Hey People, 

I am pretty new to real estate investing. Just a little tiny background on me is that I'm 22 years old, new grad working as a Automation/Robotics Engineer. My family has a real estate business so while I am new to real estate investing myself, I know a lot about the business/ the market/ what needs to be done & what needs to be avoided. 

I'm investing in my first property. It's really cheap (20k paid for in cash) needs an estimated 25k in repairs and estimated home value after repairs is $60k, it can also rent for $750 or more once done. It is in the area I grew up in so my family is going to be a huge help assisting in hiring of the contractors and making sure everything goes smoothly. 

I'm just really nervous though. I keep thinking what if I made a bad deal... My original plan was to buy a multi family unit and house hack in the town I'm working in, but a couple of people advised me not to miss out on this deal. It took a bit to save up for my cash purchase on this house and it was supposed to be used for my original goal. But this is the way things are moving and I'm just overthinking.  *sighs*

Any advice or similar stories? I am new here btw so excuse me if I am posting in the wrong thread.

BTW (might be informational, might not): I just signed the purchase agreement yesterday, but just waiting on seller to sign their portion. 

@Danni Green congratulations. Things don't always go as planned, when opportunity presents itself take it.

1. The benefit of your deal is you'll be into a property for less than it's worth. Once you complete the renovations refinance it for 80% of the value which is $48k. 

a. You'll get back your initial investment $20K and the money for your renovations $25k. Now you're into the deal for no money.

b. Take the $48K from the refinance, invest in the multi-family you want to house hack.

2. I imagine you'll have a positive cashflow of a couple hundred dollars once the place is renovated and rented. Again, not a bad thing to have. Put it away for maintenance issues. 

3. Thank the people who recommended you jump on this opportunity. You are the average of the 5 people you spend the most time with, sounds like you have a good group.

4. Rinse and repeat this process. 

Good Luck!

@Danni Green Congrats on your first deal! It sounds like you've got a great support network and if they are all telling you its a good deal, most likely it is. There's no doubt you will encounter problems and your fear will bubble to the surface but you just have to persevere through it. RE is a good investment and most likely in 5 years you will look back and laugh at how worried you were now that the property is worth 25-50% more.

Originally posted by @Carl Millsap :

@Danni Green congratulations. Things don't always go as planned, when opportunity presents itself take it.

1. The benefit of your deal is you'll be into a property for less than it's worth. Once you complete the renovations refinance it for 80% of the value which is $48k. 

a. You'll get back your initial investment $20K and the money for your renovations $25k. Now you're into the deal for no money.

b. Take the $48K from the refinance, invest in the multi-family you want to house hack.

2. I imagine you'll have a positive cashflow of a couple hundred dollars once the place is renovated and rented. Again, not a bad thing to have. Put it away for maintenance issues. 

3. Thank the people who recommended you jump on this opportunity. You are the average of the 5 people you spend the most time with, sounds like you have a good group.

4. Rinse and repeat this process. 

Good Luck!

Thank you Carl. For the b. portion of your reply :

b. Take the $48K from the refinance, invest in the multi-family you want to house hack.

Since I have to pay back my $25k loan (took out a loan for rehabbing). 48-25-20 (payment for the house) = $3,000 left to spare. The reason I am a bit confused is that once everything is done I feel like I will be in the same spot I started in...

But thank you again for the advice. It is appreciated.

Originally posted by @Peter M. :

@Danni Green Congrats on your first deal! It sounds like you've got a great support network and if they are all telling you its a good deal, most likely it is. There's no doubt you will encounter problems and your fear will bubble to the surface but you just have to persevere through it. RE is a good investment and most likely in 5 years you will look back and laugh at how worried you were now that the property is worth 25-50% more.

Ahhhh I hope so. I'm hoping this goes good. 

Hi Danni! Have you used the calculators in this site to help you determine your cash flow and Cash on Cash return? I’m not going to redo the numbers you and Carl came up with, I’ll use those. So after you refinance, you’ll have $23K. Yes you’re only getting your original $20K investment plus $3K, but that $3K is a 15% return in a short time which is much better than other investments. Monetarily, you won’t be much further ahead in your bank account but you will have your initial investment back. Plus each month you’ll be making income. Eventually you’ll have enough again for a second investment or you trade out of this SF up to a property you hoped for. Sounds like a safe and good first investment!

Originally posted by @Jamie Derasmo :

Hi Danni! Have you used the calculators in this site to help you determine your cash flow and Cash on Cash return? I’m not going to redo the numbers you and Carl came up with, I’ll use those. So after you refinance, you’ll have $23K. Yes you’re only getting your original $20K investment plus $3K, but that $3K is a 15% return in a short time which is much better than other investments. Monetarily, you won’t be much further ahead in your bank account but you will have your initial investment back. Plus each month you’ll be making income. Eventually you’ll have enough again for a second investment or you trade out of this SF up to a property you hoped for. Sounds like a safe and good first investment!

Hey Jamie! 

I did use a deal calculator on this deal after I signed (mistake on my part) and the estimated cash flow was between 100-200 dollars every month. I don't know why I was expecting a 400 dollar cashflow on this but it is what it is LOL. 

But the documents are signed - sent earnest $$ and now just waiting on the seller to close. I am now in process of trying to get a loan (25k for repairs) and OMG its so much harder than I thought. I have good credit and steady income but I've been told no by 2 banks already and I am getting nervous (due to me just being young in my career Im guessing). Anyways you didn't ask for this information but I just thought I put it out there in this atmosphere just in case anyone had some advice with that. 

