Follow Us on Social Media

email icon rss icon linked.in icon google plus icon twitter icon facebook icon

BiggerPockets Works – Don’t Take My Word For It

by Ben Leybovich on December 31, 2013 · 10 comments

  
BiggerPockets Works

BiggerPockets is the best resource online for start up real estate investors – it works.  New investors can learn through the articles on the Blog, and by asking questions and communicating with experienced players on the forums.  It’s incredible the value that is here indeed!

Today I have a treat for you.  Two days ago I received an email from a fellow BPer named William.  He is a new investor who has benefited from all that BP has to offer.  I received his permission to share the contents of his email with you, because I think that his experiences in his own words should serve as a heck of a learning opportunity for you guys, as well as a great motivation – if he can do it, so can you!  Read this carefully; there are a lot of nuggets of valuable information in Williams account of his experiences:

BEGINNING OF EMAIL (I’ve done very minor editing to this)……….

My First Deal!

Ben,

I added you on LinkedIn a month or so ago and told you I was working on my first deal and you wanted to know the details. So sure enough, I wanted to give a shout out to you (most of all) and BiggerPockets for helping me with the knowledge to close my first deal. It was not easy (at all) and was drama filled. There were more hoops to jump through than a circus act and I just felt like I had to share with you.

Forgive me for the length, this got crazy long but it’s the full story of the saga of my first real estate deal.

A little background to my situation for reference, I’m a recent college graduate (May 2012) lucky enough to find a career in my field of study. I live in GA.

I had been searching MLS for a while and wasn’t having much luck. I had put in some offers, but I didn’t get accepted. I had my criteria…I wanted to owner/occupy. I wanted at least a triplex, aiming for a quad-plex, It needed to be in mostly turnkey shape, and it needed to be less than 20min from my work. Pretty tight criteria in a market like Atlanta’s that is in an upswing.

I got lucky, looking through Trulia I found a Coldwell Banker listing for a triplex that was not listed on MLS. It fit all my criteria. It even has a brand new roof and two of the units had long term tenants. I was so excited! They wanted 93k and after running the numbers in my excel sheet, Id be netting over $100 a door at that price with me living there! I made an appointment to see it and drove by it later on my own and made an offer of 93k. I got word back a day later that another potential buyer was interested and they wanted us to go look at it and resubmit a final offer. I went and checked it out and wow was it in great shape, I came to find out later that the owners had owned the property for almost 30 years and has just sunk 20k into renovating it. I found the highest I wanted to bid was 97k with seller contributing 5k into closing costs, so I resubmitted and waited…

That weekend I got a call…my offer of 97k had been accepted! I was over the moon. I thought “Well the hard part is over now, smooth sailing.” Oh wow was I wrong.

Now it gets serious – I had to start doling out nonrefundable money. Because I was low on capital, I elected to get an FHA loan, so an FHA appraisal is necessary. I spent $700 on an FHA appraisal and $300 on a professional home inspection. Home inspection comes back, minor leaks, minor electrical issues, its a 1960′s era home, that’s expected, but everything major is in great shape.  I thought to myself, “Okay, two of the units are getting $630/mo and the other is getting $450/mo and the place is in great shape, it HAS to get appraised at my asking price.”

Nope.

FHA Appraiser comes back and appraised it at 83K!!! Apparently the 3rd unit was converted from a basement and they never got the property rezoned, so legally it was only a duplex so the appraiser couldn’t count the third units income. I was devastated….were they going to back out? I had already spent $1000 I couldn’t get back. I was just hoping the seller would come down…

Around this time I find out that the seller isn’t just one person, its a father/daughter combo that owns 80%/20% respectively. The daughter had been maintaining it and was very reasonable. The father turns out to be a hardball tax attorney that doesn’t compromise. He dropped his price to 89k with no sellers contributions and as-is. 

This put tremendous financial strain on me because now it goes from me needing $4k to close to me needing $10k to close. I didn’t know how I was going to do it and was really upset. My family is not very well off so it wasn’t like I could just ask my mom and dad for seven thousand dollars. 

After exhausting all my options. I worked out a deal with my aunt and she basically gifted me the money to fill the gap. 

So now I had my financing covered! They accepted and signed the amendment for the reduced price of 89k! All is clear, right?

Nope.

See the tax attorney 80% owning father wanted to sell the property under this general partnership entity that he formed with his daughter to shield himself from the majority of the taxes. When he found out he couldn’t do this because the title of the deed was in his and his daughters actual name’s, he threatened to back out. I had to have the closing attorney remind him that he is in a binding agreement and opens himself up to get sued by me before he would drop it and move forward!

Fast forward a week to two days before closing (which had gotten pushed back three times), I get a call from my loan officer that the FHA appraiser isn’t respecting my home inspector’s report on the heating units in the property and I would have to pay an HVAC guy to come out and write a report saying they verify the baseboard heating units are working and aren’t a fire hazard because he “smelled an odor coming from one of the units”. So I dole out another $160 dollars and get that done in a panic. 

