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Theo Hicks
  • Rental Property Investor
  • Tampa, FL
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First Property Story: Success and (mostly embarrassing) failures

Theo Hicks
  • Rental Property Investor
  • Tampa, FL
Posted Apr 14 2015, 18:47

After deciding to get into real estate (after reading Rich Dad Poor Dad, just needed to read the first chapter and I knew what I needed to do) I set up a meeting with a real estate agent/lender to go over investing options. The very next day, I received my first MLS automated email w/ a duplex in one of the better areas in Cincy. I reach out to the realtor, we see it that day, and I sign an offer letter on the front porch. A whole 24 hours after deciding to invest in real estate, it was on! The initial numbers were:

-$170,000 purchase price

-3.5% down payment house hacking before I knew that was a thing :)

-3.5% interest rate

-$1200 a month mortgage, taxes, and insurance

-$15k in renos

-Monthly rent: $1000 for unit one and $1200 for unit two

-After 10% vacancy and 5% repair I was looking at a 9% cap rate and 21% Cash on Cash Return

At the time however, only thing going thru my head was "$2200 in rent and I am only going to have to pay $1200 for a mortgage? That means 1k a month in my pocket for no work, sweet!"

Boy was I wrong. Having a "do and learn" attitude, combined with the handyman abilities of a new born infant, I have had many frustrating and just straight embarrassing moments:

1) I didn't realize I needed to put my utilities in my name before closing, so I show up to my property with the Duke Energy guy a few days (and a few celebratory drinks) after closing to get them turned on. I leave for the day feeling accomplished (I think I had ripped out some carpet). The next morning when I return, I walk thru the front do to a very loud "whooshing" noise coming from the basement. As I walk down the stairs, the whooshing sound gets louder. As I reach the bottom and turn to the sounds source, I am confronted with downpour of water coming from the ceiling of the basement bathroom. After figuring out how to turn the water to the house off (quick google search, mental note taken), I come to figure out that I had 6 burst pipes and a destroyed bathroom...

2) After the pipes incident was solved, I decided that I needed to rent this sucker out before I totally destroyed my new property so I decided to hired someone to paint. He said it would cost 5.5k with a 30% deposit. Not knowing anything about how much it costs to paint, I agree and fork over $1600 bucks. When my other investor buddies tell me how expensive that is, it takes me 3 weeks and the threat of legal action to get my $1600 back.

3) When I finally decide to just paint the property myself, I forgot to lay tarps/paper on the newly installed hardwood floors I just purchased. I had spilled some initially and saw how easy it was to wipe off, so I just continued painting without anything covering the floors. When I come back a week later to clean the floors, I figure I would just run a swiffer over it and be good to go. WRONG!! I end up on my hands and knees for over 6 hours with a nickel and sponge cleaning every single spot of paint off these floors.

You get the idea. I "do" and then "learn" later.

Most people I know would have quit after seeing a waterfall in their basement. If they didn't, they would have definitely quit after they were scammed by the first contractor they worked with. No one would have even had the chance to get to the point where they would have had spend an entire Saturday cleaning each individual hardwood floor plank riddled in gray paint. But I am not most people. I know deep down that I am going to be one of the greatest real estate investors ever and I know I will earn my financial freedom. Call it delusional, insanity or whatever you want but I am willing to do whatever it takes to make it happen. Luckily, I have found a few other "unplugged" (matrix reference anyone?) individuals in my area that have similar beliefs and goals as me, who also have a little more experience with houses so a lot of the stupid mistakes can be eliminated from here on out (hopefully). I know that more costly, frustrating mistakes will happen, but it's just another bump in the road and another lessoned learned!

So obviously, no ones numbers are correct the first time so here are what the numbers ended up being:

-25k in renovations

-$1200 for unit one and $1600 for unit two

-12.8% cap rate and 41% cash on cash return. BAM

Looking forward to learning more on Bigger Pockets and looking forward to my next deal/"do and learn" experience even more! At the end of the day, I have a degree in Chemical Engineering, so I will always have something to fall back on, so what is there to lose?

I hope you enjoyed reading my humorous first experience with real estate investing and if you have had similar negative experiences or share in my delusions, feel free to comment below :)

I apologize for any grammar/typos. I am an engineer, not an author :D

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