Your first deal
Handyman · Alpine, UT · Member since 2009 · 46 posts · 22 votes
Your first deal
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Rental Property Investor · Baltimore, MD · Member since 2009 · 624 posts · 559 votes
16ySat in a room of 30 other investors when this 23 year old kid presents an 8 property 10 unit deal... gross cashflow of $4700 a month. Asking price $280K which included his $50K wholesale fee. I had the deposit check filled out before he finished talking.
Financed it conventionally (only deal I ever did that way). Appraised for $453K. Took that $173K of equity to a bank and cross-collateralized it into a $500K line of credit.
Upside managed the 10 units to where they were generating over $10K per month in gross rents.
Sold everything in 2006 for over $1.2Million.
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- Visalia-Fresno, CA · Member since 2009 · 1k+ posts · 863 votes15y
5/2 Sfr, 107K put 20% down, financed the remainder with a bank 30yrs at 7%. $1200mo rent. Monthly cashflow is around $500.
Since then I've learned to buy two properties for the same price and get more cashflow. Why pay more....
- Full-Time Investor · Charlotte, NC · Member since 2009 · 2k+ posts · 1k+ votes15y
an agent just tried this with me the other day!!! i said, go ahead and buy it and do it yourself lol....then he asked if he could use my cabinet guy, contractors, and hard money lender....wtf
- Handyman · cedar park, TX · Member since 2011 · 2 posts · 0 votes15y
1st post about my 1st deal.
2 fam in st.louis. i bought it from an investor for 32k in 1998. he gave me some cash back at the closing for repairs(cosmetics). Had it fully rented in 1 month and sold it 3 years later for 61k. I remembered buying the Carlton Sheets program in 1996 and he was on it!!!! - Investor and RE Mentor · Miami, FL · Member since 2010 · 560 posts · 219 votes15y
The first deal is the most difficult. All the details, from research to writing the first contract and so many questions. It does get easier though, down to a routine: it will get to the point that you will write several contracts at a time and see which ones will work out.
If you can have a mentor that can help you in the beginning phase, that will definitely jump start your real estate career: you will be more confident and reassured.
As many books and courses that any investor reads, there are still questions and exceptions to the rule. A difficult first deal can scare a new investor away.
Real estate is not an easy and fool-proof business, but if you can get over the initial learning curve, it is definitely a very rewarding business with unlimited possibilities.
In summary ... any new investor should have a mentor for the first few deals. - Investor · CA · Member since 2010 · 150 posts · 40 votes15y
I am at the home stretch of my first deal, and thought I'd share my experience.
My goal was to purchase a recent rehab from a veteran flipper and hold for the long term.
Now that I knew my style of investing, it was up to location. I live in the California Bay Area, and searched locally until I found that the type of cash flow I'm shooting for wasn't sustainable, and made me more subjective to require an appreciation.
I then researched properties in OH, NC, FL, TX, TN. I first looked for properties within a certain price range, with a certain cash flow criteria. After I found that each location had these types of houses, I lowered my research to certain cities within OH / NC / TX and researched local government, employment situations, population changes, and added some of my notes of historic principles of the area and other variables of my own. After getting it down to a select few cities, I then started shopping for property management companies (since this is a remote gig).
I networked with realtors (investor friendly), wholesalers, investors and residents of the area to find recommendations of property management companies. After compiling the list of property management companies, I sent an "Interview" worksheet to all the property managements with very specific questions, to gauge response time, response methods, and attention to detail of responses. One of the many property managements was very responsive and the only one that answered all questions in the format I was hoping, and mostly with the answers I wanted. However, I chose the top 3 and interviewed them further, until finally solidifying that I found a trusting and worthy property management company.
Now that I found my property management company, it was time to start looking for properties. I sifted through assessor records for people who owned many homes, or often bought and sold. This was a criteria I looked for to help find investors that I'd want to buy houses from.
