Typically the purchase of an investment property is smooth.  Sometimes title work complicates the process or the buyer’s financing falls through.  Occasionally, you see a property seller start to do strange things.

My customer purchased a multi-unit property that had one vacant unit.  As part of the purchase agreement, we require that we are able to show and lease the property prior to the closing.  This helps us get a jump start on finding a new tenant.

The customer was at the property showing a unit and ran into one of the other existing tenants.  She told him she was moving out at the end of the month because the existing owner was a crook [her words].  Seems she claims that he stopped by looking for not just this month’s rent, but next month’s rent also (when my customer would actually own the property).  Luckily she was smart enough to realize that she had no reason to pay him next month’s rent early regardless of who owned the building.  Needless to say, my customer was quite upset.  A quick call to the listing agent put that problem to bed.

I recommend that when you buy a building that is currently rented, you as the buyer should go over to the property as soon as possible to introduce yourself and assure the tenants that you want them to stay.  Talk to them about what they like and don’t like about their unit.  Confirm that in fact there have not been any side deals made with the current owner.

This short 30 minute visit can help alleviate many silent deal killers prior to closing!

Have you always wanted to buy investment property, but never knew where to start? Don’t Wait! Get Started now.

As I have said before, I have sold many, many REO properties in the last 12 months. Every single one of these deals requires that my customers sign a bank addendum once the offer is accepted. It is the bank’s way to get all their legal language into the transaction to protect themselves. (If you think about it, a bank is selling foreclosed properties in probably all 50 states; it would be impossible for them to be fluent in each state’s real estate laws and customs)-this addendum helps them normalize all their REO transactions.

Last week, I was reviewing a bank addendum on a North Minneapolis property that my customer had just purchased.  While most of these addendum read like they were written by the same attorney (despite being from different banks), I came across the following clause (sorry for the poor quality):

The clause prohibits you from buying the property with Rehab Financing, selling it within 3 months, transferring it to another party within 3 months, or refinancing it within 3 months.  Wow.  Many of my customers are using rehab financing to buy the property, rehab it, and then refinance into a permanent loan at 75% LTV.  This clause prevents that.

Never seeing this type of clause before, I quickly called the listing agent.  She informed me that this is standard language on all Fannie Mae Foreclosure properties.  I was stunned.  I was amazed that after all the REO properties I had sold, I had never seen this before.  The listing agent also informed me that we can’t remove or change the clause.  If my customers didn’t like it, they would have to simply cancel the purchase agreement and find another property.

I guess the moral of the story is to read all the docs in an REO transaction, even if they look the same as the other 50 that you have seen!

Have you always wanted to buy investment property, but never knew where to start? Don’t Wait! Get Started now.

So you have been searching for that perfect house.  You have seen 100 different ones, but none were exactly what you were looking for.  As you drive up to the next house you start to get butterflies in your stomach.  You open the front door and immediately know this is the one.

Now what?  You just want to board up the house and not let any other buyers look at it.  You tell your Real Estate agent to guarantee you can buy this house. Jen McKinnon, over at www.TwinCitiesRealEstateGal.com wrote a great post on to make sure you get that house.  Go check it out at Twin Cities Real Estate Gal.com.

Buying Property is both at the top of the category list and the start of all our careers as real estate investors. As I look back over the last 12 months, here are some notable posts.

Buying Investment Property Category

• Best Type of Property for First Time Investors
• Don’t Get Emotional About Rehabs
• Buy the Short Sale or Wait for the Foreclosure
• 7 Questions to Ask Your Realtor About Investment Properties-My Response
• LowBall Offers on Bank Owned Foreclosure Properties
• Don’t Trust What You See or Read on the MLS
• 8 Tricks to Getting Your Offer Accepted on that Foreclosed Property

These are not necessarily the longest, the most popular or the most detailed, but I think they are a great resource for Buying Investment Real Estate.

Have you always wanted to buy investment property, but never knew where to start? Don’t Wait! Get Started now.

