EP #2 - How To Buy Your First Rental Property (Part 1)

Discover the intricacies of real estate investment with hosts Jacob Sandoval and Mike Magno in this informative episode. They break down the key steps to success, from defining your investment goals and selecting the right market to working with an investor-friendly agent and analyzing deals effectively. Whether you're a seasoned investor or new to the game, their insights will guide you toward making informed decisions and achieving your financial goals in the world of real estate investment.

FREE Real Estate Investing Tools & Resources:
https://www.cashflowsaga.com/links

Join The Waitlist For "Rental Property Investing 101":
https://tinyurl.com/k4vpbd5u

Connect with Jacob:
Instagram: https://www.instagram.com/cashflowsaga/
Website: https://www.cashflowsaga.com/
YouTube: https://www.youtube.com/@cashflowsaga
Twitter: https://twitter.com/cashflowsaga

Connect with Mike:
Instagram: https://www.instagram.com/realtormichaelmagno/
Website: https://themagnogroup.com/
YouTube: https://www.youtube.com/@realtormichaelmagno

Transcript

Nancy: 0:00

This is the Financial Freedom Fighters Podcast

jacob_1_09-08-2023_141007: 0:13

All right, Mike, what's up? We are back for episode two. I think this is another monumental moment because I don't know how many podcasts die after episode one. I prob, I bet it's a lot. I bet it's a lot.

Track 1: 0:25

know, it's funny, Jacob, that you bring that up. And by the way, I'm doing great. Thank you for asking. Uh, it's a beautiful day. It's a beautiful day here in, in the North coast, as we call it, here in Ohio. Um, there's actually, it's really funny you bring that up about the first podcast dying, right? So when you and I were coming up with names, right, it took us a while. We were using hell, we were using, you know, chat g p t to help us and this and that. There's actually another one out there called the Financial Freedom Fighters and it only lasted one episode, like back in 28, 20 18, and it was, it's dead.

jacob_1_09-08-2023_141007: 0:57

So after we publish episode two, we, we are, it, we are the Financial Freedom Fighters podcast. The, the only one that matters at this point. So

Track 1: 1:04

I agree with

jacob_1_09-08-2023_141007: 1:04

love to see it.

Track 1: 1:05

brother. Hundred percent so,

jacob_1_09-08-2023_141007: 1:07

Okay. So can jump right into it. I think we have a very packed agenda for today. Today's episode is gonna be very tactical for our audience. The episode for today is how to buy your first rental property, right? Mike and I are gonna go through all of the steps, all of the major steps that you're gonna go through in order to lock down your first rental property. Um, I'm very pumped about this. I feel like for people that don't know how to do this, so much of it is just not knowing the actual process. But once you see it, once you understand kind of each of the steps, it doesn't seem so scary. Right. Mike?

Track 1: 1:46

Yeah. No, it's, um, I think it's a great topic for our, like first, uh, first episode with, with this tactical advice that we're, that we're working with, with people. Right. Um, I know our first episode we kind of just introduced ourselves, told us, told people, told the listeners about our story, and we, we wanna start putting out stuff for people that actually take action, right? That was the whole purpose of us putting this together. And I think this, um, this list that we've come up with of the nine ways to buy your first rental property is an awesome just, you know, very macro, high, high level conversation on how to do this. And there's really no reason for people after they've listened to this episode for them to not be able to buy that first property.

jacob_1_09-08-2023_141007: 2:28

I totally agree, totally agree. So without further ado, let's just jump right into step number one. So what we've written down here for step number one is determine your goals and your budget. So I'll kick us off here and then I'll pass it on to you, Mike, to see if you have any additional thoughts to add. But the reason why this is step number one folks, is your goals and your budget are gonna determine everything else With respect to how you're gonna approach this real estate game, there are a lot of different strategies. There are a lot of different markets. There are so many ways to make money in real estate, and it's really hard to determine which avenues is the most appropriate for you unless you understand your goals Right? So what do I mean by that? Well, first, What are your goals? Are you trying to have real estate replace your W two income in two years? That's gonna lead you down a certain path, right? A certain set of strategies, a certain market, or do you have a longer time horizon, 15, 20 years, for example, to invest in real estate and have real estate kind of built over that longer period of time that's gonna lead you down a separate path and a separate market and a separate strategy, right? And lastly, how much money do you actually have to invest in this? Because that's also gonna determine the steps that you can take. Do you have 20 to$25,000 to put into your first investment property, or do you have more than that? Or even do you have less than that? Right? So the combination of your goals and your budget is step number one because it's gonna inform all of the rest of the steps in the moves that you have to make. What, what, what do you think about that, Mike?