I then contacted several companies / individuals locally and asked for listings of their properties. Finally, I found 2 houses I liked, and 1 owner owned both of them.
Now the fun began. This offer was written at the beginning of December and I was pre-approved for a mortgage well above the range I was looking in. I had the inspections done very shortly after, and after getting the list of repairs, I decided that prior to going forward with this one, I wanted to make sure it was the one I wanted. I then ordered an inspection on the other house I liked, but hadn't yet put an offer in on.
At this time the loan process had started on the first property.
I then made the decision that I'd want to spend the extra 10k on property 2 instead of going ahead with property 1.
I write an offer, and null out the existing (meaning I explained to the owner that I wasn't going to go with the first one using the inspection contingency).
I then re-do another loan application, and get it all started, and it looks like it's going to go through. During the holiday's I was notified that it was going to be a little bit longer since the risk assessment department wanted to look at a few things, and wanted a written letter that I had removed myself from the other contract per the inspection contingency. Done.
Then the new year comes, and I'm told "Sorry, we can't do your loan, it's under XX amount, and we can't do it sorry.". Mind you, 3 weeks have passed with the KNOWN amount on the offer. Not to mention, it was a question I asked up front.
Now onto lender #2, they tell me the same thing.
Now onto lender #3, he says yeah I'm not going to make enough on origination and the secondary market is horrible for this high cost loan, sorry.
Now onto lender #4, this servicing major bank said the amount didn't matter. SCORE. Now we're rolling. We enter into contract, and they order the appraisals, and get everything done pretty quick. We're into underwriting and the risk department has the loan papers when it's kicked back and denied after about 3 weeks because the house had been purchased within the last 12 months. They had a guideline where they wouldn't fund an investment property that has been flipped / sold within the last 12 months to the seller. We're now into the beginning of Feb.
I have a big long list of things that I ran into with financing and contact another bank. I contacted both a commercial and residential loan officer. They took the list and talked within themselves and confirmed that they too had the 12 month investment property limitation which looked to be tied to a fannie / freddie guideline. However, the commercial loan officer indicates that it's a residential loan limitation, and doesn't apply to commercial loans, and since I was looking at a 2 unit, that it would qualify as a commercial property. I get him all the numbers and decide to apply for the loan with personal guarantee without utilizing rents in the income to cover part of the debt services.
This process is going by quick, and the lender has been awesome.
Mind you, I'm mentally beat right now, the investor keeps asking "what's going on".
I tried to be conservative and re-use the appraisal from bank a with bank b. After a full week of going back and forth with the appraiser, bank a, bank b, rels and the seller we finally get everything bank b needs to reuse the appraisal from bank a. Score one for me.
Everything else has been pretty smooth with the exception of me being in a 5YR ARM w/ 20 yr Amortization. All my original numbers were based on 25% down w/ 30 yr fixed, and not 20% down w/ 20yr amortization. So the numbers came up a little worse then I originally wanted. But that's fine, I just want to get my feet wet at this point.
That brings me to today. I'm a day or so from everything being recorded, and getting my first rents (everything should be done by the 1st of March).
I'm nearly a real estate investor (outside of throwing money into REITs like CYS / CMO / NLY).
What I learned:
* NEVER GIVE UP BECAUSE OF FINANCING. Even the selling investor seemed impressed with my ability to press on as I kept getting weird answers and rejections with regards to financing.
* Shop, shop and shop. The shopping is free, the purchasing is what costs money. So make sure you want what you buy.
* Numbers aren't everything for your first property. Your first property will be great for learning, and hardening long term numbers. Don't just go buck wild and not use them, but don't back out of a deal because it doesn't hit your numbers. Because at that rate you may never get over that hump.
* Financing sucks
* REI takes a lot more time then some total passive income scam. At least the beginning process for me did.
