Author Topic: First Real Estate Investment  (Read 5691 times)

Wile E. Coyote

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First Real Estate Investment
« on: June 02, 2014, 02:43:34 PM »
I finally got around to finding an investment that I think could be a good one.  It's small potatoes for most of you, I am sure, but I am hoping that this is just the beginning. 

It's actually 2 small 2 bedroom 1 bath properties.  The neighborhood isn't much to write home about, but it's not bad.  Both are currently rented, but one of the tenants is about to vacate.  That house is one that needs some work so my plan is to spend some money getting it into good shape and rent it for a bit more.  The propoerties just barely satisfy the 1% rule, and should do somewhat better after some minor renovations.  I plan on focusing on the one that will be vacant soon, and fixing that up as quickly as possible and renting it for a bit more than it has rented in the past and letting the other one continue as is for a while.  If at some point the other tenant vacates, then I will do similar renovations to the other property.  I don't expect this to be a huge cash cow, but I think it will be a good first step.

I have to admit that it's a bit scary venturing into new territory, but I've been wanting to diversify into real estate for a while, so I suppose I need to start somewhere.  Thanks to those that have shared their experiences here.  They have been quite helpful and I am sure I will be looking for additional guidance along the way.  Maybe years from now, I will be able to pass on some lessons learned as well.

money_bunny

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Re: First Real Estate Investment
« Reply #1 on: June 03, 2014, 05:56:40 AM »
What's your cash reserves like?

SDREMNGR

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Re: First Real Estate Investment
« Reply #2 on: June 03, 2014, 07:23:18 AM »
Good luck.  Check out the Millionaire Real Estate Investor.  Easy to read book.

Wile E. Coyote

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Re: First Real Estate Investment
« Reply #3 on: June 03, 2014, 07:25:58 AM »
What's your cash reserves like?

I really do appreciate that you took the time to read this and comment, so please don't take this the wrong way.  Is there some specific issue or concern that you have that you would like to share?   I have a general emergency cash reserve that I keep around for various contingencies.  I also have plenty of access to very cheap cash as needed in case of even greater emergency.  I also currently save annually more than the full value of these properties, so I have no concern about carrying these properties in the event of vacancy. But I may be missing the point of your question, and definitely appreciate any insight you may have. 
« Last Edit: June 03, 2014, 07:27:47 AM by Wile E. Coyote »

Wile E. Coyote

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Re: First Real Estate Investment
« Reply #4 on: June 03, 2014, 07:28:33 AM »
Good luck.  Check out the Millionaire Real Estate Investor.  Easy to read book.

Thanks for the recommendation. I will check it out.

arebelspy

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Re: First Real Estate Investment
« Reply #5 on: June 05, 2014, 10:49:45 PM »
What's your cash reserves like?

I really do appreciate that you took the time to read this and comment, so please don't take this the wrong way.  Is there some specific issue or concern that you have that you would like to share?   I have a general emergency cash reserve that I keep around for various contingencies.  I also have plenty of access to very cheap cash as needed in case of even greater emergency.  I also currently save annually more than the full value of these properties, so I have no concern about carrying these properties in the event of vacancy. But I may be missing the point of your question, and definitely appreciate any insight you may have.

I don't think it was a personal insinuation, it's just that many first time landlords get in over their head, get hit with vacancy/repairs at the wrong time, and have trouble carrying the house.  Thus it's highly recommended that a landlord keeps on hand cash reserves for those sort of issues.

It sounds like that won't be the case with you though, based on your response.
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Wile E. Coyote

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Re: First Real Estate Investment
« Reply #6 on: June 06, 2014, 08:55:50 PM »
What's your cash reserves like?

I really do appreciate that you took the time to read this and comment, so please don't take this the wrong way.  Is there some specific issue or concern that you have that you would like to share?   I have a general emergency cash reserve that I keep around for various contingencies.  I also have plenty of access to very cheap cash as needed in case of even greater emergency.  I also currently save annually more than the full value of these properties, so I have no concern about carrying these properties in the event of vacancy. But I may be missing the point of your question, and definitely appreciate any insight you may have.

