This is part of an ongoing series about how I became the owner of a rental property in Florida while living in Utah, and all the adventures I have had along the way. If you’re just joining me now, you can check out the first installments here:
- Life As A Landlord – The Beginning
- Life As A Landlord – The Approval Process
- Life As A Landlord – Down Payment And Closing
- Life As A Landlord – Loose Ends
- Life As A Landlord – Classic Problems
- Life As A Landlord – Where is the rent!?
Not many of you know this but I own two homes, or rather, have two mortgages and the bank owns both my homes 🙂
Back in late 2008 just before the housing market really tanked, I was given the opportunity to invest in a rental property. I thought, what do I have to lose and pursued the opportunity.
Even though I had purchased my own home not two years before, I didn’t know much about real estate investing. I wasn’t sure how the deal would hit my credit, what kind of down payment I would have to provide for a rental property or if I would even qualify for the deal. Over the next few days, I’ll take you through the whole experience. While my rental has had ups and downs, I’ll try to leave my own personal complaints about the process to a minimum so you can understand exactly how the process itself went.
Let me first say that I did not seek out this deal. A friend of mine approached me about it as he was involved with the company providing this opportunity and he had just purchased his own rental property. Because I wasn’t actively seeking investment opportunities, but was happy to have had one find me, I decided to just stay cool during the entire process. If it panned out, I qualified and ended up with a home, hurray! If it fell through, too bad. I wasn’t going to get emotionally invested in this.
This company based in Florida that my friend discovered would buy a group of foreclosed houses and sell them to large investment firms or wealthy individuals. Those investors tell the company, “I need 50 houses” so the company would buy 50 foreclosed houses for the investors. Every so often, an investor would come back and say, “I can only buy 45 of them” so the company would be stuck with 5 foreclosed houses they needed to unload. So they started selling these leftovers to little investors. Since they owned the houses and couldn’t buy more big groups of houses till they got the individual houses off their books, they offered incentives to the little investors to buy the houses.
The company buying the houses also ran a property management company so the deal was, as a little investor, I buy a single home in Florida (I live in Utah) and let the management company take over from there. The management company would do what a management company does, maintain and manage the home, keep tenants current, collect rent, manage repairs and I would sit back and let the dough roll in. The incentives offered were cash, particularly $5,000 upon closing and an additional $5,000 in an escrow account in my name to cover time when there was no tenant or any repairs to the home were needed.
Sounds pretty sweet huh? Not only would I end up owning a home, but I would get some cash out of the deal!
So I got on board. I started getting all the information together that the bank needed to see if I could afford a second home.
During the process I asked a lot of questions. I wanted to know how this was going to affect my every day life. From what I was told by the company running the deal, when you buy a property that is meant as an investment and not a primary residence, your credit only takes a hit of about 50 points and that property won’t affect your ability to buy a residence in the future.
I was told there would be no down payment necessary because as part of the deal, the company that owned these investment properties would provide down payment assistance.
I was told that the property was government subsidized and that there was a renter in it already. I was also assured that of all the homes managed by the property management company, there was a current tenant in them 90% of the time.
At that point, the deal looked pretty solid. The only thing I had to worry about was getting qualified and I’d be sitting on a winner.
Check back tomorrow to see what comes next in the story
Image by nannetteturner br>