Track 1: 4:04

No, it's, it's, uh, absolutely the. The first question I actually start with, when I do consultations with people, right? I ask'em, Hey, what's, what's the goal? Um, you know, what's the best outcome for you? And then, you know, what, what budget are we working with? You know? Um, and a lot of people don't know. Um, so that's why I ask'em what the goal is and we can kind of back into a, uh, a budget. And when I say budget, that's a, a purchase price, right? Um, and then from there, the purchase price will then dictate what you're gonna need to take that property down. Um, or oftentimes people will give me a number that they have. Um, you know, they'll tell me, Hey, Mike, I've got$40,000 for that. I'm willing to invest or put towards this first property. What, what, what do you advise me to do with it? Right? And so what I would tell them in that, in that example, right, you've got 40,000, but you really only have probably. 30 or 33,000 because you want to have reserves, right? I think that's a huge thing for people, uh, because once again, we, we want to keep it real with people. They'll listen to a, another podcast or they'll read in a, a book, or they'll read on a online blog that, oh, I've got a hundred grand. I can buy five properties, uh, with 20, you know, I can buy$500,000 properties with$20,000 each. No, you can't because it's$20,000 for the down payment. You're gonna have$4,000 in closing costs. You're gonna have a thousand dollars for your appraisal and inspections. You got 26 or$27,000 that are sunk into a hundred thousand dollars property. So if you have a hundred K, you can probably buy three properties. Because you're also gonna wanna have some reserves. So I, I always like to bring that up to people when they're talking about goals and budgeting. Um,'cause I feel like it's, it's best, especially for the new investor, that you have those reserves that can cover a, a large expense.

jacob_1_09-08-2023_141007: 5:56

Yeah. And you hit on a very important point that I just want to emphasize is that let's say you do have 40 K that you want to invest, right? And that's, and that's what you have. I still would advise you. To not just sink all of that into the deal. Because if that is the most money you can put aside into the deal and you go all into this one deal and you don't have any liquidity beyond that, it's just gonna make you really nervous. It's gonna put you in a position mentally where you feel like you've went all in, and that's just not a good feeling. So I would advise just, just naturally go less than that. Right? Make sure you have a little bit left over for the unpredictable event like Mike said. So again, just want to emphasize that point. I think it's really important. Just don't, don't go all in. If you can help it, don't go all in because that is just gonna give you more comfort.

Track 1: 6:50

Yeah, absolutely. And I, I think at the end of the day, Setting expectations with people too is, is huge when it comes to the setting up the goals and the budgets. Um, and that's why I always do, you know, when, when I'm meeting with people and doing that initial consultation, when, you know, they're looking at our market, for example, I like to emphasize like, Hey, this is, this is, these are real live numbers. I'll, I have done enough deals and I own enough properties to know like, this is how this works, and that's the expectation that you're gonna need.

jacob_1_09-08-2023_141007: 7:17

Yep, definitely. So again, ladies and gentlemen, have your goals in mind and have a good understanding of what your realistic budget is and just write those things down. And just for an example of a, just a goal to throw out there, right? Let's say you want to have$10,000 in passive income from your real estate portfolio inside of 10 years, right? You can reverse engineer that to say, okay, cool, I need 10 properties. They're gonna cash flow me a thousand dollars a month at the end of 10 years. And that's really important. That timeframe is really important because to achieve$10,000 in passive income in 10 years, I would say realistic goal, right? You're giving yourself enough runway, you're giving yourself enough time for the rents to appreciate. If you're giving yourself enough time to get to stabilization for that entire portfolio, that's realistic to say you wanna do$10,000 a month in passive income in two years, I would say that's gonna be pretty challenging, right? So again, have a realistic goal, and then determine your budget. So I feel like we've, we've cleared step number one, so we'll keep it moving. We have nine steps, ladies and gentlemen, nine steps, so we'll keep it moving. Step number two, Mike, is to pick a target market. So I'll turn it over to you. What are all the considerations, to take into account when selecting a target market?