* Appraisals are a MAJOR deal with valuation. My valuation went down 5k in offer because of appraisal. The seller was livid because of the choice of comps (1+ miles away, 1.5 year old sales all while newer closer and better comps could have been chosen to support the offer price).I learned more, but I've written so much already I forgot where I was going with this all.
My numbers:
Offer: 65k
Sale Price: 59K
Down Payment: 20%
Monthly Payment: 325 (PI)
Expenses: 420 (TI + Utils + PM)
ROI: 16.5%
Cap Rate: 10.0%
Cash on Cash: 10.3%
Expenses / Income Ratio: 54.6%Again, I wanted better numbers but moving it to 20yrs thwarted all of that.
I know some will say I didn't do well, but I did it. I got a property, and I've got my skin in the game (well almost a few more days).
I must thank ALL the people who have answered questions, given me support on the forums or via contacts through email from BP. It's been a wealth of knowledge, and a good pointer on things to look for.
- 15yZach SikesBusiness MemberResidential Real Estate Broker · Edmond, OK · Member since 2011 · 452 posts · 183 votes
The first deal that I was a part of was ran by my family. It seemed like I did a lot of the actual work, but it was great experience. They bought 4 4-plexes for a total of 16 units in a small town in northern Oklahoma where we lived. Bought it for 300k, and it needed to be completely gutted. I did a lot of the gutting and rehabbing (mostly on a summer off from college). Around a 100k later we sold for 500k to an investor from out of state. Everyone in town was happy to have those trashy places cleaned up, and we made some good money doing it. Wish I got a taste of the money, not just the experience! :D
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Homestead & Co4.9172 Reviews - Real Estate Investor · Cda, ID · Member since 2009 · 10 posts · 0 votes15y
My first deal is still going..... one year later! What a great learning experience, but I tell you I am out of pocket on this baby. I am writing a report about it and I'm going to share it with a comparison to my next property that is night and day different to this deal.
Can we say spread! You have to make sure that you have enough of a spread to make the deal work. And you have to know closing costs. One of my issues was that I jumped the border to a different state and didn't realize that they had some taxes associated with a sales. There's a few thousand out of pocket. Also, pricing is so key. Trying to go near market value and believing I could get it to the death has done that--killed the deal. But it is all a learning experience. So, not only did I get wiser, but I've got some real experience to share and nothing but success after this deal! - Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes15y
I didn't understand marketing, negotiation, or contracts. I did know how to figure out what a house is worth, and I knew I could find someone who could tell me how much it would cost to fix the property. I decided to buy a house from a wholesaler. Makes perfect sense; the wholesaler did the marketing to find the property, negotiated with the seller to get the contract. All I had to do was fund it (hard money), fix it up and resell it. I used a broker to that last part. I basically came in with the desire to succeed, signed for the money, and watched all the players do their part. At the end, I was left with a $26,000 profit for playing project manager.
Good luck! - Rehabber · South Bend, IN · Member since 2010 · 13 posts · 1 vote15y
Hey guys here are the specifics on my first deal.
I bought a home from a wholesaler for 14k in 2009 and brought in a buddy to help me with the work. In about 3 months and after spending about 8k in repairs we sold the property for 43k after 11 Dom.
It was tough doing all the work but the experience From it really helped me learn to talk with/ hire the right contractors.
On to the next one! - Involved In Real Estate · Hyattsville , MD · Member since 2011 · 298 posts · 256 votes15y
Everyone's first deal seems so great - Mine not so much. :D
2002 I bought my first not primary home. I worked in mortgage so I knew how to do it with less than 5% down the works. My realtor while out looking for a house tells me that he knows a couple- a pastor and his wife that were looking for a home to rent, their landlord was selling the house they were in and needed to find something quick. RED FLAG. I could rent them my small 2 bedroom primary while I moved to this bigger house. I thought what a wonderful idea. The people came and saw my house and thought it was too small to rent.
