Hey everyone, this is my first post on BiggerPockets and I am big fan of the content! Got started on my pre-qualification and have my real estate agent all lined up. Now I am hitting a roadblock which is analysis of a deal. I was wondering what seasoned investors recommended for a first deal. Should I dive in head first for a big reno in an up can coming area or should I play it safe with minor renovations and more of a turn key deal to get my feet wet and save up more money in a safe house hack. I am 23 so I am willing to take a risk and have enough money saved up for renovations, but am not familiar with working with contractors or estimating repairs. Any tips are helpful and thank you in advance!
@Rudy Cecere I think it depends if you’re doing this local or not. If you’re local and have the money, I think you could do some rehab, but if it’s long distance I would be very careful doing a major rehab as your first project. I do long distance so I do turnkey for now and will likely do some of my own rehabbing down the road
@Caleb Heimsoth That makes sense, to give you a better picture, this is going to be an owner occupant/house hack in my home town (Downtown Buffalo Area). I am pretty familiar with the market having grown up here and rented for the past two years. I think there a few up and coming areas considering the major development of a solar city/Tesla factory nearby and a massive medical campus that is opening up soon. I am just worried about possibly putting too much money into a house and not getting it back.
@Rudy Cecere well if it makes you feel any better (I'm. Also 23) and am about to close on my third property. Not including this third property, I've invested about 32k and so far I've made 4K or so in 6 months, for a ROI of about 12 percent so far. This doesn't include principle pay down, which so far has been about 500 total.
My point in saying this is this should give you an idea of how long it could take to get your money back. If you’re not brrring it can take a while. I don’t plan on ever selling, so I’m okay with that.
Also this doesn’t even take into effect the tax benefits which in my opinion are just as Awesome
@Caleb Heimsoth wow! You are very active on the forums and in the market for our age; congrats on closing your third deal that's amazing. I tried to get started about three years ago while in school, but could not get a loan due to income and credit. I am okay with the long recoup time as well because I am more focused on maximizing cashflow.
How much rehab did you have to do for your first two deals? Was that 32k investment for your downpayment or were those your rehab costs?
@Rudy Cecere I’m trying to get to 2k posts by end of 2018 so I have to be active. Just to clarify I haven’t closed on the third property yet. That’s in about 2 weeks.
32k includes downpayments and closing costs. I’m investing long distance so I’m not comfortable doing major rehabs. One of those was turnkey, so it was totally rehabbed before I bought it. The second one wasn’t turnkey and will probably have some maintenance in the near future.
@Rudy Cecere good question. If you have the desire, I would recommend taking on as much of the project yourself. Some people hate the work so their better at getting others to do it for them. But if you do it, this will be an invaluable learning experience that will benefit you the rest of your investing career and save you thousands fixing stuff yourself at home. You are young so the time to learn is now. I did most of the renos on my first house hack situation, and I learned and took my time and now I fly and save thousands. Get local people's advice whenever possible and pay handy people to guide you through the renos. For large purchases I can get you 10% off at big box stores. PM me and I'll give you my # if you need any help. I can show how to not overpay for materials and make wise decisions with your $. I have 3 duplexes around Clarence/ East Amherst and a couple single families in Buffalo.
@John W. Thanks for the tips, I was thinking of as much of the work myself or with the help of friends and family as I could for those exact reasons, but as a novice am worried about some more complicated tasks like tearing down walls and getting permits. Mainly I am concerned about the 60 day move in period for a FHA loan which would be a tough deadline to hit on a first time major remodel. Does anyone have experience with this problem?
@Rudy Cecere just remember, you won't be living at this place forever so don't drop too much on it or go too crazy, UNLESS you will get your money back out of it or more. Or unless you just want the practice. Which area is this?
Oy. Well be careful if you 'go big or go home'. If you want a broad perspective on essentially what you are thinking of doing (and if you like snowboarding or can appreciate a snowboarding analogy)-
One more article that might help you...
If you have a knack for things and some kind of guidance on the rehabbing/reno part, it might not be completely crazy to do that route. But remember that there are a lot of fundamentals to learn underneath the harder stuff and while the big rehabs are the things that will ultimately get you to the bigger profits, you'll never see those profits if you dive in too fast. Slow and steady wins the race...build the fundamentals, get progressively more and more advanced with what you are doing, and build from there. That's the most solid route. But again, if you have a knack for things and are generally pretty slick at getting tough things accomplished, you might be able to pull it off! It's all about general self-awareness and knowing your own skill levels and abilities.
Originally posted by @Caleb Heimsoth :
Rudy Cecere id take John W. Up on his offer. That’s a great offer.
I second that! Having a mentor who is actually doing it is invaluable. It can save you from repeating a million mistakes that other people have already made, save you thousands in "learning experiences" and really be the make or break. The mentors I've had are literally the only reason I've gotten as far as I have and have stuck through the challenges.
@Ali Boone Thank you for those articles, you have a great perspective on this issue and really opened my eyes. Thank you for sending those links!
You bet! Happy to help.