Track 1: 8:46

I, think first and foremost, what's what, uh, it goes back to step one. What's the goal? Um, if the goal is some cash flow, then you're gonna look at a market differently than a market where it's, I just wanna dump money. I. Um, to maybe have passive losses even, right? So it's gonna, it's gonna vary from, from, from person to person, investor to investor You know, I've talked to High, I've talked to very high income earners that actually want the losses, right? So they, they come and buy stuff and they overpay and they buy stuff that doesn't cash flow, but they're buying in areas where they know the appreciation will help them in 10 or 15 years. So there's that aspect of it, or you have the people who want it simply just want that passive income, that$200, that$300 potentially up to, you know, eventually four or five,$600. As the rents grow, the, the debt gets paid down and and it just kind of organically grows. So picking a market market is obviously gonna depend. And then you have markets where it could be a combination of those things too. Um, traditionally Cleveland, for example, where, where I live and operate and where you invest. Traditionally has been a cash flow market, right? Like people weren't expecting appreciation. But that being said, as as things have gotten more expensive in the country, inflation has grown and things like that, I think appreciation's gonna be a very big part of investing here too. Um, in, especially in the long term, as things would get more expensive everywhere else, people are gonna naturally look for places where it's a little bit cheaper. So I think that's gonna be, that's gonna play a part in it too. Um, you know, uh, your Portland property, for example. Probably a good combination. You know, I know you're not cash flowing a ton, but, um, same thing with the, the Florida property that I have. It doesn't, it doesn't cashflow a ton, um, if at all, but it's also appreciated by A couple hundred thousand dollars in the last three years, you know, so you have to, you have to pick and choose. And

jacob_1_09-08-2023_141007: 10:46

that's what I was gonna touch on too, broadly speaking, the Midwest has been traditionally known to be, um, a cashflow play. Whereas some of your coastal markets are definitely more appreciation plays. And then there are markets that are in between. But we don't know if that's always gonna be the case, to your point, right? There might be appreciation as there is a flight to afford affordability kind of nationwide. The funny thing is, you mentioned the Portland property, but with the high interest rates right now, That's hurting disproportionately hurting higher price markets. So if I just open my Redfin app or my Zillow app, and I look at the property value for my Portland property, it's actually declined 10% on the flip side, my duplex, my west side duplex in Cleveland, that's appreciated 10%. So I'm seeing a much different behavior and that, that we don't know if that's gonna hold. I, I, I expect Portland to rebound, you know, when the interest rates come back down and I expect that to rebound. And so that's why I'm fine to hold the property. Um, but this speaks to The fact that you can be strategic, right? You can be strategic about how you're building your portfolio, um, in different markets or within the same markets, and you should have that kind of perspective of what do I want this portfolio to look like? But if I take two steps back, I think it'd be helpful to touch on for the listeners more of a macro perspective. What are some of the things that you take into account when you're selecting a market? I think there's obviously a lot of standard things that people say. You wanna look at some of the population trends, right? Like is the population growing or is it declining? You wanna look at the job growth. Is the, are there more jobs that are moving? You wanna look at some of the companies, the, like Fortune 500 companies that are headquartered there in that particular market, you take all of these things into account. But what I will say, you can make money in any market and you can lose money in any market. So don't get stuck in the analysis paralysis. for me on my side, what I, I, I really like about Cleveland is there, there is, I feel a larger flight to affordability in general. I think we kind of touched on this in the last episode, but I think Cleveland is, is, is being overlooked a little bit on the, on the market side. And I think largely a lot of that has to do with, oh, people like to quote the declining population that we see in Cleveland. But what I actually believe is that that population trend is starting to reverse. And you're seeing that now in, in cities like Cincinnati. Where Cincinnati also had a declining population for a very long time. That's starting to reverse. I think Cleveland is probably not far behind that. And then when you kind of look at it, it's a major city. If you combine Cleveland and Akron, it's a major, major metropolitan area, major sports teams. And I'm gonna pass it to you, Mike. You're the expert on Cleveland. So let's talk about a little bit about Cleveland.

