We’re about to become real estate investors! Our First Investment Property

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As part of our efforts to achieve financial independence and retire early, Ken and I have been talking for several years now about purchasing some rental properties. Within the past year or so, we’ve started to do a lot more formal research on the topic, and over the holidays, we even scheduled a few property viewings with a realtor.  And now, we’re about to close on our first investment property!

Over Christmas, we found a duplex that we liked and we’re planning to put in an offer. We’d be long distance property owners (but I’m familiar with the area as it’s the neighborhood that I grew up in and that my dad still lives in), so we’d have to use a property management company.  The neighborhood is not the greatest, but the rental market is strong.

Real estate appreciation in that area is negligible, and doesn’t really outpace inflation.  So this purchase would definitely be about acquiring an “income stream” as opposed to buying and holding a house and hoping for some decent appreciation. Because that would be very unlikely.  This area was even pretty immune to the housing bubble of the 2004-2007 era.

The duplex we’re looking at already has tenants, so we’re currently doing some due diligence communications with the seller’s realtor, asking for copies of leases, payment histories, and permits for previous house renovations, as the current owner put in extensive renovations since purchasing it about 5 years ago. We want to make sure things are all in place before buying our first investment property!

We’re anxious to put in an offer, but we are resisting that urge before we have all the information we need!

This will very much be a learn-by-doing process.  However, it’s not totally uninformed.  Ken and I have both read a few books on the topic (which I realize doesn’t make us experts by any stretch. But, we found that books were a lot more helpful than the voluminous, yet disjointed information all over the internet.)

We met with a lawyer to discuss, for instance, whether he’d recommend setting up an LLC, or whether an umbrella insurance policy would be sufficient.  And, although we had read in several places that getting a mortgage is usually the best bet for a return-on-investment for rental properties, I wanted to hear the lawyer’s thoughts on whether he recommended paying up front, or whether we should get a mortgage (“Mortgage as much as you can!” was his response). For what it’s worth, the houses we’re looking at are VERY inexpensive, that’s why we could consider paying for it in its entirety!

My sister and her family currently rent out their old home that they own, and she uses a property manager as well.  Their house isn’t far from the house that Ken and I are considering putting in an offer on, so we’ll likely use the same property management company.

So, we’ll be documenting our first foray into rental property investing.  This will also be the first home I buy (Ken bought the house we live in now before we got married).  We’ve decided that I would just be on the mortgage for this house, with the idea being that we’ll acquire more rental properties over the years, and we’ll likely want to “split” the mortgage amounts on our credit reports in an effort to get approved for more.

I’ll also be interested to see that, as a frequent credit card churner, if any additional explanations will be required about why I always have so many credit inquiries on my credit report, and why I have so many open accounts! I don’t carry any credit card balances, so it doesn’t affect my debt-to-income ratio or anything, but I have read anecdotes online that the multiple credit inquiries sometimes attract additional questions.

So much going through my mind!

Do any of you have rental properties?  Any last minute tips before we put in an offer?