I don't think it was a personal insinuation, it's just that many first time landlords get in over their head, get hit with vacancy/repairs at the wrong time, and have trouble carrying the house.  Thus it's highly recommended that a landlord keeps on hand cash reserves for those sort of issues.

It sounds like that won't be the case with you though, based on your response.

Thanks.  I didn't take it as an insinuation.  I really thought maybe I wasn't understanding the question.  One of my major flaws is that I am extremely literal, which can sometimes lead to misunderstanding when things aren't spelled out in great detail.  I really do appreciate any and all advice, comments and suggestions.

Of course, my initial response was going to be "I'd say strong......to quite strong.";)

https://www.youtube.com/watch?v=_rTLZujmHXY

« Last Edit: June 06, 2014, 09:00:24 PM by Wile E. Coyote »

Bearded Man

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Re: First Real Estate Investment
« Reply #7 on: June 11, 2014, 06:39:23 PM »
I bought my first house, which is now a rental, in a so-so neighborhood, and would not buy in the same area again unless I had no other option.

Lower income areas tend to attract lower income/lower class tenants, who will be more hassle, and will be harder on the property since their credit is already shot, they have no assets, and the courts in my state basically seem to give you no recourse if they trash the place.

Also, it appears that higher class properties tend to have tenants that stay consideraly longer, which reduces the ammount of turnover and thus your profits. They are generally more expensive but also a lot newer. My rental is 72 years old but built like a rock.

Blindsquirrel

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Re: First Real Estate Investment
« Reply #8 on: June 12, 2014, 08:21:21 PM »
 You may want to check your local MLS for better deals. If the same RE investor is selling both, I would automatically suspect them of being dogs. Just me being me but think on that for a bit.  I do not sell my great performing rentals and I do not think many other RE investors do either. We have about 5 tenants who have actually paid for the house that they rent for us.  Unless you live in a HCOLA area, crushing 1% rule with some work done by either you or others should be no problem.  If you are new to RE investing, seriously play not to get hurt, since you are in a great financial position it is a who cares as it will not really matter one way or another as any loss is small compared to your net worth. I advise some caution for those where a RE investment is a reach as really negative cash flow is horrible. We take a -4K hit for the month for property taxes 2x a year and I really hate the cash flow negative months on the properties.  I would read the posts on this forum end to end and check out bigger pockets also.  You may wish to follow the blindsquirrel rule of land lording that is do not rent any house you would not be comfortable living in yourself. It works for me. (My standards ar low but no really crappy houses and areas.) However- yields in those areas can be off the chain.

Wile E. Coyote

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Re: First Real Estate Investment
« Reply #9 on: June 12, 2014, 08:48:46 PM »
I bought my first house, which is now a rental, in a so-so neighborhood, and would not buy in the same area again unless I had no other option.

Lower income areas tend to attract lower income/lower class tenants, who will be more hassle, and will be harder on the property since their credit is already shot, they have no assets, and the courts in my state basically seem to give you no recourse if they trash the place.

Also, it appears that higher class properties tend to have tenants that stay consideraly longer, which reduces the ammount of turnover and thus your profits. They are generally more expensive but also a lot newer. My rental is 72 years old but built like a rock.

Thanks for the response.  The neighborhood isn't great, and I am a bit concerned about quality of tenants, but I know the existing tenant that will be staying, so that helps.  I admit this is a bit of a crap shoot and I may well regret it, but it's not big dollars and for the amount that I am investing, there is little risk.