Track 1: 13:30

So at the macro level, what I tell people is you have to look at Ohio on, um, so what I, when I explain to people is you look at Ohio on the whole. Ohio is actually the seventh largest state in the country. People don't realize that in population. And then if you take it down, step one, step further from there, if you look at my area, it's uh, 45, 45, 40 6% of the population of Ohio is in what we call Northeast Ohio. That comprises like 16 counties. Um, of those 16 counties, I service like eight or nine of them. So, but if you look at it from that perspective, you're like, oh, okay. Wow. That's, that's good to know. Right? And then if you drill it down even further of, of the top 10 cities in Ohio for population, six of them are in this northeast Ohio region. Right. And it's Cleveland, Akron, Canton, Youngstown, Lorraine, and Parma. Those are those six. Those are the six of the top 10. So if you kind of look at it from that perspective, you're like, oh, okay, cool. Um, and then the drivers in our market. Um, you know, that's the other thing too. When you're picking a market, you wanna know what are the drivers of, of industry in those markets, you know? And for a long time, Cleveland was the Rust Belt, right? We were the Rust Belt. We were manufacturing, we were Ford, uh, we were Chevy, uh, steel. And rubber. Right? And a lot of those things have gone away. The Ford plants have closed, the Chevy plants have closed the, you know, things have closed. But we've, we've rebuilt, we, we've reborn, right? For example, uh, in Cleveland, Cleveland's largest employer, Cleveland Clinic, right? We're huge in medical here. Uh, we have four pretty well-known hospital systems in, um, the Northeast Ohio market, including, and I, I lump Summa in there as well, because Summa is, is Summit County's largest employer and Summit Counties where Akron is, right. And I basically lumped them together. Um, and then on top of it, people don't realize this, but the Cleveland Clinic is actually the largest private employer in the state of Ohio. Over 50,000 people employed by the Cleveland Clinic. Right? And then you, you throw in other things. Uh, so medical's huge here. Um, We've got, um, key Bank, uh, headquartered in downtown Cleveland. Huntington Bank is headquartered in Columbus, but has a huge imprint in northeast Ohio because they acquired First Merit Bank, uh, some years ago and converted it all to Huntington. And First Merit was actually headquartered in downtown Akron. So you've got that imprint here. Um,

jacob_1_09-08-2023_141007: 15:55

Sherwin

Track 1: 15:56

Sherwin Williams, Sherwin Williams, the paint company headquartered in downtown Cleveland. They're actually building a brand new, like$85 million state-of-the-art, uh, headquarters in downtown Cleveland, progressive. Remember everybody, Remember everybody, remembers the Baker Mayfield commercials with Progressive Insurance, right? And, uh, progressive is over, um, in the east side of Cleveland and Mayfield Heights, so they're headquartered over there. So, I mean, you've got a lot going on, uh, down in Akron. You still have a huge rubber industry in Akron and the surrounding area. Goodyear Goodyear's still here. They're still alive, they're still kicking. They just rebuilt and, and made this massive infusion of, of capital and rebuilding their, um, Uh, headquarters in, in what is what's called the Goodyear Heights neighborhood of Akron on the east side. Um, they've, uh, there's a whole new, like, redevelopment over there. There's a couple, there's a brewery over there. There's a, there's a, uh, an auditorium for concerts and stuff over there now called the Goodyear Theater. So you've got that going on. Firestone's still here. Uh, they're not headquartered here anymore. They're owned by Bridgestone now, which is a Japanese company. But the Amer, the North American Technical Center is still here in Ohio as well, in Akron, uh, sports, you know, we're the, actually, it's funny, it's our, it's Cleveland's claim to fame. Cleveland's actually the smallest city in the country with three professional sports teams. So you've got, you know, obviously the guardians in baseball, you have the Cavs in basketball, and you have the Browns in football, right? And then all the ancillary things that go along with that. mean, you've got just a lot going on. I mean,

