My plan: investor toolkit

Your first deal, step by step

Decide what you want from investing: monthly income, long-term growth, a home to live in and rent part of, or a one-time profit.
Find the most you could put into a deal without touching your emergency fund or money promised to other goals.
Pick one strategy that fits your money, time and comfort with risk, and learn it first.
Seminars, coaching programs and “deal finders” cost many beginners thousands. Know the signs before anyone pitches you.
Choose where you’ll buy, and exactly what kind of sale. A deed, a lien certificate and an offer through an agent are different purchases with different rules.
An affordable property is not enough: check whether the area supports your strategy.
Set your limits before you look, so a property can’t talk you into it.
Compare the ways of paying for your kind of purchase. Most auctions and lien sales need cash or certified funds, on a short deadline.
Work a full purchase with fictional paperwork before you risk money: the numbers, the documents and the decisions.
Decide in advance what makes you stop, including your walk-away price (the most you’ll pay). An investment is bought on the numbers, not on how much you like it.
Know who you’ll call for each part of the deal, and check their licenses before you need them.
Sellers want to know you can pay. With a loan, that’s a pre-approval from a licensed loan officer. Paying cash, it’s proof of funds.
Know exactly what your agent will do and how they’re paid before they write an offer for you.
Run the numbers on real properties in your buy box, with sources for every number, before you’re in a hurry.
Find a real listing that fits your buy box, then decide quickly whether it deserves more work.
Base your numbers on what similar homes actually rented and sold for, not on the listing.
Price the costs that sink deals: insurance, property taxes after you buy, HOA dues and rules, and repairs.
Discuss an offer at or below your planned maximum with your agent. Ask which contract conditions (contingencies) could let you cancel and recover your deposit, and what notices and deadlines apply. A refund is not automatic.
Wiring fraud is common in real estate. Confirm instructions by phone before you send anything.
Hire a qualified inspector (check the license or certificate your state requires), get the report, and settle what it found before your inspection period ends.
The lender orders an appraisal. If it comes in low, you can ask for a lower price, bring more cash, or cancel within your appraisal contingency.
The title commitment lists what must be cleared before closing and what the title policy won’t cover. HOA documents have the rules and finances.
Pre-approval is not a final loan approval. Send the information your lender needs for its final review (underwriting), while the property checks continue.
A quote is not active coverage. Confirm the policy covers the planned rental, vacancy or renovation use.
With your agent, check the condition, agreed repairs, included items and the agreed possession arrangements before you sign.
Check the final numbers, confirm wiring by phone, have insurance start at closing, and keep every document.
Make the property safe, secure and insured, and set up clean records from day one.
Fix safety items first, with qualified contractors and permits where required. Bought at an auction? Finish “Before you remodel” first.
Screen every applicant with the same written criteria, give the required disclosures, and use a lease that follows your state’s law.
Track every dollar in and out each month, and set money aside for vacancies, repairs and big replacements.
Compare what happened with your plan. Then decide whether to keep, refinance or sell, with your tax advisor and lender, and update your buy box.
If you bought with cash or a short-term loan, a refinance can return part of your money. It depends on the appraisal, the rent and the lender’s waiting period.
For a flip, this is the payday; for a rental, it’s a choice. Know the selling costs and the tax before you list, so the net matches your plan.
Selling a rental to buy a bigger one? A 1031 exchange puts off the tax, but only if it’s set up before the sale closes and you meet the deadlines. You have 45 days after the sale to identify the replacement in writing, and 180 days to close on it, or until your tax return for the year of the sale is due, including extensions, if that’s sooner.

Worksheets

Lender interview

Ask two or three lenders the same questions, and compare their Loan Estimates or written term sheets side by side. Loans for a property you won’t live in often come with a term sheet instead of a Loan Estimate.

What loan types fit this property and my plan?
What are the rate, points and closing costs?
What down payment and cash reserves will you require?
Do you lend on homes that need work?
If you offer DSCR loans, how do you calculate DSCR, and what minimum do you require?
What conditions must be met before closing, and how long will it take to close?
Is there a prepayment penalty, a balloon payment, or a limit on refinancing?
Which license do you hold, which regulator issued it, and what is the number?

Contractor interview

Get at least three written bids for the same scope of work from qualified contractors, and check the licenses your state requires on its official lookup. In Texas, there’s no statewide license for general contractors or remodelers: check the trade licenses (electrical, plumbing, air conditioning), insurance and references instead.

Which licenses do you and your trades hold, and does the job fit their type of work (and dollar limit, where the state sets one)? What are the numbers?
Do you carry liability insurance and, if you have employees, workers’ compensation?
Can I see references from similar jobs?
What is included and excluded in the written scope?
Who pulls the permits and schedules inspections?
What’s the payment schedule? (Pay as work is completed, not far ahead of it.)
How are change orders priced and approved?
What warranty do you give on the work?

Property manager interview

Read the management agreement before you sign, especially fees and how to end it.

What’s your monthly fee, and your fee to find a tenant and to renew a lease?
How do you screen tenants, using the same written criteria for everyone?
Who approves repairs, up to what amount, and how are they billed?
How do you handle emergencies after hours?
What reports do I get each month: rent collected, vacancy, expenses?
Do you hold a real estate or property management license where required?
How do I end the agreement, and what does it cost?

Auction checklist

Work through it before every tax, trustee, sheriff, HOA or IRS sale. Rules differ by state and kind of sale.

Find the official sale notice and who runs the sale.
Confirm the parcel number, address and exactly what interest is being sold.
Read the deposit, payment deadline and accepted forms of payment.
Have a title professional review which liens survive this kind of sale in this state.
Find out who lives there and plan a lawful path to possession.
Check any redemption period and what it means for repairs.
Budget repairs you can’t see, possession costs, holding costs and reserves.
Set a walk-away price with the calculator, and have the cash ready before you bid.
Never contact or pressure the homeowner. Deal only with the official seller.

After you buy

The first weeks of owning a rental. See the lesson “After you buy” for your state’s rules.

Landlord insurance in place from the day you own it.
Locks changed or rekeyed once you legally have possession, and utilities in your name.
A separate bank account for the property, and every receipt kept.
Safety repairs done before you advertise.
Written screening criteria and a lease that follows your state’s law.
A cash reserve for repairs and vacancies.
A plan for emergencies: who answers calls, and which vendors to use.
Once a year, your actual income and costs compared with your plan.