How Do You Buy Real Estate?

Buying real estate is not that different than buying a car and there are a lot more protections with real estate. In this article, I will explain the overall process and provide some cost estimates.

Real estate can be purchased with cash or can be financed. If you ever financed the purchase of a home or a car, you know the basics of purchasing investment real estate. Longterm fixed rate financing is one of the biggest advantages of real estate over any other sort of investment. Because of the ability to finance (called leverage), you can add a large asset to your portfolio for a fraction of the actual cost of the property.

The Process

Below is an illustration of a typical purchase process. Depending on where you purchase the process may be a little different.

  1. It all starts with arranging financing if you are not paying cash.
  2. We make offers based on return, not asking price. First, this means we have to make multiple offers to get a single property. Second, the properties we do get are highly likely to be profitable.
  3. Once the offer is accepted there is a period of time (in Las Vegas it is usually 10 calendar days) in which you have inspections and such. This period of time is called the due-diligence period. Assuming everything is acceptable, you proceed to close.
  4. Once escrow closes, you own the property.
  5. Immediately after the close of escrow is the time where the property is made market ready. This period of time is called the rehab period. Our rehabs rarely run longer than one week but this depends on the amount of work necessary and the availability of the tradespeople required.
  6. Once the property is market ready (I will talk about market ready in another article) the property manager markets the property and qualifies the applicants.
  7. Once the selected applicant moves in, income starts. I will talk about what I consider a "good tenant" in another article.

Typical costs

I am regularly asked what are typical costs. Obviously, the cost is property, location, and condition specific. However, below are costs for a typical Las Vegas property.

Below are typical costs for a Las Vegas property based on the above assumptions.

So, the total from start to finish is approximately: $78,432. So, I would assume that you need approximately $80,000 to acquire, rehab and rent the property.

Summary

Purchasing an investment property starts with getting a loan pre-approval. Also, the down payment is not the only cost associated with buying a property and getting it online as a rental. Please note that the costs shown are what our clients typical for a property in Las Vegas. Depending on where you purchase the costs could be higher or lower.