jacob_1_09-08-2023_141007: 17:20

Yeah, so folks, don't sleep on Cleveland. Don't sleep on Cleveland. Don't, don't sleep on the Midwest in general. I saw, I saw an in, I saw a very interesting chart. It was just highlighting the year over year rent growth in different markets. Red, yellow, green, green being the, the rent has increased more than 5%, and then yellow being kind of like in the middle tier, and then red is like, it's decreased a certain percentage, and the, the concentration of green is all in the Midwest, right? That's where the rent increase and the rent growth is still happening. All these coastal markets, all these more expensive markets, they're seeing flat rent growth or declining rent growth. And so again, I just feel like the Midwest markets are shining right now because of the interest rate environment. And so don't sleep on Cleveland, don't sleep on the Midwest. I've said this before. You can make and lose money in any market, have an investment thesis, have reasons why you want to be there, and then move on to step number three. Step number three, Mike, is pick an investor friendly agent. Obviously, you being a top 1% agent, you have a lot of perspective to share here. I'm gonna say something very briefly and then I'm gonna pass it over to you. For people that are just getting into the real estate investing game, it can feel extremely daunting. It can feel as if there's so much information. You don't know any of this stuff. Maybe you've read a couple of books, but you still feel pretty overwhelmed and you still don't feel ready. You don't have to be an expert. You don't have to be an expert. And the reason why is if you find an investor friendly agent, someone you trust, someone who is a local market expert, that is knowledgeable about real estate, this is your cheat code. This is your cheat code. They are going to, for lack of a better term, hold your hand throughout the entire process. And that's exactly what you're gonna need as a beginning investor. So what I will say is it all starts with agent. Your real estate investing career starts with you finding an agent. A good agent that you trust that's gonna have your best interest in mind, and then the rest is gonna fall into place from that point. Right. So for, I'm gonna pass it over to you, Mike, but for me, for a beginning investor, all roads go through a solid agent, but I'll pass it over to you, Mike.

Track 1: 19:39

Yeah. So, you know, uh, I've shared my story before and, you know, I made a conscious decision several years ago to focus on the investment side of real estate. So, uh, but what's important for people to understand is there's two languages of real estate, right? There's the language of the forever home and there's the language of the investor, uh, real estate agent, and there, and the language of the investor, real estate agent is also a lot like a commercial real estate agent as well. And there's some crossover. But for, for those out there who are, you know, looking to, uh, hire an agent and, and interview agents, like you want to know, like what, what's their experience with investors, right? First and foremost, obviously I have a ton. Secondly, you want to, uh, are they an investor themselves, right? That's, to me, that's important because they're out there doing the deals, they're in the trenches with you. You know, I don't have this huge portfolio, right? I'm, I'm in the process of growing my portfolio as well. I didn't get serious about actually Um, continuing to buy properties to keep up until the last couple of years. So, um, for us, you know, we, we saw it as an opportunity as well, right? To help build our retirement because we don't have one, right? I don't have a 4 0 1 K that a pension. I don't, you know, I don't have some retirement fund. So for us, that's what what we're doing. So when, when you're picking your agent, you know, those are, those are things that are very important. Are, are they investing themselves? Do they, do they speak the language? Do they understand theri like we've kind of talked about with picking the market, you know, um, you know, I can give you all kinds of information as to why I think, you know, investing where I. M is the, the right move. So, yeah, it's just really understanding that your agent. You mentioned it earlier, uh, Jacob is, you know, that we have your back. And that's the other thing too that I emphasize with people too.'cause I look at it from this, I look at it from, it's a multifaceted perspective. One, I'm not selling million dollar properties, uh, for the most part, right. Um, some of the larger multifamily. Sure. But, you know, my bread and butter is the, you know, a hundred to$200,000 small, single and multi small multifamily properties. Well, those aren't, you know, they're not, you know, you know, once again, they're, they're, they're decent properties and, you know, make a good living off'em. Don't get me wrong, but they're not out. I'm not out there. So I'm selling a lot of'em, right? That's how I make a good living. I, I sell a lot of properties and what I, what I always like to emphasize with people is get an agent that is not, you're never gonna get forced into a deal with me. Um, I've had plenty of deals fall apart post inspection or, you know, just throughout the process, I'll be the first one to raise my hand if I think something is amiss, right? Like, hey, that's, I think it's time to punt, or if it just doesn't work, right? Like, I've had that happen. Um, and so it, it, it does happen. It, you know, it sucks when it does, but I'm also not, I'm not that agent who needs that. I'm not chasing that paycheck, you know, so to speak.

jacob_1_09-08-2023_141007: 22:48

I want to, I wanna jump right in here, Mike, because I think this is a very important point and, and one that I feel is a, a big reason why I ended up trusting you a lot is that immediately I felt as if you. Were really looking out for me because I would send you a deal and immediately you'd say all the things you don't like about that deal. Right? And that was big to me, right? Because if you are an agent that is looking for that transaction, then you probably would just all look for all the ways that you would sell that property to me. But immediately, I sent you, I think the first time that we started working together. I sent you maybe like eight deals. I was like, oh, I like these. Rank them in order. And then you went down the list systematically being like, one of these is probably one that we can pursue, but the other seven I don't like, which was huge for me. I said, okay, cool. This man is, he's trying, he's trying to actually like, give me a, a property that aligns with what I want.

