Thornwall Properties, Inc.
I would suggest finding an agent first, who can direct you to a good lender for your situation. The properties you are considering have financing challenges when you as the buyer have limited funds. There are some options out there, but you won't find them going to Wells or BofA. You will also need to look at the Berkeley Rent Board site, http://www.ci.berkeley.ca.us/rent/ to understand how the rent laws could impact you as a landlord, and also you as a buyer if the property comes with sitting tenants. The concept of buying and putting in sweat equity has been severely tested in the Berkeley area. At this point, the cheaper properties are beyond sweat equity and into new foundations, structural repairs, damage behind the stucco - things that tend to be beyond most DIYers. So, education on all fronts will be your first task.
ONE: the reasons for identifying a Realtor* that you want to work with first are:
a. There are MANY moving parts to what you want to do. Working w/ a knowledgeable agent will make your effort more efficient & ultimately produce better results for you in both time & money.
c. Most properties in our markets don't "pencil out", meaning it's hard to find the ones that can be cash flow positive in the near term. When they come on market, they are gone before you blink.
d. You have to Lay down a base of knowledge, Put together your team (agent and lender and YOU), Confirm All of your financial information, & be able to submit a credible offer very quickly when a good match hits the market. An experienced agent will know what this means and help get you "in position" to be taken seriously as a buyer. Your agent is marketing you to the listing agent in the same way a seller's agent markets the property.
e. Your agent will recommend strong service providers who have a track record and an added incentive to perform on your behalf, because their (the service providers) reputation within an agency depends on that track record.. Your agent will know if your lender is not performing well, and can hold them accountable in ways that you can't.
TWO: The lender matters as much as your Realtor. And the particular lending agent within the lender you choose also really matters. This is not an area where you want a newbie working on your loan. Getting it right from the beginning can save you THOUSANDS of dollars on the purchase and many thousands of dollars over the life of the loan.
Knowledge really matters in this market. I agree with all of Mary C's comments below. I prefer mortgage banking companies over the direct lenders, for a variety of reasons. RPM/LaSalle are my favorites - very tangible reasons.
THREE: Rent Control Laws Both Oakland and Berkeley have strong and complicated rent control laws. You will want to familiarize your self with them. This can be done after you choose your Realtor, but will need to be factored in as you decide on locations. There are additional expenses & restrictions involved in both. They really affect the experience you will have, & what you can qualify to purchase. Emeryville, Albany, Richmond Annex, El Cerrito, and the outlying areas do not have rent control, so you may want to include them in your search. An experience agent can ask you the right questions and explain in detail.
FOUR: Finding an agent. You want an agent who is very well versed in the areas you are interested in, & one who will ask you lots of tough questions before you get started. This is not really a good arena for a newer REALTOR, unless you want to spend lots of time learning together. Tough love from your agent is a good thing. Also, don't hire the agent you think will be your new best friend & spend extra time - that likely means they don't have a lot of business. Hire the one who knows the details, & is committed to not wasting your, or their time.
FIVE: How to make your agent the most effective.
Be clear about you expect from the agent, & test your asumptions. Ask the agents you interview "What do I (you) need to do to help us work effectively together". They will appreciate being asked. Every agent has had the experience of a client that comes in expecting the agent to earn their commission through time. Time is NOT the best measure of your agents professionalism,& the agents with the experience to help you make money on a property are not going to waste their own time on busy work.. You WANT expertise, & one measure of the agents effectiveness is getting you through the process in a shorter amount of time.. That said, the likelihood that you'll buy the first property that you really like is pretty slim, so you can have some confidence that you aren't going to be rushed through the process. You are probably looking at 90 days minimum, more like six months. You want the agent that is in it for the long haul, but is going to be the linebacker that gets you there in a manageable timeframe. The agent may not be the one to see the property first on the MLS. You should be working together as a team, and you should be actively working on identifying properties. The suggestion that your agent will be able to narrow the field of properties to the one's that are easy money makers does NOT accurately represent our market place. If you go into your search expecting that, it will cost you six months, easily.
I hope you won't be discouraged by my reply. Your model is very worthy...just get yourself a good agent who will help educate you...and then be prepared to work the system. Good luck!
Your discussions should include
- your financing or funds to buy, to fix up. If you can't afford to pay all cash, then you may need to be preapproved to determine how much you can afford to buy, and what you will need at the outset for downpayment and closing costs
- where do you want to focus your search. There are a lot of distressed markets --- but how distressed are they, and what are the chances they will rebound soon. Some markets are harder hit than others and may take longer for properties to recover market value or to appreciate
- will you live on premises, or will you have to travel to get to the property. If you are not going to live there, consider your commuting time to work on the property, and to manage it once completed
1. Speak to a lender to find out what you can afford.
2. Familiarize yourself with the Berkeley rent control laws.
Berkeley has very stringent rent control, and that may affect which properties you are going to make an offer on, especially if the building has tenants.
After that, find an agent you can work with, and move forward. But those 2 first steps will be your foundation.