Every week I talk to new people interested in investment real estate. Most of them can see the incredible opportunities in the market these days between all the foreclosures, short sales, and generally the lower prices of investment properties. Add to that one of the strongest rental markets that we have seen in years and good interest rates and you could call this the perfect storm of real estate investing.

Despite all these indicators, I do run into an occasional fence-sitter. This person who is sure that the market is going to go down a little more and the deals are going to get that much better. They are going to wait until the absolute bottom of the market. In their minds, they are able to do what none of the experts even claim to be able to do. They think they can predict when the bottom of the market is.

I am hear to tell you that will only see the bottom of the market in the rear view mirror. Here are two reasons that you do not want to wait to start building your investment property portfolio:

1. What indicators are you using to predict the bottom of the market? Prices, housing inventory levels, average time on market, or maybe just how long your neighbors house took to sell? All of the above stats are lagging indicators. In other words, they show was has happened in the past. And what if they show that for that one time period that the market is upturning? You have already missed the “bottom of the market”. Plus more simply, if real estate investing is considered a long term wealth building prospect, who cares if you missed the last .5% of value decreases before you buy?
2. Waiting to buy may actually cost you money as interest rates and mortgage regulations may make your cost of money more expensive. We have seen massive changes in the lending requirements for investment properties. We are expecting to see even more. Where once you could buy a 4-plex investment property in Minneapolis for only 5% down, now you need 25% down. In fact, the lending requirements have actually sidelined many seasoned investors because of the elimination of stated loans.

Get started now. Stop waiting for that perfect property or the best deals or the bottom of the market. Now is the time.

Making offers on foreclosed properties can sometimes be a daunting task even for seasoned real estate agents and investors. Each bank can required different and very specific requirements that must be submitted before they even look at your offer. Recently, we have been seeing multiple offers on these homes and above asking price offers on many REO (bank owned) properties. Here are some tips and tricks that we have learned to get our offers accepted:

• Pay cash-REO banks love cash buyers. Although this may appear impossible for you to do, see if can move some equity or money around to make it happen. Alternatively, see if your bank will give you a line of credit against another property so you can write a check for the purchase of this new property.
• Offer to close in 2 weeks-This requires either a cash offer or a very organized mortgage broker to make this happen. Truthfully, I often find that it is the REO bank that can not close that quickly because the title work on a foreclosed home can be difficult.
• Remove the inspection contingency-Only do this if you are confident about your analysis prior to making your offer. Alternatively, many banks will give you a verbal acceptance one day and then require you submit your earnest money check and their bank docs within 48 hours. You can use that window to do your property inspection and then not turn the docs in if you need to cancel. Although this not the most professional way to handle yourself, it could prevent you from buying a problem that you did not see when you did your walk-thru.
• Make sure to use a reputable investment real estate agent-Surprisingly, the number of REO agents in Minnesota is actually quite small. Although they don’t have much if any influence over the bank’s decision, they may be willing to give you useful advice that may help you win an acceptable offer. I found that I had to earn the respect of the big REO agents before they would talk to me.
• Do not ask for seller paid closing costs-Banks just look at the net offer. To them a $100k offer with $5k in closing costs is the same as $95k offer with $0 closing costs. In fact, they feel that paying closing costs can just complicate the transaction.
• Do not ask for the bank to perform any repairs-They will almost never pay for any repairs or changes to the property. They are selling it as-is. Just factor that work into your offer price.
• Do not put any time limitations on when you need a response from the bank. The banks are on their own time table. They will do what they want to do, when they want to do it.
• Refrain from any other non-standard language or requests on the purchase agreement which may include: assigns to, access prior to closing, repairs, etc.

Although this is not an exhaustive list of foreclosure buying tips, just using the main ones will help you win more offers. Gosh, on second thought, maybe you will be competing with me and I shouldn’t have told you my secrets! I guess in this market, sadly, there are enough foreclosed properties to go around!

Are you searching for investment properties on your own and frustrated at your results?