Track 1: 23:44

I, and you make a, you make a great point. I didn't even touch on that yet. I, I, I've, I've had people tell me I'm too negative, right? Like, I've had, I've had, I've had, I've, I have frustrated people. Um, I'm too negative and I'm telling'em like, no, no, I'm being real. Like I want you, I want you to keep firing deals at me.'cause I want to poke holes in them. Because at the end of the day, I also see it as a, a long-term relationship. Right? Like, I would rather sell, I would rather have you work with me over the next 10 years and buy 20 properties than me go find 20 clients to work with. Why? What, why? No, I would rather work with some, you know, I'd rather work, I'd rather have, honestly, if I could get to this point and I had 25 people in my network buying two properties to three properties per year, uh, I'd be so happy. I'd be so happy.'cause I could just focus and we could just, you know, uh, that would be awesome. So, yeah, I mean, that's the way I look at it. Like I'm looking at it from the perspective of. Uh, multiple. And once again, the other things too, to throw in there too, not only do I want you to buy multiple properties,'cause I'm trying to help you get to your financial goals and your financial freedom and whatever that looks like for you, you're helping me do it.'cause I'm making money too, right? Like we're all helping each other. And then on top of it too, you're, you're gonna wanna trade that property someday. I mean, there's, there's going to be a time when it's okay Mike, let's sell this thing now. Right? So I'm also looking at it from that perspective. Like, I've, I've by, you know, aligning myself with you by poking holes, by giving you the, the, all of the, the reasons why you shouldn't buy the deal. And then when we finally get a deal, like, hey, okay, yeah, like, I like this because I know then too, you know, two years, three years, four years, five years down the road, you're gonna call me, Hey Mike, let's, what's the property worth? Let's, let's anal send me a c m a. Like, let's look at it from that perspective of what can we, can, what can we then turn this into,

jacob_1_09-08-2023_141007: 25:33

So again, folks, get an investor friendly agent, somebody that whose goals align with yours and somebody you know, that you vibe with as well, because you're gonna be spending a lot of time talking to your agent. If you are serious and you are on the hunt. There's gonna be a lot of conversations, a lot of phone calls, a lot of text messages. my, my wife actually joked with me in when we first started hunting for deals and she was just like, oh, is that, uh, is that your new, your new girlfriend Mike? Because we're talk, we're texting so much. We were texting so much and she's like, should I be worried? It's hilarious. And, um, so yeah, and that's real. You're just gonna, if you really are invested in the real estate game, you're gonna have a lot of conversations. And so it's important. It's important that you have a good report. It's important that you vibe and also to the cheat code point. An agent is going to help you usher you through all the rest of these steps. And step number four, Mike is a pre-approval. And so I'll touch on this. I used to think that you need to get pre-approved. And for everyone listening who doesn't know what a pre-approval is, you're gonna go to a bank and you're gonna say, Hey, I want to get pre-approved for a mortgage in order to purchase an investment property. And the bank is gonna take your information, they're gonna underwrite you from a risk perspective. They're basically gonna take a look at your income, your bank statements, all this stuff, your credit, and they're gonna say, you can afford this much, right? So they're gonna give you a budget and they're gonna give you a letter, an actual letter, preapproval letter that says Jacob Sandoval can afford this much based on his credit, his income, et cetera, et cetera. So they're gonna give you a pre-approval letter. I used to think that you need to get that before you even talk to an agent. Now, what I've learned through this process is a good agent prefers to work with a lender that they've worked with before. So you actually don't even need to get a lending contact or a pre-approval letter until after you speak to the agent, because the agent is going to have a preferred lender that they work with. And so before I pass it to you, Mike, another good thing about the pre-approval process is it kind of ties back to step number one. A good lender as well is going to help you understand what a realistic budget is going to be, which is very, very important. The lender's not gonna, if you think about a lender from this perspective, they're putting up 75, sometimes 80% of the money for you to secure this property. They want you to be successful. The lender wants you to be successful as well.'cause you gotta pay back that loan. You gotta pay back that loan. So they're not gonna let you get over your skis and they're gonna counsel you. I've talked to a lot of great lenders, a lot of great lenders, and I've always been really impressed with their perspective and their counsel that they're willing to give. And it's because at the end of the day, they want you to be successful. So that's just another thing to know there. There are aspects of the lending process that kind of are a pain, right? The documents and everything like that. But at the end of the day, that's what it is. And I'll pass it over to you, Mike, but you as an agent also, you're not gonna take anyone shopping until you have that letter because you don't know what they can actually afford, right? So you, you can speak on pre-approval.

