First Deal Analysis, no money down!
Hello, earlier today I closed on my first investment property. There’s no turning back now, but I would like to share my experience for other newbie investors and also I would like to hear what some of the more experienced members think.
The home is a 3 unit in the Albany NY area. It is about 90 years old and in better shape than most of the inventory we saw in its price range. The purpose for purchasing this home is to live in one unit and rent out the other two while living as close to free as possible. And most importantly, while learning the ropes of REI. I know this will not generate cash flow while we live there but as we improve the units and move out in a few years I suspect this house will cash flow well and be a good transition into a buy and hold.
]The numbers:
Purchase price $135,000
Unit rents currently 400, 600, 800
PITI $600
The reason one of the units is renting for so low (400) is because the previous owner of the home (and 85 yr old woman) wanted to stay in the home until she died, so because of that we agreed on a low rate to accommodate her. Unfortunately we plan on moving into the $800 unit, so after we move in our income will only be $1000 a month. The good news is there is the possibility of finishing off the attic of this home and making the 2 upstairs units into split level apartments. Once we do that we estimate that each unit upstairs would bring in $750 a month, but we will cross that bridge when we come to it.
Approximate after renovation rents of units 750, 750, 850
As of now we are not living for free, we still owe approx $50 a month for the mortgage as well as our own utilities, and obviously repairs/ maintenance to the building.
Money down:
The closing earlier today was the most exciting. The short story is we used FHA financing and after credits from our lender, credits from the seller, and security deposits we ended up walking away with positive $2,440.00 cash. Purchasing my first investment with no money down, and even gaining some money was a real win for me and hopefully a good start to successful REI!
Please feel free to post any comment/concerns. Thanks again BP for all the help, I wouldn’t have been able to do it without you!
Seems like a great deal! Good on ya!
Value. Cash flow.
Keep up the good work! On that note, when's your next one?!?
Keep us updated.
VS
thanks for the words of encouragement everyone. It really helps to hear other investors approve of my first deal!
@Andrew Machado before anyone starts giving me more credit than is due, I honestly did not have this outcome planned out before it happened. Along the way I learned from biggerpockets a few tips that lead me in the right direction and ultimately to the final outcome. I would say there was some luck involved. My advise to beginners would be, don't be afraid to make the first deal. You can study and try understand everything before you buy but the truth is you will never know everything. Personally I think I know the basics but that's about it, I realize I have a ton of more research to study to do on REI but, I took the leap and made that first deal and now I'm living rent free and having my mortgage paid by my tenants. Possibly most importantly I'm learning the real life lesions of being a landloard, things a book or class could never teach.
@Vince Harrelson thanks! I'm still looking for my next deal, probably another buy and hold but I am interested in doing a flip, just to gain some experience and more understanding of REI.
This a good thread with good advice. I'm looking to do something similar in the coming months and it gives me great direction. Congrats on the success.