While looking I found a foreclosure carpets were torn, needed new roof and a bunch of other repairs but it was a 3/2 bath home not far from my other house and I thought if the tenants like house then I could buy, rehab and rent to them. They agreed to rent it and I agreed to not charge more than their current rent of $1100. I was getting the house for 87k. My uncle who is a GC was doing all the work so my rehab costs were mostly materials at the time. I think he did the whole roof for 1k, I found the cancelled check the other day.
Anyway I had had these people signed a lease before I bought the house- they agreed to live with their parents for about 2 or 3 months while I got the place ready. The husband came by the house while repairs were being done and I had hicckups along the way- the HOA was closing down so I didnt qualify for one loan- held up closing for about 2 weeks while I went to a new lender. I did the loan myself. My carpet guy bailed on me which held up the closing even more. While all this was taking place these people and I were having problems- I offered to give them back the security deposit and I would find a new tenant they told me if I did that they would sue me. RED FLAG
They also told me they wouldn't be able to come up with first months rent till after they were in the house. :roll: Too bad I didn't know at the time that was a RED FLAG.
So we kept changing the moving date and they ofcourse told me they were fine at their parents for the extra 2 or 3 weeks for the delays. So this friday they were to move in on sunday but the carpet was not done- my carpet guy had bailed and I found a guy in a scramble, he came out and did part of the work friday to finish the rest of the house on saturday morning. Friday night I get a call from them they have no place to stay RED FLAG. My heart went out to these people that I had let wait 3 weeks for my house- I couldn't let them sleep on the street(Me Dumb A$$) My uncle said no, I drove over and opened the door, they agreed to sleep in the living room where the carpet was done and in the morning me and the carpet guy would come over and finish and they could move in-In the morning, the carpet guy and I were there bright and early, they handed me back the keys to get the cut and I stayed there all day with the carpet guy while he carpeted and padded the rest of the house on saturday.
I didn't hear from them for the rest of the weekend, I thought how could they have no where to stay on friday and miraculous find on sat/sun and monday was a holiday. Tuesday I go to work and call the wife she said they no longer wanted to rent the house, I said why not come back and look it's all finished. I said okay I will return your $1100, she said no I needed to return more than the security deposit. I needed to compensate them for the entire time I had them without a home waiting for the house. I said I don't owe them anything except the money they gave me which was $1100 and they said to expect a law suit in the mail.
Three weeks later I found out I was being sued for 15k the max in the state for letting them live in a slum which they had so nicely taken pictures of while they stayed that night. Anyway I rented the house a week after they decided not to rent from me, that tenant stayed for 2yrs.
They with the picture and me being naive won a judgement for 3500. The judge gave them money for payments from the time they signed the lease until the court date which was months later. They eventually came to my job a few years later and garnished my wages, ofcourse the job then fired my royal behind 7 months pregnant nonetheless.
Okay this should be a cautionary tale if there was ever one. Sorry for the long post- You would think after that being my first experience that I'd never be a landlord again but HA here I still am, loving real estate more than ever. - Involved In Real Estate · Hyattsville , MD · Member since 2011 · 298 posts · 256 votes15y
Hey Jon,
I heard a quote from Tony Robbins once that said that most investors have a big massive loss and they can never get back on the horse again and that is what defines who they are for life. I have to say without a doubt that was one of the best life lesson/experiences I have ever had- Granted it ruined my credit for years and cost me a lot of heartache but you can't buy this stuff from a real estate guru book! It would have been easy to say oh tenants suck and I never want to be a landlord again but if the bank would give me the money I would own 1000 rental properties in a heartbeat!. Those people were con artist and they saw me coming with a sign on my head called Sucker but I tend to think of the positive and this experience thought me the value of screening your tenants. If you get a bad feeling- follow it. I eventually sold that home 2 yrs later for about 80k profit so they may have won the short run but I can almost guarantee that in the long run I'm the one that's winning. - Full-Time Investor · Charlotte, NC · Member since 2009 · 2k+ posts · 1k+ votes15y
awesome story ophelia..and an even better attitude...congrats on the deal
- Real Estate Investor · Winter Park, FL · Member since 2009 · 94 posts · 124 votes15y
My first was a wholesale deal.
