A few months ago I decided to stop actively searching for our first investment property and focus on setting myself up for making the first deal. So I worked on building my real estate education through books and podcasts and getting my finances in order. Although I wasn’t looking for properties to buy at the moment, I was still keeping a close eye on the market and analyzing deals for practice.
I came across a run down duplex in the heart of our target area, ran the numbers, and reached out to our agent so we could take a look. I was very apprehensive at first. It wasn’t the right time for us to buy something and the place looked tiny in the listing photos. As soon as we walked in I fell in love.
Yes, you can fall in love with a crappy small duplex.
The place was a little larger than I thought and while it was going to be a complete renovation, the home itself looked solid so the majority of the renovations would be cosmetic. It fit all of our criteria.
Know your criteria and stick by it.
- Location: It was in the perfect location in a B+ neighborhood, a block away from shops and restaurants and within walking distance to the train into Philadelphia.
- Condition: The renovation seemed manageable. We didn’t notice any water or foundation damage and wouldn’t have to tear down or put up any walls.
- Target Tenant: Both units were one bed/one bath units. With one bed units in this area of town, our tenants would most likely be single professionals commuting into Philadelphia or a young couple. Since this was going to be our first attempt at landlording, we wanted to stay away from families and multiple roommate situations.
After touring the house and running the numbers again, we put in a low ball-ish verbal offer. Within a few hours, we were notified there was a higher offer on the table and the seller countered back by asking for our best and final.
Choosing a best and final offer was nerve wracking. Not only was this my first time ever putting an offer in, but now i have to come up with a best and final offer?
I mulled over the numbers for hours and came up with a price that was high enough that if we lost, I wouldn’t be angry but a price low enough that if they accepted, I wouldn’t panic.
The next day, they accepted!
It was a whirlwind of emotions. I went back and forth between excitingly flipping through home depot catalogs for renovation ideas to crying over the fact that I’m investing so much money. The hysteria subsiding after 24 hours. Thank god.
So they accepted the offer, now what?
Well since we weren’t expecting to make an offer, we had nothing prepared. So we took the next week to get everything in order.
- Due diligence/Confirm the numbers- During the initial evaluation, I used ballpark figures i gathered from the MLS and prior market research. But I needed to verify these to ensure there were no hidden surprises. So we got quotes for: homeowners insurance, closing costs, and potential contractors. I reached out to the county assessor’s office to confirm the current tax amount. If there were tenants living there (There were not in this case) I’d ask for verification for the rent they were paying. Since there weren’t any, and we’re rehabbing the whole place, past rents didn’t really matter.
- Further inspect the property- To save ourselves from making a huge mistake, we submitted our offer with contingencies on a home inspection, termite inspection and radon inspection. A radon inspection isn’t standard in every state but is in NJ. So we scheduled these three through one company that was recommended by our realtor.
- Get finances in order- We wanted to stay organized from the beginning so we opened a separate checking account for the property as well as opened up a new cash back rewards credit card to keep all expenses in one place. I am planning on transferring my estimated total costs into this new account and will pay the new credit card from said account.
With inspection scheduled for next week, we’re excited to see where this takes us!