Hello BP!

This post is meant for people like me. You've read all the books. Got your finances in order and are ready to make this happen but not sure if you could.

A little background:

I graduated college in 2017 with a B.S. in Chemical Engineering. I took my first job at a chemical plant in Philadelphia. I became interested in investing and money soon after I started earning some and wanted to find some ways to get new returns. I read about stocks, dividend investing, startups, etc.. but eventually landed on real estate. It made the most sense mathematically and I loved the control it provided.

Fast forward 2 years. I made a point to save a good chunk of change, about 19K in liquid savings I wanted to use to buy a house hack. My goal was to get my living expenses under $500/mo. As I had been paying about 1700 for rent in a 580 sqft 1/1 apartment.

I joined a local REIA (THIS WAS KEY, NETWORKING IS EVERYTHING). Really newbies. You NEED to surround yourself with encouragement and people who are doing it. It really works wonders to shrink the task down and make it manageable. Furthermore, I was introduced to both a rockstar agent and mortgage broker during these meetups. THIS WAS THE MOST IMPORTANT STEP. The second most important IMO is reading and gaining a good basis of knowledge in RE analysis. Even before I was ready to buy I was analyzing deals using an amazing spreadsheet (they don't get messy if you lock your cells Brandon). Please message me if you'd like it.

This made me confident with my ability to assess properties and found MANY MANY MANY (I'd say about 90%) during this dry run period that made absolutely no financial sense to invest in. This was discouraging but every now and then I'd find maybe 1 out of 90-100 that were in the green. I thought "Maybe the market is too hot" "Maybe I should wait" "Maybe this isn't the right time".

Those thoughts will cripple you. It's simply fear holding you back. It's you holding YOU back. Don't abandon all caution but throw that crap to the back of your head a plow forward. NOW is the good time to invest (if the numbers work)

Leading up to the deal

After being connected with my agent, I began automatic MLS notifications for a certain part of philadelphia. I had met with a broker (not the one I ended up using) to get a good idea about what I can afford (he advised around 265K) and set this at the top of my range for the MLS notifications. The analyses began, I was looking for 3 bed and 1.5+ bathrooms at this price point. They made the most financial sense and were IMO the most desirable for young adults (my target group). I became discouraged after seeing about 95% of these deals were not financially viable. Also, the ones I did find had a big issue with the 3rd bedroom not being even virtually big enough for someone to live in. I began to branch out from the initial neighborhood I had pinned down and found I either had to concede quality of property or quality of neighborhood at that price point. Bear in mind, I am house hacking this property and was not willing to live anywhere that was either dilapidated or unsafe.

 My agent suggested I bump my price range to 300K which I reluctantly did. This was a pivotal moment in the search, I quickly started seeing more desirable properties that would demand good rents. After I made this adjustment (about 2 weeks after), I offered on a condominium (I didn't know it was a condo when I offered). It was a 3/3 1700 sqft new construction located in a fringe/up and coming neighborhood on the same block as a major metro line. I had 19K to close and was planning on putting 15K down to stay in conventional territory. I needed a seller assist or I would not be able to buy the property. I offered asking price with a full 3% seller assist and the offer was accepted. First thought that entered my head when I got that call was "What on earth did I just do"

The Deal

I ran the numbers probably 20 times (I analyzed the property as if I wasn't living there). It had a great ~20% CoCROI with ~$500 in cashflow. This is largely due to the fact that there is a 10 year tax abatement on the property. When the tax abatement expires the return will tighten to 10% assuming no rental appreciationI had to make a difficult decision to go with a mortgage broker who had an amazing mortgage product instead of the other one from earlier that was a quasi . mentor for me. The difference was not negligible (3.75% LPMI vs 4.25% + PMI loans). I needed the better rate/LPMI to quell myself and pad the financials.

It took about a month to close, had to have all my bank documents in order but the process sort of moved under its own momentum. There was a small hiccup in the beginning: since this was a new construction the AOS was not standard and my agent wanted me to get it reviewed by a lawyer. I did but it was almost a complete waste of money (875 bucks). He gave me very little guidance and I ended up reading it myself and going against his guidance of not signing it until it was made into a standard AOS. lesson learned.

All in all, I closed thursday and have 2 signed leases for 2 of the 3 rooms. I am getting 100/room more than I thought I would (amazing) and will be living for free (minus utilities which we split).

Final Thoughts

In short. It worked perfectly. I could not be happier, it was a lot of work but I kept chugging along with the end goal in mind.

People told me not to do it. To be safe and just invest in index funds (I max my roth 401K already, saved the extra for the property).

They told me I was too young. They told me the market would crash and I'd lose everything. They told me to just rent like a good 24 year old. There is discouragement everywhere, it will find you. It is up to YOU to go out and find the few people who succeed in spite of all of this. This will motivate you to make it happen.

I am a normal 24 year old. Nothing amazing about me and I did it. I am fully convinced now with enough properly directed effort and consistent action that anyone can do this. Where I once paid 1700/mo to live I now spend ZERO. This is going to be a financial catalyst like none other. All I did was make the effort.

Really, just go out and do it. Be smart, but make it happen.

Deal Detals

Asking: 300K

Bought for: 300K plus 9K sellers assist

Closing costs: 12875 - 9K (assist) =3875 out of pocket

Down payment: 15,000 (5%)

Loan: 3.75% Lender Paid MI

PITI: 1375

HOA: 226

Rent: 800/room (1600 gross for house hack, 2400 after I move)

Utilities: Split evenly for house hack