How prepared did you feel going into your first deal?
New to Real Estate · Nixa, MO · Member since 2019 · 64 posts · 50 votes
How prepared did you feel going into your first deal?
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Investor · Fort Collins, CO · Member since 2014 · 123 posts · 329 votes
4y@Blake Ramsey Think of it like being a student when you're researching for a paper. You look in the bibliography of an applicable book, and rent out all those books. After a while, you've found that the bibliographies you are referencing all reference books/articles that you've already examined. At that point you know you've pretty exhaustively covered the topic.
In a market, I talk to as many vendors as I can - property managers, contractors, appraisers, realtors, etc. After a while you start hearing the same names and promising neighborhoods over and over again. Same with deal analysis. If you conduct enough of them, after a while you'll KNOW when you see a good deal and be ready to pounce. Trust your numbers, trust your team, and have fun! If you either don't have the bandwidth or still feel like you're just not sure, consider a turnkey company as a way to tap into an existing, proven network while also having a mentor to provide some guardrails for your first deal. That's what I did with Rent to Retirement. Either way, the biggest thing is to pull the trigger! You'll get a great education along the way and be even better with each deal.
84 Replies
- Rental Property Investor · Erie, PA · Member since 2015 · 1k+ posts · 2k+ votes4y
Great question. I felt really good when I found my first property. The numbers made sense (and then some) and the property (a 4-unit) was C-Class but in a pretty good neighborhood surrounded by SFH (which I consider a good thing).
The seller made a lot of the repairs I wanted - a few didn't get done because I didn't walk the property prior to closing to make certain all repairs were done (lesson learned). Over the past 5+ years I've fixed it up and rehabbed it. One unit has yet to be worked on (inherited tenants still live there) and I've had no issue renting the apartments out.
When I started I had watched a lot of the Brandon Turner webinars where he talked about the 2% rule. I know some BPers hate that rule but it has worked for me in my market where I've exceeded the 2% rule (my record at purchase is 3.68%). I like cash flow and don't factor in appreciation as it's minimal in my market, plus I buy-and-hold so appreciation is not a factor for me (and I'm less likely to be reassessed if it's low, which is cool).
I had watched a few dozen Brandon Turner webinars (which are geared toward new investors and the info is somewhat repetitive which drummed it into my mind) and so I was confident I knew the difference between a good and bad deal.
- Investor · Fort Collins, CO · Member since 2014 · 123 posts · 329 votes4y
@Blake Ramsey Think of it like being a student when you're researching for a paper. You look in the bibliography of an applicable book, and rent out all those books. After a while, you've found that the bibliographies you are referencing all reference books/articles that you've already examined. At that point you know you've pretty exhaustively covered the topic.
In a market, I talk to as many vendors as I can - property managers, contractors, appraisers, realtors, etc. After a while you start hearing the same names and promising neighborhoods over and over again. Same with deal analysis. If you conduct enough of them, after a while you'll KNOW when you see a good deal and be ready to pounce. Trust your numbers, trust your team, and have fun! If you either don't have the bandwidth or still feel like you're just not sure, consider a turnkey company as a way to tap into an existing, proven network while also having a mentor to provide some guardrails for your first deal. That's what I did with Rent to Retirement. Either way, the biggest thing is to pull the trigger! You'll get a great education along the way and be even better with each deal.
- Member since 2022 · 2 posts · 2 votes4y
@Blake Ramsey I am on the same spot as you are at the moment. looks like all we can do is just go for it. Hope everything goes well, this place has SO much information it is crazy.
- 4yPeter MckernanBusiness MemberResidential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes
@Blake Ramsey Nice! Good for you on your first deal and honestly, everyone feels different, some people do a ton of research to make their decision feel more confident and some just randomly jump into it and let the experience build their confidence. I was the one that jumped in did not run numbers and closed my eyes (I do not recommend this) and when we looked back we bought at a good time. The best piece of advice that got me through that first deal that we still have today and have had a great tenant in it 9 years later was knowing the area we invested in and knowing the rents verse the mortgage (we did not know or look at the rental calculator). Two things: know the area (or work with someone that really knows the area) and know your price point.
The McKernan Group4.957 Reviews - Investor · SoCal · Member since 2021 · 12 posts · 19 votes4y
I am closing on my first next Wednesday. I was focused on Columbus, OH and I felt the numbers were too risky for being out of state and lack of experience. I put one offer in at 85K (10K over list) and was beat out by a 110K offer. I switched to Texas and was beat out on the first two, but got the third which was the best of the three. I was under contract in two weeks after I switched to Texas vs a little over a month in Columbus, OH. I used a hard money lender. Here are some things that I learned that I didn't know:
-I was requesting rehab funds. The lender wanted a bid from a general contractor plus insurance and their info before closing and access was only available once for the appraiser. I was able to get a GC in there at the same time that had great reviews and he ghosted me. I got one or two text replies from him, but no phone call or bid. Now I am funding the rehab myself.
-The lender was requesting 1 million dollars general liability. I should have asked why, but got an umbrella policy anyways for my personal house, cars, and this investment property. It turns out it wasn't needed because I was funding the rehab myself.
-The lender also required storm insurance which was harder to get than I thought, but made 50+ calls since only TWIA in Texas provides it, but they don't sell directly to consumer. They just have a list of 1000 of agents that can provide it on their website. Some of the people I called didn't even know they were on TWIA's website, but got it worked out.
-All property management companies are pretty similar in fee structure, but if someone isn't calling you back when they are trying to get your business, I doubt it will be better when they have your business.I will end up using a property management company to oversee the rehab and for leasing. I am not interested in taking tenant calls or finding tenants and the property will still cash flow each month with all money out and little extra on the refi. The hard part now has been waiting and not moving too soon on the next deal in case anything else comes up that I wasn't expecting.
But I felt ready when the numbers made sense. My strength is probably on the valuation side based on my prior work experience. Everything else I made work as it came up.
Hope this helps!
- New to Real Estate · Nixa, MO · Member since 2019 · 64 posts · 50 votes4y
@Karl B. I read a post from bigger pockets (I'm sure it came from somewhere else first) that said "You're not chasing properties, you're chasing deals." Maybe I just haven't found a deal that really speaks to me yet. I'll definetly keep searching though. Thanks for the reply Karl!
- New to Real Estate · Nixa, MO · Member since 2019 · 64 posts · 50 votes4y
@Trevor Fleck I like that comparison. I guess I just need to continue analyzing deals to gain more confidence in my ability to distinguish good properties from bad. I don't think I'll ever feel 100% confident in my first deal so at some point I'm going to have to take a leap, but I'll make sure I'm as prepared as I can be.
What kind of questions are you asking vendors when you first reach out? Is it better to ask them for their judgment on local markets rather than asking for specifics I am looking for like certain neighborhoods, housing types, etc.?
Thanks for the reply Trevor!
- New to Real Estate · Nixa, MO · Member since 2019 · 64 posts · 50 votes4y
@Francisco Barrientos I know right! I recently had a breakthrough and decided that I was just going to make posts on here every day. It used to be if I had a question I'd just search on here to find answers instead of actually making a post and interacting with the community. Now, I feel so much more engaged and involved, its really helping me absorb a lot more information! Good luck on your journey Francisco!
- New to Real Estate · Nixa, MO · Member since 2019 · 64 posts · 50 votes4y
@Peter Mckernan Sounds like you had a little bit of luck in your first deal haha. That really gives me confidence though because sometimes I feel like if its not a perfect property with perfect numbers its going to bankrupt me. But I'm starting to learn from a lot of people on here that even if its not perfect, as long as you're smart and creative about it, there are ways to make it work that won't send you into financial ruin. I'm not going to chase after deals that I know are no good, but I'm giving myself a little bit of slack when finding my first deal so I don't hold off 5 years waiting for THE perfect property.
Thanks so much for your input Peter! - New to Real Estate · Nixa, MO · Member since 2019 · 64 posts · 50 votes4y
@Vince Abernathy Just for context, where are you based out of? What made you choose to buy property elsewhere rather than local?
Thank you for walking through your process of finding a property and talking to lenders and pm companies, its cool hearing about someone's first experience as an investor with those guys rather than someone like Brandon Turner who's delt with hundreds of them (Love you Brandon, haha).
Really appreciate you taking the time to reply Vince!
- New to Real Estate · Nixa, MO · Member since 2019 · 64 posts · 50 votes4y
@Trevor Fleck I just saw that you're in Raleigh! I'm based out of Springfield, Missouri, but I'm really interested in the Wilmington area, possibly for short-term rentals near the coast! I know you guys aren't exactly neighbors, but do you have any insight on that area?
- Investor · SoCal · Member since 2021 · 12 posts · 19 votes4y
@Blake Ramsey I am in SoCal, so the choice for other places was made for me $$$ haha
I took out 50K on a cash out refi to get started. In hindsight, now that I am close to closing on my first property, I would have taken out more, but was being overly cautious.
I have family out side of St Louis. They have been sending me photos of the snow all day. Stay warm! - New to Real Estate · Nixa, MO · Member since 2019 · 64 posts · 50 votes4y
@Vince Abernathy I was thinking it might be somewhere out in Cali haha! Did you start out looking out of state or were you looking local first? Was there any added sense of pressure for you once you chose to look out of state?
Yes there's a ton of snow over here, seems like all the mid-west is getting blanketed today with it!
- Real Estate Agent · Syracuse, NY · Member since 2020 · 137 posts · 107 votes4y
I started out househacking a property in Houston, Tx. I had done a fair amount of research beforehand but I knew with househacking even if something went wrong it would be okay because I was living in the property.
- Lender · Kansas City, MO · Member since 2016 · 142 posts · 71 votes4y
Go for it you will figure out the details you need along the way. You can never prepare fully and you will always be able to do it better, I would recommend buying your primary as a live in flip or house hack first, it is hard to mess up if you approach the purchase with just a few calculators and make sure you have some equity starting off by buying it at a discount. YOU CAN DO IT
- Investor · SoCal · Member since 2021 · 12 posts · 19 votes4y
@Blake Ramsey I was always looking out of state. For example, I am buying a place for 135K with 20% DP in an A+ area. I am not sure where I could find that in SoCal, but if I could find it, it definitely wouldn't be in a good area.
Since I found an area I like out of state, I will try to stick to that area and build a network of good vendors, but won't be married to the area. It probably just the way I value properties, but I have found way more potential deals in Texas than I did when looking in Columbus, OH., Louisville, KY., or Atlanta, GA. area or maybe I was just late to the party in those areas.
I keep remembering extra things as I type haha Another thing I would do that might be obvious some, but not all, is line up your lender before you have a deal you like. I tried getting one when I found a deal I liked in Columbus and they were very slow to get me the things I needed. After that, I started talking to lenders to figure out who had the product I needed and then who was the most responsive. Get someone's name with the lender, talk to them, build a relationship. When I first went under contract, I would text my POC at random times throughout the day and get a response within 10 minutes. I am doing the same process now for the refinance portion.
- Dallas Tx · Member since 2021 · 112 posts · 31 votes4y
@Karl B. Which market are you In ? Dallas market sucks
- Canton OH · Member since 2019 · 41 posts · 39 votes4y
@Blake Ramsey
Good question. Here's what I knew when I bought.
1. I wanted to move out of my parents house.
2. I didn't want to pay rent.
3. I didn't want to pay a mortgage.
When I told nearly everyone I knew what 3 things I wanted they all said it didn't exist. I figured I'd buy a house and try to rent to friends, but then I ran into someone who suggested I buy a duplex and live in one side. He kept telling me to 'run the numbers'. I said "well my mortgage after collecting rent is $100 a month so the number's look good". Didn't look at anything else! Luckily it worked out. LOL
I felt great because I basically met my criteria. Had I known more maybe I would have hit this analysis paralysis phase a lot of people get into but I found that first hand experience worked best. And living on the property made me feel more comfortable.
Good luck to you!
- Dallas Tx · Member since 2021 · 112 posts · 31 votes4y
@Vince Abernathy is this your first property? I live in Texas and actually looking to buy q property in the next 10 months but outsourcing and investing out of state long distance is definitely on my radar, how did you do this? Have you done several deals ? Sounds like a lot went in!
- Houston, TX · Member since 2022 · 9 posts · 7 votes4y
For people that recently or are close to buying their first property, are you spending most of your capital on the down payment? Feels that way for a property I found with great CoCR. Don't see how a second opportunity can be had without saving and stockpiling returns, which are minimal, on the first.
- Member since 2018 · 4 posts · 1 vote4y
Not at all prepared. I just pulled the trigger and glad I did.
- Investor · SoCal · Member since 2021 · 12 posts · 19 votes4y
@Juan Campos This will be my first deal (COE Wednesday). Its definitely more risky being out of state without a network in place, but putting in the extra time to read reviews on vendors, calling vendors, BP forum reading, facebook groups, etc. It also helps the property I am buying is a good deal with light rehab (make tenant ready plus paint, fixtures, and updating the full bathroom). I am also hoping using the property management's contractors that they will do good work and won't over charge. I assume the PMC uses these vendors frequently and they do solid work at a reasonable price.
- Investor · SoCal · Member since 2021 · 12 posts · 19 votes4y
@Cody Richard I am spending a good portion of my funds on the down payment and definitely couldn't do two deals at the same time right now. My plan is to start the refi as soon as I know the rehab costs so I can get the process going and hopefully have the appraiser ready for when the repairs are completed.
- Houston, TX · Member since 2022 · 9 posts · 7 votes4y
Originally posted by @Vince Abernathy:
@Cody Richard I am spending a good portion of my funds on the down payment and definitely couldn't do two deals at the same time right now. My plan is to start the refi as soon as I know the rehab costs so I can get the process going and hopefully have the appraiser ready for when the repairs are completed.
Sounds like a plan but I'm focusing on a buy and hold, cash flow portfolio. The issue I'm having is I can't get into my first deal without dumping just about all the cash I have as the 20% down. It's rent-ready with a tenant but that being said, the CoCr is some 20% but monthly CF is around $300. I intend to hold the majority of the assets I acquire long term but emptying the coffer for $300/month will take years to get into a second deal with a partner/investor. It doesn't appear hard money loans are appropriate for my strategy but then again I'm just beginning so alternative lending is a very new concept to me.
- Dallas Tx · Member since 2021 · 112 posts · 31 votes4y
@Jacob Trogan
I'm in tx looking at my first single family home for my first investment
Trying to stay under 250k preferably around 200 but even then I've been looking and searching on MLS, zillow, realtor, running the numbers and hardly anything cashflows, I'm taking cap-Ex,vacancies,maintenance,management,taxes mortgage insurance since I'll be using fha, and I surely endup with either 100 in cashflow or negative cashflow 1 out of 100 properties brings me at most 100 in cashflow, bit there's hardly any homes!
I have 10 months to get into my first property that's when I'll have enough saved up for my down payment.. but I see the market and how it is and I think I rather wait not really sure what's going to happen in the next 10 months though, any advice ?
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