Start planning by knowing how much you want to invest.
Everyone should be diversified in stocks, bonds, cash and real estate. It's not wise to have all your savings in one thing. Keep this simple. If you can put down 30% and get the remaining 70% financed, go for it. Once you know how much you can put down, call a lender and see how much real estate you can buy with the amount of money you can invest. If you can't get financed, don't panic, there are plenty of condos you can pick up for under $40k.
Get your funding approved before you get here.
Many investors are shocked to discover that they are no longer qualified to purchase an investment property. Wouldn't you rather enjoy a nice dinner/show than drive around in the heat looking at stuff you can't buy?
Get advice from a fellow investor.
Too many times we hear investors get advice from someone living in an exclusive neighborhood of Las Vegas. Really? Do you want to get advice from a mechanic about your tooth problem? Good neighborhoods don't always make good investments. This myth destroys wealth faster than Godzilla. If you don't want our advice, at least review our case studies and talk with our investors.
If your partner is your spouse, that's ok. If a partner is a relative or best friend, STOP. These rarely work out. The trouble with partnerships isn't getting into them, it's getting out. Conflicts flair up every single time when it comes to making decisions on repairing, selling or renting the property. The second reason why this is dangerous is because the property can be tied up for years in court if one partner dies or has some major medical issue. Hundreds of properties are lost every year because of this. Don't be another statistic. We see this happen all the time - don't do it. If you want a financial partner, take a second deed of trust out on the property. This is safer, better, easier and smarter.
Take baby steps.
If a lender says that you are qualified for $300k, start by purchasing your first one at $100k. Making a mistake on a $100k property is much less painful than a $300k property. The process for purchasing, rehabbing and tenant placement is complex and demanding. Investors who purchase a handful at a time often get overwhelmed and frustrated. Relax - purchase one at a time and your life will be much easier.
Avoid properties that don't appeal to a standard family.
Focus on a single family home, 3 bed, 2 bath, 2 car garage. A "SFR-3/2/2" will almost always out perform a 2 bed condo in an upscale neighborhood. The bulk of the population is "Johnny Lunchbucket" with a wife, 2 kids, a dog, and a mini-van. You want to feed the masses what they want, not something that will impress your friends. Remember, this isn't your vacation home so get that whole idea out of your head.
Avoid properties that require a lot of maintenance.
In Las Vegas, this would include homes with pools, grass or anything that requires a lot of attention. Vegas is in a hot dry desert with wicked winds that will kill anything that isn't indigenous. Pools are nice but about every 4th tenant will destroy your pool pump or collect a cloud of mosquitoes. Pool maintenance and repair always eats up the modest increase in rent. Our investors (including the broker of Limestone Investments) have serious regrets about purchasing pool properties.
Avoid HOAs that have stringent rules.
If the investment property you purchase has grass in a neighborhood patrolled by Nazis, you will go insane. HOA fines have teeth and your property could accumulate liens without you knowing about it. HOAs are ok if taken in small doses. You can usually get a feel of the neighborhood by checking the status of the yards and vehicles. If everything looks spotless, be wary.
When hunting, pay attention to rental signs.
A rental sign is a good sign. There are some HOAs that have rental restrictions. Unfortunately, there is no database that tracks which community does what. HOWEVER, our team of agents have ways of keeping you out of these.
Gated communities aren’t always safer.
When you see the pizza guy roll through the "exit" you will have all the proof you need. Air conditioners in these communities disappear just as frequently. Guarded communities are marginally better but not by much. In fact, you will discover that properties in guard-gated communities take longer to rent or sell because no one can see them!
Don't fall in love with a property.
You will be fortunate to get any property. One-third of our investors who fly down here fly back empty handed. Most investors have to put in 6 offers to get one accepted. Flying out here to put an offer on one property is a massive waste of your time. Do you really want to fly out here 10 times?
Don't imagine yourself living in the investment property.
You are not a renter. You are an investor who thinks completely different from a typical renter. A renter wants something clean, affordable and close to work. Period. So many investors poo poo a property because they can't imagine themselves living in it. You are an investor looking for returns, not a love nest.
Get a large capacity laser printer/scanner and/or fax machine.
The majority of the foreclosure properties require "wet signatures" which means there are dozens of documents that have to be faxed back. We agree, this is ridiculous but there isn't anything we can do about it. It is very common for a bank to say "we have accepted your offer and you have 2 hours to review this 20 page document and fax it back to us." Frustrating and common. The best thing to get will be a combination unit and make certain it's a laser printer - NOT AN INKJET. The number of documents you have to sign is unbelievable.
"Days On Market" are meaningless with foreclosures.
Every listing brokerage, asset manager and listing agent uses a different strategy to move a property. Some listing agents use the "dog pile" method of listing a property way under market so they can sit back and collect leads while Bank of America starts high and simply lowers the price every 2 weeks until it moves. At the end of the day, competing investors are your biggest foe.
If you find the property you want, don't mess around.
Cream properties get taken in a day or so. Every week, an investor loses a deal because it took them 3 days to fax a contract back. Remember, there are thousands of other investors combing these properties that are quick and jump on deals immediately. If it takes you 3 days to fax an agreement back after you made a decision, you will NEVER NEVER NEVER get a cream property.
Decide what you want to do with the property before you close.
Some investors burn through 3 months of vacancy, because they didn't make up their mind what to do with it. However, if you want to make money quickly, decide on which path(s) you want to take. Here is Las Vegas property management info. This is a good time to start getting familiar with your options.
Get your "Ya Yas" out days before hunting for properties.
Las Vegas is a lot of fun. Have fun, enjoy a show and party hard if you want. Get this out of your system. If you are hung over or tired, we will not go hunting or scouting. We don't have time for investors who are not serious.
Purchase used appliances.
Spending thousands on new appliances is wasted money. If you elect to just rent the property, your tenants will probably trash them or steal them. If you lease-option your property, you can even avoid purchasing them all together. For some reason, this tip never hits home with newbie investors. After you have purchased your fifth washer you will get it.
Start marketing the property immediately.
During inspection time, begin marketing the property immediately. The ideal scenario includes a crew busting through the door the moment you close and bringing the property up to standards in 2 days. Too many investors lose an entire month of income because they jacked around getting estimates. If you plan on doing the rehab, schedule your crew immediately!!!
Don't dump a bunch of money into the property!
Nearly every investor who does their own rehab puts too much money into their property. Perhaps it's an "ownership pride" issue they have been brainwashed with over the years.Your upgrades will never be fully recovered by the small increase in rent. The only time you should dump money in a property is when you are ready to sell. That time is a long way off...