While driving for dollars, I noticed a VERY small For Sale sign in the window of a home, listed by a Realtor. It was owned free and clear by the son of the former owner who had just passed. He was asking $50k for it, I offered $25k.
It was rejected.
6 weeks later, the realtor called to tell me the owner accepted my offer.
Put flyers out at the general meeting of the REI association I had just become a member of. An investor called, we went to see the home, he offered $32k of the $35k I was asking. I took it and made $7k.
Turns out the owner accepted my offer because 1. someone had vandalized the home and 2. it was the only offer he had received. I got him to fix the problem caused by the vandalism.
It still fascinates me how things just happen when you take action!
- Rental Property Investor · Knoxville, TN · Member since 2011 · 701 posts · 531 votes15y
I've been spending most of my time on another REI site for a while, figured it was time I joined this one as well.
I purchased my first property in Feb. 2010. I was finishing my Junior year in college and was determined to find a deal since there were so many out there. I purchased a 2700 sq. ft duplex that had been foreclosed on for $72k. Luckily for me the price dropped $15k 2 days before I made an offer and I negotiated another $13k of that. I was stoked because I didn't think it was a bad deal at $85k!
The property was older and had been converted by a weekend warrior in the 70's. We ended-up doing a total gut of the property that cost $35k, which was $5k over budget. I didn't have any major issues but the renovation process was h*ll and took almost 6 months. After purchasing the property I got an offer for an internship that I just couldn't turn down. In addition to working 40hrs a week, managing and personally completing a major renovation I was also taking 6hrs of Spanish in summer school so I could graduate this May. It was brutal, I was up at 7 am and typically not in bed until 1 or 2 am every night including the weekends.
It worked out though. I have amazing tenants and am even though I live in the larger side (1700 sq. ft) I am still generating positive cash flow of $120 a month. Not a ton of money but if I ever move out I estimate it will generate around $12,000+ in positive cash flow per year for me.
The numbers:
Purchase Price: $72k
Renovations: $35k
ARV based on appraisal: $140k
Equity: $35kI only used $5k of my own money, borrowing the rest from a family member. After the project was completed I refinanced the property using my gain in equity and repaid my family back and now own a duplex for free!!
- Rehabber · Alexandria, VA · Member since 2011 · 446 posts · 171 votes15y
Sounds like a great deal Christopher! I would have never had the cahones to attempt something like that while in school.
I am a recent grad however '10 and looking to do something similar to yours (minus the complete rehab).
Could offer more insight on your operating expenses and how you came up with your cash flow? I'm curious as to how much you set aside for vacancies and repairs... Did you follow the 50%, 2% rule?
- Champaign, IL · Member since 2010 · 1 post · 0 votes15y
Newbie here....just finished first deal.
Bought a house in a short sale, it took quite some time to come to terms, two lenders were involved with previous owner. I was patient, stuck to my guns on valuation, and ended up with a 5 bedroom 1911 sf. house for $86k. I have spent $11k in repairs, which included a new roof, mechanicals are in good shape. Appraisal was at $110 with repairs included, which allowed me to carry more on the primary loan and not on my HELOC. I have a traditional 30 year mortgage, and utilized a HELOC for repairs and downpayment. Building in 5 year amort for HELOC payback and current rent rate of $1,350 / mo, I have net positive cashflow of $292 (before vacancy factored in). My goal is for buy and hold, this is my first property and I would like to buy more over time. I'm interested in finding cheaper sources of debt for future deals, while interest rates are ok now with traditional mortgages, the bank fees seem awefully high.
