As I mentioned in my previous post, my first investment property came with challenges. I thought they were behind me once the terms had been agreed to and the contract signed. Really, my saga was just beginning.
By November 2011, I had a contract in place on a four-plex in St. Petersburg, Florida. We had agreed to a delayed closing, anticipating that everything would work out by February 2012.
Let me take you back in time. America had just experienced one of the worst plummet of real estate. Everyone was pointing fingers at who was to blame. New regulations were put in place and mortgage lenders became the focus of scrutiny. I got caught up in the middle of these dynamics.
My plan was to purchase the home with a mortgage. Interest rates were low and I confirmed that I would qualify for a loan. I got the paperwork started as soon as the contract was in place. In the meantime, I wanted to take advantage of the low interest rates on my current home in Montana that I would be keeping. The Montana loan was approved and finalized without a hitch. I financed it as my primary home since I didn’t have another home at the time. I had let the lender for the Florida home know my plans and he had cautioned me about financing. But it seemed crazy to wait as the rates were so low.
LESSON #4: LISTEN TO YOUR LENDER
The lender was right. His underwriters didn’t like that my Montana home was listed as “primary.” If my intent was to move to Florida, why had I refinanced? Try as I might, I could not get through to the bank that this was my primary home for now and when I purchased the other home, that would be my primary home. I lost about a month-and-a-half of time and the cost of the appraisal. Loan denied.
LESSON #5: DO YOUR HOMEWORK WHEN FINDING A LENDER
Undeterred, I found another lender and re-applied for the mortgage. Everything went smoothly this time … until it came time for the appraisal. The appraiser had come back with his report citing several comparable properties within my neighborhood. The bank was not satisfied that the properties were good enough matches. Keep in mind, there hadn’t been many multi-plexes selling during this time. I tried to appeal their ruling to no avail. I lost another month of time and the cost of another appraisal. Loan denied.
What I didn’t know then is that all lenders are not created equal. Some underwriters have different rules and standards. I hadn’t done my homework to see which mortgage companies were actually closing on properties in the area. My Realtor also hadn’t been proactive with the appraiser to make sure that he had the best comps possible.
LESSON #8: DON’T GIVE UP!
The third mortgage application proved to be a charm. My Realtor found a lender who had closed on another four-plex in the area within the past couple of months. Everything went smoothly through underwriting and I closed on the house toward the end of April 2012, more than five months after we had originally signed the deal.
In hindsight, there were many things I could have done better. But despite my many mistakes, three qualities helped me succeed with my first investment property: 1) desire; 2) creativity and 3) persistence. And when you decide it’s time for you to purchase your first investment property, be willing to do what it takes to see the deal through.