It’s been a bit since we’ve talked real estate around these parts.
Since pretty much the start of this blog it’s been a goal of mine to dive into the real estate game, preferentially with a rental property given my situation.
The dream of having a couple cash flowing properties to help fund a post FI lifestyle is very appealing. Unfortunately, back then I really didn’t know much about real estate, and had a lot to learn.
Well, it’s been nearly a year and a half since then, and while I’ve learned quite a bit from various blogs and podcasts, I still had taken barely any steps to get moving on this.
Until last week that is!
In a February post I revealed that I thought it may be a good idea to keep an eye on my local DC market to see whether there was a chance I could snag a property that would fit the dual bill of making my current housing costs cheaper, while at least being cash flow neutral if I ever moved and turned it into a rental.
Keep in mind I knew this would be very challenging to find in a high cost of living city like DC.
Nevertheless, I figured I would give it a shot, and low and behold, I ended up submitting an offer on a property last week!
It was a crazy hectic week, but here was the entire process behind that:
Finding A Property
As the tweet above suggests, since that post I’ve been casually looking at the Redfin and Zillow apps I downloaded onto my phone, with a filter in place for properties I could actually afford (there are quite a few I absolutely cannot afford!).
This has given me a sense of what areas I need to be looking in, while also looking at average rents in those areas.
Even though I could afford a lot of these properties, most just would not make sense as a rental property. Either the rents are too low compared to the total monthly PITI (principle, interest, taxes, insurance) and HOA fees, or the rents cover that portion, but would fail to cover any additional property management fees or regular maintenance that comes with being a home owner.
There’s been very few properties that caught my eye, and the ones that did were listed and gone within days. Yes, you read that correctly, DAYS!!
Intimidating? You bet.
I was beginning to think I should probably go back to researching other markets again, now that my cash reserves are starting to burn a hole in my pocket, when the condo above my girlfriend’s apartment went on the market.
The list price ($425K) seemed high, considering that the building was fairly old, it was a 2 Bed 1 Bath condo at less than 900 sq ft and when my girlfriend toured it, she reported that the renovations seemed pretty shoddy.
On the other hand, the overall look of the condo was nice, it had a low HOA fee (or so we thought) and it was located in a great neighborhood, surrounded by high six figure or million dollar rowhouses.
At that price and HOA fee, the numbers looked like they could work, but I was unconvinced. That weekend I discussed this property when I went home to visit my parents for Easter. After reasoning through it all with them, I actually felt a little bit better about it, and figured I would follow up on it when I returned to the city.
The property had already been on the market for a week, so time was pressing.
One Week In a Hot Real Estate Market
I returned back late Sunday, so on Monday I called up the selling realtor to ask a few questions I had. Alas, the listed HOA fee was a mistake, and she mentioned there were several others interested in the property as well.
She asked if I wanted to see the property, and made a point to go see it on Tuesday after work. In the meantime, I had to do some work on my end.
I was not pre-qualified or pre-approved for any kind of mortgage, and though I understood the steps of the offer process from my learning over the past year, I was no realtor and did not feel comfortable going at this alone (or with the selling agent).
Thus, I needed to find a realtor and a lender. Luckily, a friend in the area gave me a great contact for a lender, and my girlfriend’s coworker had just bought a house and highly recommended her realtor.
A couple phone calls later and application filled out and voila: I was pre-approved for a loan and had a meeting set up with a realtor!
I would not have had a great idea where to start without these recommendations, which is why it’s always helpful to ask around from people you know!
My girlfriend and I met with the realtor on Wednesday afternoon, and determined it would be a good fit. When he called up the selling realtor to let her know he was representing us, she informed him that she needed offers in by that night… talk about a quick turnaround!
Thus began a scramble to figure out what we wanted to give for an offer. Given the short deadline, we only needed to give a verbal, and then follow up with the official paperwork in the morning.
The realtor did several price comparisons, and came to the same conclusion my girlfriend and I did: we thought it was overpriced (even for this market!)
We decided we were most comfortable submitting an offer lower than the asking price, given all that we knew. We were told that even at this price, we were in the running, which meant we would follow up with the paperwork the next day.
However, upon receiving the paperwork, we found out that the selling realtor had lied to us as she had told us just a day earlier that the HVAC and appliances were all less than 9 years old, when the paperwork clearly stated they were 10-15 years old. In addition, she had verbally said the HOA fee was much lower than was it stated in the paperwork (for those keeping count, that’s twice she gave us the wrong HOA fee…)
Given this unexpected turn of events, the numbers didn’t look nearly as good with this new information, and it was frustrating that we were lied to along the process. That said, we decided to lower our offer a little further to account for the changes.
Since we were now a decent bit under the asking price, we were probably a bit of a long shot to actually get our offer accepted.
As we figured, we found out on Friday that the sellers decided to go a different avenue. As it turned out they were reviewing a few offers that were above even what we initially offered verbally.
What a waste of one week, right!? Well, I don’t particularly think so.
It was a hectic week, and even though it ended without a property, it was still a great learning experience!
You can read as many blogs or listen to as many podcasts as you like, but sometimes it takes actual real life experiences for you to truly learn and understand how a process works.
I’ll surely be utilizing what I learned during this process on any future properties I find, and even potentially for finding realtors in markets out of state in search for those elusive rental properties!
In the meantime, while DC will remain on the radar, I may put this on pause as some interesting news on my job has come to the forefront, which could potentially lead to a change of scenery… to be continued!
Do you remember the first offer you made on a property? What was that like? Does anyone else have experience trying to buy a property in a hot real estate market?