Yes, we are taking this purchase seriously
Over the last 6 weeks, we have seriously considered 3 different rental properties. And by serious, I mean we came this_close to making an offer or actually submitted an offer. To get to those 3 properties, I probably looked at (online, not in person) about 200 others. Each property met most of our guidelines for purchasing rental property.
Even though we are still without a second rental income, I don't regret the time spent on each of these. Here is what I've learned from each vetting experience.
Lessons in Offers and Almost Offers
Property #1: A foreclosure that needed a lot of work. We lost in a multiple offer scenario where our cash offer (over asking price) wasn't enough to secure it. We did some serious number crunching when we submitted our best and final offer to the bank, and know that if we had bid any higher (and won) we would have overpaid.
Lesson: Follow the numbers, not the emotions of "winning".
Property #2: We actually got to see this one in person as we were visiting family in our hometown over the holidays. The property needed work (mostly some small repairs and updating), but was in an up-and-coming area of town and was waaaay below market value. We submitted an offer a few hours after viewing it with a home inspector (our realtor was out of town) and had a solid sense of what the repairs would need to be. The listing agent, however, delayed presenting our offer to the owner until almost 3 days after we submitted it. Our realtor contacted the listing agent on the third day and was told the owner accepted a different offer.
Lesson: Be more aggressive. Put in writing that there must be a response to the offer within 24 - 48 hours to avoid allowing the listing agent to drum up other offers and putting you into a multiple offer situation. Be aggressive with your own listing agent. We should have pushed ours to press for a response within the first 48 hours.
Property #3: This was the only duplex of the 3 that we seriously considered. In our market, duplexes aren't often found in "good" parts of town and this one was no different. It was also way under market value but that was due to a bad foundation (yikes, breaking multiple criteria on this one!). We were about to submit our offer (it was even drafted for our signature) when I realized that given it was a duplex in a less-than-desirable location, we should probably confirm with our property management company that they would, indeed, manage it for us. Thank goodness we made that phone call. We have a great manager, and the owner of the company explained at length why they wouldn't manage the property (they used to do so, but found it to be a big headache with the type of tenants they dealt with) and even urged us NOT to purchase the property and laid out several reasons why that we actually hadn't considered. We decided not to submit the offer.
Lesson: If you use a management company, always verify that they will manage the property before you get to far down the purchasing path. In our case, the only positive to the property was the price and monthly rent. That might seem like the only thing that is needed, but we would have needed to repair the foundation and the possible monthly rent isn't always worth it if you have problem tenants and a bad management company (since ours assured us that no reputable company would take that neighborhood).
With that last lesson, I think I'll go back and modify our 5 criteria to include a 6th one - always verify that your management company (if you use one) will manage the property before you purchase.
So the name of our game is still patience and perusing the MLS. I'll keep you posted.