Wile E. Coyote

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Re: First Real Estate Investment
« Reply #10 on: June 12, 2014, 09:00:46 PM »
You may want to check your local MLS for better deals. If the same RE investor is selling both, I would automatically suspect them of being dogs. Just me being me but think on that for a bit.  I do not sell my great performing rentals and I do not think many other RE investors do either. We have about 5 tenants who have actually paid for the house that they rent for us.  Unless you live in a HCOLA area, crushing 1% rule with some work done by either you or others should be no problem.  If you are new to RE investing, seriously play not to get hurt, since you are in a great financial position it is a who cares as it will not really matter one way or another as any loss is small compared to your net worth. I advise some caution for those where a RE investment is a reach as really negative cash flow is horrible. We take a -4K hit for the month for property taxes 2x a year and I really hate the cash flow negative months on the properties.  I would read the posts on this forum end to end and check out bigger pockets also.  You may wish to follow the blindsquirrel rule of land lording that is do not rent any house you would not be comfortable living in yourself. It works for me. (My standards ar low but no really crappy houses and areas.) However- yields in those areas can be off the chain.

Thanks for the advice.  I did some research on the area and the prices are very fair for the properties.  The reason the seller is selling is he has owned the properties for at least 50 years, he is 85, and he no longer wants to be a landlord.  The property is also adjacent to several properties that are owned and rented by some of my family and there is potential for doing something larger down the road with the entire block.

I like the blind squirrel rule of land lording and I had been applying a similar rule to properties that I have been looking at for quite a while.  The problem with it was that none of them ever met the 1% rule.

Bottom line is that I know that there is risk here, so at the price, the risk is acceptable.

Wile E. Coyote

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Re: First Real Estate Investment
« Reply #11 on: August 01, 2014, 01:30:25 PM »
Closed on the properties yesterday!  Wish me luck!:)

Johnny Aloha

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Re: First Real Estate Investment
« Reply #12 on: August 01, 2014, 01:54:58 PM »
Congrats!  Now the hard work (profit) begins!

Mr Mark

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Re: First Real Estate Investment
« Reply #13 on: August 01, 2014, 05:40:08 PM »
Wow. Congratulations! Best of luck.

Have you found the bigger pockets website/community? Lots and lots of good advice and resources now you are a real live rehabber-landlord!

are you doing this through an llc or have you got an umbrella insurance policy wrt liability? You need to do one or other asap.

maybe start a journal entry and keep us updated on your adventures?

Wile E. Coyote

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Re: First Real Estate Investment
« Reply #14 on: August 01, 2014, 06:23:22 PM »
Wow. Congratulations! Best of luck.

Have you found the bigger pockets website/community? Lots and lots of good advice and resources now you are a real live rehabber-landlord!

are you doing this through an llc or have you got an umbrella insurance policy wrt liability? You need to do one or other asap.

maybe start a journal entry and keep us updated on your adventures?

Thanks!  I have browsed bigger pockets a bit, but will likely spending a lot more time there. I am using an LLC.  Not sure I have the time for a journal, but I will come back and post some updates here.

Mr Mark

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Re: First Real Estate Investment
« Reply #15 on: August 01, 2014, 09:22:12 PM »
Wow. Congratulations! Best of luck.

Have you found the bigger pockets website/community? Lots and lots of good advice and resources now you are a real live rehabber-landlord!

are you doing this through an llc or have you got an umbrella insurance policy wrt liability? You need to do one or other asap.7

maybe start a journal entry and keep us updated on your adventures?

Thanks!  I have browsed bigger pockets a bit, but will likely spending a lot more time there. I am using an LLC.  Not sure I have the time for a journal, but I will come back and post some updates here.

great stuff. It is still a bit of a wild frontier, rentals. There doesn't seem to be an amazon/google/whole foods of rental housing yet, a place where everyone goes because they've cracked the value/cost/sevice business model. Lots of opportunities for Cash on cash returns well above 10% unleveraged.

All the best and hope it goes super, meanwhile would appreciate hearing of your learnings along the way. It does seem to be habit forming, this real estate thing, once you get going...

arebelspy

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Re: First Real Estate Investment
« Reply #16 on: August 05, 2014, 10:45:06 PM »
Closed on the properties yesterday!  Wish me luck!:)

Congrats!  It's a fun journey.  :)
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.