Track 1: 28:43

So pre-approval is obviously a critical, a part of the process, right? It goes back to determining your goals and your budget. Um, you have to understand what you can afford, and then also understand too, like what. Are you comfortable with in the, if you have a vacancy, right? You know, you, you talked, you talked about it earlier. You had vacancy, the unexpected vacancy, so then you had a mortgage payment to pay for one, one or two months, uh, while you did that, right? So it's, it's important. Um, and then you touched on it as well. Obviously as an agent, I'm never gonna make you work with anybody. But that being said, we as agents have forged relationships, right? Like we know that these lenders have our backs because lenders, once again, just like an agent, they don't get paid till the deal closes. And we wanna align ourselves with guys, guys and gals that we know can get deals done, that are creative, that can get over hurdles that, and also speak the language too. So that's, I, you know, as I have, as I've, you know, foraged into the investment side of the, of the business, I've aligned myself with people that are investors themselves too. So, but yeah, so the pre-approval process is, is pretty straightforward too. Like, it doesn't, it's not, um, it doesn't take a ton of, uh, time and energy. It will take some, you know, the, the biggest, uh, things of emphasis I want to tell people, uh, about the pre-approval process is, you know, have, have bank statements available, um, have pay stubs available, uh, have your W twos available, and then have your last two tax returns available too. Especially if you're gonna go, you're gonna, the conventional route. I mean, if you have bonuses and stuff, they're gonna need some of, some of some other things. If you have, um, you know, just depending on your personal situation, um, there are other things you'll need, but that's the basic, uh, of what you're gonna need. And they're gonna run a scenario, like you said there, it's a risk profile. You know, how much, how much is your primary residence, right? Like how much is that mortgage is on your credit report? How many cars do you have? How many payments do you have? Those are all gonna factor in what's, what's called your d t i, your debt to income ratio and your d t i is gonna determine how much money they're gonna lend you. Right? You know, you could have a ton of money sitting in the bank, but if you're a high risk, you know, you could still be considered higher risk if you're, if your, if your ratios are outta whack. Right? Uh, and depending too, the type of loan that you're getting, they may be able to use some of the rental, the potential rental income as a qualifying, uh, aspect of the loan as well. Once again, I'm not gonna dive too deep into that'cause I'm not a lender. Uh, but just know that that's available to you. So that's really, um, the biggest thing I want to tell people. And then that to touch on the, the determining the goals in the budget, right? That's gonna be dependent on also how much liquid cash you have available to actually put into the deal. So, um, but yeah, the other thing too, I would, I would also stress, when you're preparing to get pre-approved, don't buy anything. Don't go buy a car, right? Don't go run up credit cards. Um, try to keep, try to keep your spending as you normally would. So when they, when they grab your credit report, they're gonna see it, you know, unfortunately, you know, credit as much as Dave Ramsey doesn't wanna make it the, you know, credit is what makes the world go round. And it's very, very important, especially for the real estate investor because if you can't get credit, then you're, then what? Then you're gonna have to look at different types of loan programs. And they are, there are loan programs out there, um, but Even in the D S C R world, the Dex Service coverage ratio loan world credit still matters. That's how they determine your rate. So, you know, it's, it's, it's crucial. So yeah, I think, and then once you're, you know, once you get that pre and that pre-approval can be done within a couple of days. it depends on how fast you're willing to get the information to the, to the loan officer, really. Um, you know, and depending on your income too, if it's, if you're a high W two income earner, it's, it's a lot easier than if you're a self-employed individual that's a 10 99 or you have multiple businesses, that's gonna be a little bit more complicated. But if you're a higher, high income earner with W two income, it's pretty easy to get pre-approved. It really is. And you, and once again, you talk to any of the three or four recommendations I have for people, as soon as you tell'em, Hey, Mike Magno referred me. Okay, cool. Uh, yeah, let's, let's get it done. You know, they, they know you mean business at that point.

jacob_1_09-08-2023_141007: 32:54

we'll close this out. Pre-approval. That's your ticket. Your license to shop, if you will. And then we can move into probably my favorite step, which is step number five, analyzing deals and making offers, right?