My first deal

37 Replies

I got through my first deal....well, I don't have it rented yet but wanted to share some of the details and then talk a little about why it was such a great learning experience.

ARV: 94K

Rehab: 29K

Purchase price: 39.5K

Rent is $1050/mo although I may lower it to $1000.

Taxes: $166/mo

Ins: $70/mo

P+I is about $380

Im putting away $150/mo for vacancy and maintenance. Some will say that should be higher, but I got all the major items fixed in the rehab. I can still adjust that if I want, as current numbers cashflow about $230.

I took a hard money loan at 14% with 3 points. Refi'd into a conventional loan (we close on the conventional early next week)

Total amount of the conventional loan is $66,875 at 5.25% 30 year fixed.

I rolled just about all the associated costs into the loan with a couple exceptions. I paid cash for the following: 3K for the foundation repair. I bought the appliances (stove and dishwasher) for about $300 (got a super deal on used appliances)

I spent maybe $200 getting the yard looking nice. I paid $800 to fix an unforeseen plumbing issue.

I acquired the property from my yellow letters. So that was a good lesson in marketing and sales. Talking with so many people on the phone and making offers taught me a lot....mostly about building rapport and negotiating. I think it was Account Closed who suggested reading anything by Herb Cohen, which I did and really got a lot out of it. I don't think people realize how important it is to study sales and negotiation.

I lost one deal to another investor because of my inexperience, but that was a lesson in itself.

I learned how to get a hard money loan, how to do a rehab estimate and how NOT to do a rehab estimate. My original estimate was....get this....$5000. Boy was I wrong. I'm glad I didn't try and wholesale this as I would have made a fool of myself.

I was expecting the final appraisal to come in much lower, so it was a nice surprise when it came in over 10K higher.

Another nice thing was that the GC I used has done a lot of deals with the HML I used. The HML paid the GC directly, so I didnt have to take any draws or pay out of my own pocket, which is good because I couldn't afford to.

Any thoughts here? Am I missing anything?

I'll post pics here in a minute.

Thanks

Some after pics....I know these arent the best....the last two were with a better camera. Going to take more this weekend.

Awesome work Joe. The quality looks amazing.

I will be closing on my first rental property in July. We'll have to do a toast when we get our first rent checks!!!

Congrats Joe!!!

It's great to see this, especially learning that you got this from a yellow letter. I havent heard about Herb Cohen before - I'll check out his material

Looks great! Hopefully it gets rented quickly

Thanks @Zaid R. . Yellow letters work for sure. They get the phone ringing. I took me a few calls before I started seeing who is motivated and who isn't.

I actually got a call this week from a guy who got a letter I sent back in October!!

@Ben G. good question. I tooka breif hiatus from my marketing but it goes back into effect this weekend. I plan on adding a couple more strategies.

I am also learning more about Sub2 and other deal structures so that I don't lose leads because I'm not sure what to do with them.

I'd like to do a flip or aquire another rental.

Thanks Aaron. Your podcast was very motivating. Going to the BP Meetups, my local REIA and some DFW investors were VERY inspirational and helpful to me.

@Jon Klaus @Jerry Puckett

I only started doing this about 6 months ago and never imagined I would have gotten this far. So, not to sound too "Academy Awards" but I should thank Brandon Turner and Josh Dorkin. I was able to do this without paying any gurus or attending any rah-rah seminars. Most of the info I got from the forums and podcasts.

Congrats!

Fantastic Joe! it's been great to see you learning by leaps and bounds, and now taking down your first deal. Get a good tenant in there and move on to the next deal!

@Ben G. exactly. There's honestly so many different scenarios and ways to structure a deal, different types of motivated seller, etc that it seems like the only way to know which one to use and when is to keep studying, keep marketing, keep networking and keep making offers.

@Joe Butcher That's what I'm doing. My organization/lead management could use some work. What tools do you recommend besides the typical excel spreadsheet? If you have a system in place I'd love to hear about it.

My weakness is engineering a marketing system. I just take action without having a plan. I excel on the phone with sellers and networking with buyers. I struggle with creating, and implementing systems. Any advice is greatly appreciated.

Congrats Joe! Awesome job on the rehab. It should rent pretty quickly.

@Ben G. To be fair I use Jerry Puckett for my letters and he also provides a lead tracker via Google Docs. It's fairly straightforward and since it's web based we can both access it.

A few of the podcasts have mentioned other types of lead trackers but I cant recall them right now. I think Podio was one of them.

@joebutcher

That is very impressive that you marketed for and got your first deal off market. Looks great, congrats. 1.5% rent to purchase ratio with Texas appreciation, awesome.

"I rolled just about all the associated costs into the loan" How did you do this? Every lender I have talked with wants a 12 month seasoning period to do a loan to value refinance.

@Brant Richardson my RMLO worked that out I guess. I met him at my REIA and he works largely with investors, especially buy and hold investors.

When I got the deal I called him and told him my intentions and he said it would be no problem.

One more thing I wanted to mention that other newbies may want to consider. My initial idea was to wholesale this deal, but I saw someone start a thread here to the effect of "why do wholesalers tell people that they are cash buyers when they really aren't?"

I'm pretty sure it was @Account Closed who said something like (and I'm paraphrasing) "Instead of telling the seller that you're a cash buyer, why not find the financing and buy the deal yourself?"

Thats what inspired me to do just that.

I should also mention that since I've done this I've had friends and family offer private money to partner up on a flip. If you get a deal done, TELL EVERYBODY.

Originally posted by @Joe Butcher :
One more thing I wanted to mention that other newbies may want to consider. My initial idea was to wholesale this deal, but I saw someone start a thread here to the effect of "why do wholesalers tell people that they are cash buyers when they really aren't?"

I'm pretty sure it was @K. Marie Poe who said something like (and I'm paraphrasing) "Instead of telling the seller that you're a cash buyer, why not find the financing and buy the deal yourself?"

Thats what inspired me to do just that.

I should also mention that since I've done this I've had friends and family offer private money to partner up on a flip. If you get a deal done, TELL EVERYBODY.

Did I say that? If so, I should take my own advice more often.

If people have a REALLY good deal, the LTV ratio should make it finance-able and worth buying instead of wholesaling, even if you have to use hard money. But you went all the way and rehabbed it. And refi-ed out of the hard money. Impressive.

I totally approve of painting boring builder grade oak cabinets all white. So much bang for the buck. Rehab looks great.

Congrats!

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you