Then I get a call THE DAY BEFORE CLOSING that I had to replace the locks on two of the windows and replace a spacer on one of the breaker panels or else they wouldn’t fund the loan….were talking $10 dollars in repairs…so I dash to Lowe’s get the fix, and send pictures.

FINALLY! We close just this past Friday and I feel like such a burden has been lifted off my shoulders. It feels great to own my own home and being paid and making a profit from living here. Your knowledge you shared here really helped me out and I wanted to recognize you for that. It’s not as easy as it seems and I’m just glad I stuck it out instead of walking away.

With my roommate moving in with me next month I’m expecting to net around $400 after putting %10 gross into maintenance reserves. I don’t think that’s bad for an owner occupied triplex! You’re the man. 

Thanks Ben and thank you BP!

END OF EMAIL……………………………………..

Conclusion

BiggerPockets is the best resource on the internet for a start-up investor.  If you are a new investor, and you came to BP to get help on your first, second, or third deal and you are not seeing results like William – you are not using BiggerPockets the right way.  It’s all here – learn and go get it done!
Photo Credit: nickcummins

Email *
  



{ 10 comments… read them below or add one }

Sharon Tzib December 31, 2013 at 8:14 am

Wow, congrats to William, and I’m glad he ended his email by saying he was going to be funding his maintenance reserves, because that’s my biggest concern for him. Hopefully his biggest takeaway was there’s no such thing as a smooth escrow, especially if a lender is involved, until the day it closes!

Very motivating post, heading into 2014. Happy New Year, Ben!

Reply

Ben Leybovich December 31, 2013 at 8:42 am

Hi Sharon – haven’t seen you around the site for a few. Good to see you back!

Yes – I found William’s email motivational as well going into new year. He’s stepped out of the comfort zone, but he’ll be just fine. It’s exciting to know that taking the time to contribute to BiggerPockets results in success stories such as William’s!

Thanks so much for your comment and see you around Sharon!

Reply

William December 31, 2013 at 8:53 am

Ben,

Thanks for sharing my story! It was a difficult but rewarding experience. Can’t wait to do it all over again when the time comes. Thanks again for all of your help.

-Will E.

Reply

Gerald Harris December 31, 2013 at 9:12 am

Great Job William
You did it! Your first deal and it is cash flowing. Back in the early 1990′s I had an opportunity to acquire a 4 unit apartment complex due to fear. Had I been thinking correctly I would have bought it and rented out the other units. The great part about your email is that you took action. No matter what obstacles came your way you focused on the end result and closed on your deal. This is a testament to all new investors to give them hope in not giving up. Its a great feeling to know that you have structured a situation that will benefit you. Happy New Year!

Reply

Joshua Dorkin December 31, 2013 at 9:13 am

Great post, Ben. And William — congrats! These are the stories I love to hear.

Reply

Joel December 31, 2013 at 9:34 am

(I realize this is frowned upon).

Disguising a loan as a gift is more than frowned upon. There are usually affidavits signed stating it is a gift and that there are no outside arrangements.

The reason is it affects your DTI for the loan and being approved. If you have more loan obligations to pay that are not disclosed then you have a higher chance of failure. It’s water under the bridge now it seems from your posts William.

Reply

Adrian December 31, 2013 at 11:09 am

This is what I was going to say as well. This is not just “frowned upon”, it’s probably mortgage fraud. I would be very careful about cutting corners like this.

Reply

Dawn Anastasi December 31, 2013 at 10:24 am

Congrats William!

I was once asked about loaning someone $2,000 to help them buy their first home. They wanted me to sign something stating it was a “gift” not a “loan” and I did not do it. Everything worked out in the end, however. I just did not want to lie about it and sign my name to something that wasn’t true.

Reply

Michael Gammage December 31, 2013 at 11:08 am

This is what its all about!!! Thanks BP, Ben and the contributing writers.

Ps. I’ve listened to BP Podcast 14 five times and it’s like 50 first dates.

Thanks again.

Reply

Ceasar January 1, 2014 at 3:38 pm

Congratulations and good learning experience, i hope to find myself in your shoes soon enough. Finding my first multi-family that is.

Reply

Leave a Comment

Comment Policy:

• Use your real name and only your name in the field designated for your name.
• No keywords allowed as anchor text in the name or comment fields.
• No signature links allowed under your comments
• You may use links in the body of your comment, but it must be relevant to the discussion at hand, and not merely be some promotional link.
• We will have NO reservations about deleting your content if we feel you are posting merely to get a link without adding value to our discussion.
If you add value, but still post keywords, we'll use your comment, but remove your link and keywords.
• For more information about acceptable practice, see our site rules.

Want your photo to appear next to your comments? Set up your Gravatar today.

Previous post:

Next post: