My first deal...

5 Replies

Long time, first time...

I'm closing my first deal this month.

A friend I use to work with bought several houses a few years ago.  He was relocated for work and asked me to manage the properties.  He paid cash for these and is looking to get some of that back.

He offered to sell me one of the homes.

The good: I've managed the property for several years and know what it needs and what's been done...Takes in $699 with about $300 cashflow...Tenant has been there for 2 years and is about to re-sign 2 year lease, pays every month on time...Has a garage apartment that will take in about $400/mo...It's about 3 blocks away from my house.

The bad: The garage apartment needs a considerable amount of work, which I was expecting...

A couple of questions:

My lender asked why get a loan if I can get pay cash?  Since this is my first deal, I felt more comfortable writing a check for 15k rather than 55k.  Do you have any opinion one way or the other?

I noticed the tenant screening on BP.  While I don't need it immediately, does anyone use it and how comprehensive is the info provided?  I've seen how landlords will require tax returns if self-employed.  If they are not self-employed, is income part of their screening process?


What kind of rate are you borrowing at from the bank? Would your buddy consider owner financing with the same amount down? At least you could potentially save points/origination fees and maybe get a better rate. 

The added bonus is that the owner financed loan won't be visible to the bank in the future when you go back for money you really need to do a deal.

Best of luck however you proceed!

Opm, that's why. Seems like a no-brainer. You want to have free capital to invest in other projects. Why tie up all your capital to maybe recoup it in ten years?

@Jeff Baillis - I was able to lock in 3.875% for my loan with 25% down.  Principle and Int = $193.

Originally posted by @Phil DuChamp:

@Jeff Baillis - I was able to lock in 3.875% for my loan with 25% down.  Principle and Int = $193.

 Also, We discussed owner financing but it turns out that wasn't an option...  

So it's been 9 months since I was supposed to close on this property.  As we went through the process the appraisal came through at the purchase price, but the property didn't pass underwriting due to "exterior paint".  This was a kick in the shorts and took the wind out of my sails for some time...

Fast forward: A few weeks ago, there was an electrical issue and totally gutted the front bedroom and charred the rest of the house.  The owner had a couple and child in the house under a rent to own deal.  Luckily no one was hurt and he had another vacant property in the area to set them up in.  A reminder to keep your property insured and that your tenants have renters insurance.  Not the case for these folks.

Now I'm developing my plan for my next, first step. Looking at going the turnkey route and have been consuming everything in the way of reviews/podcast/horror/success stories. I've come to the realization that I don't have the bandwidth to handle a BRRRR which seems like the most logical way to achieve my goals. Turnkey is a close second I think, if I can manage it correctly.

I've gotten a few leads on local turnkey providers and continue to look for the perfect property.  Any leads in this area are appreciated.

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