Risk is opportunity in disguise - My first property

The first property that I ever bought was certainly one of the riskiest, but best purchases I ever made.  I was living in Great Falls, Montana around the big housing market meltdown was occurring.  That particular year, the government was offering anyone who was a first-time home buyer up to $8,000 for buying a new home.  That was more money than I have managed to save from working, so that was a big incentive for me. I also figured I had to live somewhere, I might as well get a mortgage and start building equity instead of pay rent and have no equity building for me.  I thought a two-family home would be best because if I decided to leave, I could rent both units out and cover my mortgage payment.

I figured I was in entering a buyer's market, and I was planning on holding the property over the long haul to build equity.  I took advantage of the VA-Home loan program, which allowed me to purchase the property with "no money down" at 4% financing for 30 years.  Now, a lot of people might look at a investment like this as a "risky" because I was going to have zero equity going into the ownership, which  normally makes your debt service rather high.  However, the thing I had going for me here was the mortgage was for 30 years, which effectively spreads the price of borrowed money out over a long enough period to make the mortgage payments manageable.  Since I took 100% financing on this property, the property produced next to noting in net operating income at the start.  I limited my risk by living in the less desirable unit of the two, and fixed it up so I could rent it for more after I moved out. 

I was fortunate and had good tenants the entire time I have owned that property.  I would encourage anyone to look at the Great Falls, Montana area for rental property that are looking to find a very stable market.  The price swings in Great Falls have never been to drastic, but because prices never got too high there, they never really fell that much.  I mainly recommend people look there because of the quality of tenants that are their.  Great Falls is right near an Air Force base that has provided the area with a good base of tenants that are responsible for paying their rent and who deter domestic trouble.  

Besides my favorable luck with the duplex and the tenants I've rented it to, this first investment would have looked very risky on paper.  I was fortunate, I was able to raise the rents quite considerably a year after I fixed it up a little.  I also was quite lucky that I did not have any major emergency type repairs like HVAC systems or roofing issues that sometimes come up unexpectedly.  I was also fortunate enough to have the opportunity to buy a house with no money down.  My return on investment (ROI) is well over 1000%  on this property because I literally used next to none of my own money to buy it.  I spent maybe a few hundred dollars in closing costs, and a few extra for new paint.  I had zero equity here, but that changed when each month I was making the mortgage payments with the rental income.  I saw this as a "forced" savings vehicle for my retirement.  I figured, if I screwed up saving money over the next couple decades, I would at least be able to sell this property one day and collect whatever equity I had in it.  This experience was all it took for me to decide I had enough of the military, and to pursue a career in real estate.