Building the First Time Real Estate Buyer and Investor’s Case Study

There are tons of books and information on buying your first property or getting started with real estate investment. Unfortunately, most talk a lot about how you are going to make a lot of money and not so money provide straight talk and stepwise advice on exactly how to perform the process. While writing a book is probably a great thing to do for this, I am going to start with a case study. This article outlines and describes the contents you can expect the study to cover.

First, a case study will describe the various potential home purchases considered by the first time buyer. This will close with which was selected and why. This area will discuss purchasing without a realtor, with a realtor, or with a realtor acting as a buyers broker. Additionally, some specific project inspection considerations and property evaluation considerations that the buyer should apply to protect their investment interest.

Next, the debt sources for the buyer including banks, credit unions, direct federal sources, and possible direct state sources will be reviewed. The general terms and conditions of these options will be reviewed. Sources will be divided between conventional and guaranteed federal loan sources.

The next step will be a review of the financial documents and personal information required for the closing. This area will cover important qualifying characteristics for the buyer and potential disqualifying issues. Methods for resolving issues, their costs, and their risks will be reviewed.

The closing process will be reviewed as a next step. This will discuss closing inspections and the closing activity. A quick review of items that should be complete by the closing will be completed.

Files and records to set up an hold post closing will be covered next.

Since this discussion contemplates a purchase as a precursor to becoming a real estate investor. Having completed the purchase, we’ll review setting up an S Corp or LLC and transferring the interest to that entity. Issues with bank covenants and considerations regarding this will be reviewed as well. The process will discuss setting up necessary accounting, identifying service and support services, beginning renting the property to tenants, establishing tax identification, completing year end statements and taxes, filing taxes, developing and maintaining reserves, and so on.

Finally, we will review the tax benefits and issues and how you will use this activity to create more equity in the future, develop cash flow, and leverage into additional investments.

At the close of the case study, we will have gone from the idea of purchasing a residential property to an investment property owner and operator.