@Danni Green good luck with your REI journey!

@Danni Green tough position to be in with banks. Your best bet might be trying to ask family for money. Let them know they’d get it back within a certain timeframe and with some interest. You could try a private money lender but they’d still probably require a down payment and the interest would be much higher, definitely would eat into your bottom line. 

Originally posted by @Jamie Derasmo :

@Danni Green tough position to be in with banks. Your best bet might be trying to ask family for money. Let them know they’d get it back within a certain timeframe and with some interest. You could try a private money lender but they’d still probably require a down payment and the interest would be much higher, definitely would eat into your bottom line. 

 I'm scared I might have to wait to improve this property.... Yeah I don't have any family who can do that for me unfortunately.

@Danni Green hey Danni! Fellow newbie member here although I've been doing REI for some time. I was really interested seeing you're in a similar field- I'm a software engineer. Good luck with your endeavors!

Originally posted by @Lyn Dee :

@Danni Green hey Danni! Fellow newbie member here although I've been doing REI for some time. I was really interested seeing you're in a similar field- I'm a software engineer. Good luck with your endeavors!

 Hey Lyn!! How is it over there in Delaware? I sent a request to connect with you. Feel free to message me and maybe we can chat. I'm always down to make new friends lol.

Congrats on the deal Danni.

I think you have a lot of opportunity based on the rough numbers you provided.  If you are looking for financing it is available.  There are a LOT of people looking to put their money to work.  I don't want to give any bad ideas but a short term high interest loan on your rehab may not be that bad of an idea.  If your family has worked in and around RE for some time see if they have any connections to people who invest.  You could partner with someone, find a willing money lender or possibly just wholesale the deal to someone else.  I am sure you will find a solution!

@Danni Green you could look into hard money lenders. I think with your family having a good reputation in RE and you being able to die that it's a good deal, you could qualify. I am working with Lima One and they have a few good options. Get the work done and then refi into a conventional loan to get out of the higher interest.

Relax, you got this. Don't try to talk yourself out of a deal. 

Lets look at what you got going for yourself:

-sounds like you have a decent paying job

-your family has been in the RE business for a while so I'm sure they would love to offer you some advice and bail you out if Sh*t hits the fan

-its only a total investment of 45k which is a lot of money but still relatively affordable

At the end of the day if nothing goes your way, it'll be a great learning experience. Even if you lose 45k, that would be worth it in my opinion.  

Let us know how it goes.

-BA

Originally posted by @Blaine Alger :

Relax, you got this. Don't try to talk yourself out of a deal. 

Lets look at what you got going for yourself:

-sounds like you have a decent paying job

-your family has been in the RE business for a while so I'm sure they would love to offer you some advice and bail you out if Sh*t hits the fan

-its only a total investment of 45k which is a lot of money but still relatively affordable

At the end of the day if nothing goes your way, it'll be a great learning experience. Even if you lose 45k, that would be worth it in my opinion.  

Let us know how it goes.

-BA

I appreciate the advice Blaine. 

An update for everyone : I got approved for the rehab loan!!! So we are in business haha! I'm so happy! 

@Danni Green , it is completely normal to be nervous.  I bought my first rental for $22.5k, cash and was terrified when the realtor called me and told me the bank accepted my offer.  The first thing I thought was "uhh oh, what did I miss in my walk through?"  But you have to trust your instincts that made you go after it.

As noted, you will hit hiccups. Thankfully, you have some margin between all in and ARV. And even if you go over on rehab, you have options to hold and rent or sell, even if you don't make a big profit.

Regarding your goals, a SFR is a great way to test waters on being a landlord. Maybe you hate it, and saved yourself the headache of buying a bigger property and living next to your tenants. Or, if you can get the rehab done and sell for a profit, you are that much closer to your goal, and with 5-10k more than you had initially.

@Danni Green  
Congrats on the Rehab Loan.  We all knew you would make it happen.  

I don't have a ton of experience with Rehabs but I would suggest as an engineer your mind may work a little like mine.  I suggest documenting your processes, taking note and pictures.  If you decide this is what you are going to keep doing you can refine your processes over time.  Plus you can share with us here on BP.

Thanks! I do plan on documenting my progress and have already took pictures/videos of my before. Feel free to connect with me as I will be posting my progress on my profile and eventually in the forums!

@Danni Green Congrats! Already by taking action, you are ahead of many people on this platform. The first one is always a learning experience. My recommendation at this point, keep a close eye on the property and work on building that support team if not already in place. Weekly communications with a property manager and the construction crews. Ask questions of your lenders and agent. Ask questions to BP. Try not to assume much or set it and forget it.

I am an IT engineer who started in 2018 in much the same way. I partnered with a private lender for the renovations capital. So don't forget this is an option! Happy Investing!

Originally posted by @Chris Levarek :

@Danni Green Congrats! Already by taking action, you are ahead of many people on this platform. The first one is always a learning experience. My recommendation at this point, keep a close eye on the property and work on building that support team if not already in place. Weekly communications with a property manager and the construction crews. Ask questions of your lenders and agent. Ask questions to BP. Try not to assume much or set it and forget it.

I am an IT engineer who started in 2018 in much the same way. I partnered with a private lender for the renovations capital. So don't forget this is an option! Happy Investing!

I really appreciate it Chris!!