The Landlord Lens - The Complete Home Buying Process

Episode Date: June 3, 2024

Ready to become a homeowner AND a landlord? 🏡 This Be A Better Landlord episode is your ultimate guide to navigating the complex world of real estate. We'll break down the home buying process step-by-step, covering lending options, inspections, negotiations, and more. Don't miss out on these essential tips to maximize your investment!

I'm Jonathan. This is Krista, and we're here to help you be a better landlord. So to be a landlord, you first need a rental property. What if somebody is watching this and they have not yet bought a home? Should we teach them how to buy a home? I think we should. Let's do it. Okay, where do we start? I would start by looking at your financial situation and figuring out what's realistic. First and foremost, I always advise that people have at least three to six months worth of expenses saved. even before they start saving for a down payment or closing costs. So start there. Make sure that you have a nice little buffer in the bank so that you can move through these proceedings without worrying.

All right. Say I've got that. Money is aside. I've got some money hopefully towards a down payment. Now what? If you're not sure what to save for your down payment, I would look at the average home price in your area and then figure at least 5% of that to be saved away.

Now, if you're a first-time home buyer, you can qualify for specific loans that reduce your down payment from the traditional 20% than most people are used to to something that's more in the like 3 to 3.5% range. However, if you're looking to use this property as a rental property, you need to be very upfront with your lenders about that because you can't always qualify for the same loans if you were using it as a rental. So all of this is to say, you've got your money. Now you need to get your team. That lender I mentioned, that's somebody that you're going to be working with really closely. So I'd recommend shopping around and trying to figure out what rates you could get. Okay. Do I just walk into a bank and say, who wants to give me money?

That is your first option. Okay. What's the second one? I would say ask people who you know. If you know someone who's purchased a house recently, you could talk to them. If you are a part of any kind of local meetup groups, you can ask them. But otherwise, you can also lean on trusty old Google and start searching around for people in your area. Look at their reviews.

See what people are talking about with them. I'd recommend finding at least three lenders so you can compare rates because each lender should be able to get you a different rate and different qualifications for your loan. So I have a lender. How do I find a real estate agent? Yeah. Once again, I would ask your network, see who's out there that people have really enjoyed working with, or once again, leaning on Google to start searching for people in your area.

And again, I would try and contact at least three, evaluate how you feel when you're talking to them. Are they taking you seriously? Are they answering your questions? or they just kind of rush you out the door. You want someone who's going to be willing to sit with you through the process, answer anything that pops up, and doesn't make you feel stupid when you do it. That is important. Okay, what would you say to people who question whether they should use a real estate agent?

If it's your first time buying property, I think that real estate agents add significant value. So I would say do it. It's really nice to have someone there to hold your hand throughout the process, make sure you have the right documentation throughout everything you need. and also to ensure that you don't miss something big like a home inspection or something that would be really damaging down the line. Okay, to talk to me about pre-approval. What is that and why do I need it? Pre-approval is basically the process of presenting your financial history to your lender and asking them to pre-approve a specific amount that you can then use to purchase a house. This is a really good step to do before you start looking for houses. Just bear in mind that it has an expiry period.

right? So you really want to get a pre-approval when you are ready to seriously start and you intend to buy once you find a good property. Because I believe it's like 45 days that it expires. Make sure you talk to your lender to know your specific pre-approval expiry timeline. And all these questions, if you have a good lender, you can ask away, right? That's why they're there. Yes. Ask away. Make sure you understand everything. With that pre-approval, it is going to require a credit check. So if you were at all, nervous about your credit leading up to this, I would say take some time, make sure you're paying off your bad debts, paying bills on time, and otherwise trying to boost your score as much as possible because a higher score is going to get you better rates. All right, so what about the fun part? What about actually looking at houses and choosing which one you will hopefully buy?

Yeah, so before you hit the road, I would recommend sitting down and listing out the things you need to have in a house, the things you'd want to have, and the things you don't want to have, just to make sure that you have some parameters as you go looking. It can be really tempting to fall in love with the first property that you see? I would say tour at least a few. Also, share that list with your real estate agents so they can point you in the right direction. And again, if you are looking to rent out or house hack this property in the future, let them know so that they can help you find things that are going to align with that goal. Yeah. And then comes time to actually look at them. Then it actually comes time to look.

You should go through, you know, if you are buying with someone, let's say a partner or your family, have them there as well if you can. If not, make sure you take a lot of pictures, maybe do your own video walkthrough and figure out how you feel about the space. You know, this is somewhere where you're hopefully going to live for some chunk of time. So it probably would suit you if you have a couple top contenders to go visit them at various times, like once during a weekend, see what the vibe is, go again at night, and just see if you could picture yourself living there. That's really the goal with this kind of work. When I bought my most recent house, I took my dog there before we closed and just walk the neighborhood with her, which was a good way to see what the neighbors are doing.

Good way to find out who has dogs that are prone to barking. And I don't know, just give me a good feel for the neighborhood. Yeah, absolutely. I think that's a great tip. Okay, so I found a house that I like. I make an offer. How does that work? Well, first of all, congratulations on your offer. Thank you. Always good. So when you tell your agent to put down an offer, you are going to, in many cases, have to put money down. This is not your down payment. This is in fact called earnest money. Ernest money is basically assigned from the buyer saying, I intend to move through with this deal.

I'm very serious about this property. I want to do it. It's typically, I think, one to three percent of the property price. In most cases, you can roll this money over into your down payment and closing costs, assuming that the deal goes through. There are some situations in which you can get your earnest money back if things fall through for a specific reason. Let's say you have a contingency based on the home inspection, for example, and you can't come to an agreement with who's going to cover what repairs.

You might be able to pull out and still keep the earnest money. However, if you pull out for a reason that is not outlined in your contract, then the sellers will get to keep your earnest money. Okay, so where do negotiations happen? Negotiations are a huge part of the home buying process. You can really negotiate quite a bit, even more than most people anticipate. So, first, I would say, always make sure you have a home inspect. you can negotiate using some of those results. Let's say that the home inspector finds that the roof is leaking or that the walls are

garbage. You can then take that back to the seller and say, hey, based on what we're seeing, could we reduce the property value to this, the sale price to this? And they will say yes or no, or they might come back and say, well, we can't do that, but we could throw in a free repaving of the driveway. Really just depends. That's expensive. It would be nice.

It would be nice. There are a lot of different levers that you can pull. You might also see that the seller wants to keep specific things and they are willing to maybe reduce the price if you also wanted those things. You could also negotiate closing costs. I mean, there's so many different things that you can do, which is why I think it really pays to work with an experienced real estate agent. What about determining the actual move-in date? Is that at this point? Oh, highly negotiable. Yeah, absolutely. So you can figure out what works best. It could be that the seller wants to stay until a specific. date. They could be trying to leave as soon as possible, and you can work together to determine when you want to take over this house. Now it's time for you to go to your closing day. So you're sitting down with the seller. Both of you are signing away once everything is all signed. You know you're moving date. You can relax. You've done it. You've purchased a house. And you get to start paying a mortgage. Okay, Krista. Well, thanks for walking us through how to buy a house. If you out there have any other questions or want to tell us your story of buying your house drop them in the

comments below don't forget to subscribe turbo tenant is the all-in-one platform for landlords to manage their rental properties from vacancy to tenancy we have you covered with industry leading tools and expert advice landlord better from anywhere for free at turbotenant.com