- Member since 2011 · 1 post · 0 votes15y
what is the gist of real estate? I am trying to get my feet wet and need some good starting info
- SFR Investor · York, PA · Member since 2011 · 11 posts · 1 vote15y
Bought in April this year at 36K (seller went down to take my price), assessment is 49.5K, comps are 52.5 to 55K. Renting out by the room (4 beds, 2 bath) while I serve as the onsite property manager. First renter came less than 30 days after I bought it, now all three rooms are rented out. Had success with turnaround time at 20 days or less. Average rent in area ranges from 800 to 1100, currently grossing 1025 a month.
Looking for second deal so I can move into next property and work on it so I can rent out 4th room and bring gross up to 1400. Target goal is 1500 gross by 2013.
- Investor · Virginia Beach, VA · Member since 2011 · 68 posts · 12 votes14y
Hi everyone
Just found this site today and am blown away by the knowledge and experience here.
I've been investing for a few years already and my first deal was a 3br/2ba REO for $160k. It needed a lot of work but had good bones, so after looking at a LOT of places, I took the plunge. 30-year conventional with 20% down. After that, my girlfriend (now wife) and I spent many weekends "camping out" at the house, painting, tiling, carpet and doing general fixups. After two months, it was complete and we had spent about 8k in total to fix it up. (I didn't pay this until way later, though, since it was on the zero-percent promo-rate Home Depot credit card)
Then the fun began with trying to find a renter. Because it was my first time doing anything contractual, I had the RE agent that sold me the house also do the leg-and-paper-work to find a renter. I had to pay a commission, but I think for the first time it was worth it.
I found it difficult to find a good renter, but it eventually got rented at $1500 / month, which had a throwoff of about $400. There were a lot of months that I had to chase my renters down for money but after the first time or two, it wasn't that stressful. After the first year, they left and I had some cash in the reserve left over to do some landscaping. I also found my own renter the next time and was able to get more rent for the place, $1650.
If I would have to give advice, I'd say watch your numbers and make damn sure you're in the positive, even if by a little bit. After a year, you can accrue a float and even a little bit will make a huge difference.
Cheers!
- Member since 2011 · 1 post · 0 votes14y
First deal was a 156,000 4/2 here in the central coast which I bought 20% down and have rented, no problems for $1,600.00. When I talk to other investors, they say its nota good deal since I had to put over $30,000.00 down. Mort/Ins/Tax is less than $1,000.00 and havent had any issues in the one year that I owned it and its apprecaited about $30,000 in value, but I will hold this long term. Do you guys include the mortage money going towards principal in accouting for your cash flow?
I am trying to get a 2nd property here in North County San Diego for less than $200,000 that will rent for about $1,500 which is in a better area then my first home and is undervalued, put in a couple offers at 20% convential, but cash offers seem to be king and I havent had an acceptance.
I also have a inherited restaurant from my mother that is paid off and produces $1,350.00 in rent that gave me the idea to invest for my kids.
- Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes14y
Josh solicited videos on this topic about a year and a half ago.
http://www.biggerpockets.com/renewsblog/2010/12/05/first-real-estate-investment-deals-video/
- SFR Investor · Dallas, TX · Member since 2009 · 71 posts · 12 votes14y
Originally posted by Jon K.:
Josh solicited videos on this topic about a year and a half ago.http://www.biggerpockets.com/renewsblog/2010/12/05/first-real-estate-investment-deals-video/
Jon K., was that the profit you brought along for the last meetup, if so, compound interest does amaze me how much it can grow in 17 years :)
- Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes14y
Bala, with profit from that deal I paid for a high risk birth with various complications for my oldest son. (Not Josh who you met). No health insurance at the time. Up until 4 years ago I mostly invested in stocks with market like performance, so I don't have a large amount to roll with. Hopefully I'll be a better steward going forward.
- SFR Investor · Dallas, TX · Member since 2009 · 71 posts · 12 votes14y
Jon K., I did read your original text post in this thread on your first deal and I knew the use of that profit. I thought it was Josh but obviously your older son. I was not making fun but what a great a use to put the very first RE profit into.
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