With investment properties you are competing with a lot of developers, 1031 buyers who often are looking for a quick close and have all cash, and / or professional investors. There is a learning curve in this process, and with it comes becoming comfortable with less comfortable terms.
What I can assure you is that I have been through this process many, many times. My personal comfort level is pretty high for all things that come up. We have been through most issues and have come out the other side successfully. That said, all I can offer is perspective. At the end of the day I, nor anyone else can tell you what to do or do the hard work for you. Working with an experienced agent and investor in this market is going to give you an added edge and a truer sense of security in what can be a more challenging buying experience.