From Browsing to Closing
January 31st met me with a bit too much time on my hands in between projects at work which in turn led to browsing the Internets. I can’t remember what I was looking for exactly but what I know for certain is that I had a question and I found the answer: BiggerPockets. As I write this draft on Microsoft Word I realize there’s that annoying red squiggly line under BiggerPockets, and without hesitation I right-clicked the word and selected “Add to Dictionary”. This is exactly what I did in real life from the day I joined BP. The concepts and strategies I’ve learned from this site have made it impossible to get through a conversation without name-dropping the greatest tool I have at my disposal (Thanks @Joshua Dorkin!). Although, I will admit I did not start taking full advantage of this tool until a few days later.
February 3rd was a typical day, up until it wasn’t. I had Rich Dad Poor Dad in my possession for nearly 2 months (Courtesy of my older brother. Poor guy doesn’t know he’s not getting it back.) before I finally decided to crack it open. The awakening that occurred just a few chapters into that book was unreal. You know how people “Find god”? Well I found Rich Dad. The best way I can describe it to people I talk to is to say that I’ve been asleep for 25 years and I’ve finally woken up. Now that’s not to say this is a one stop shop for investing in real estate because it’s really not. In fact, looking back it now there’s hardly any actionable details to get you started. But the inspiration I felt to take real estate investing seriously was unparalleled. That inspiration led to questions which BP was able to answer, and introduce me to new questions I didn’t even know I had to ask.
February 6th one of the more important decisions had been made. I was debating whether to invest in Syracuse (near my alma mater) or Baltimore which is significantly closer. After researching several neighborhoods, entry points, strengths, and weakness of both I had finally decided on Syracuse. I also binge watched The Wire on HBO soon after and had no regrets about that decision. I found @Cerwin Haynes on BP and he was able to refer me to a real estate agent who is also an investor in the area. This was crucial for me because I wanted to work with someone who could fill in the gaps for me whenever there was information I did not take into consideration in my decision making process. Thanks Cerwin!
February 8th I watched @Brandon Turner speak for about an hour and a half on a live BP webinar about getting started with rental property investing. During this webinar he provided amazing material (Seven Years to Seven Figure Wealth being one of them) and talked about the benefits of small multifamilies. I was already leaning in that direction so it was good to receive more affirmations about doing so. Then we got to the best part of the webinar: the Rental Property Calculator. He walked us through a bit of a primer on how to use the calculator beginning to end, especially how to research the figures we didn’t have immediately available such as city/county taxes. This was all I needed to convince me that I needed to sign up for a Pro membership. I spent the next few months analyzing deals every minute I had available. I literally mean MINUTE because that’s exactly how long it took to generate the report for each property. It got to a point where I was able to tell whether a property had the potential to cash flow just by looking at the financial details of the listing. Of course I would use conservative figures because I have always been of the mindset that if you’re prepared for the worst case scenario then you can only win (take this with a grain of salt, you don’t know what you don’t know). During this Webinar Brandon challenged those of us watching to set goals to accomplish over the next 90 days. I made the mistake of taking mental notes of the things I wanted to accomplish instead of actually writing them down. I say this to point out that it’s harder to hold yourself accountable for missing your goals when they’re not written down anywhere.
April 29th was a long but productive day filled with a handful of tours of multifamilies that had great potential on paper. After seeing the properties in person, the number of deals that were viable dwindled down to just two. One of these two properties was under my budget but outside of my reach at the time due to the down payment. The weekend came and went with a very easy decision left for me to make.
May 1st my agent submitted an offer for full asking price (90k) on my behalf. The offer was accepted the very next day and I felt like a kid at Christmas. The reason I offered asking price was because the property would cash flow very well at that price and I did not want to get into a bidding war with those who had recently viewed the property. I was extremely eager to nail this property down. It had dawned on me that I was an anomaly at this point. Most investors never have their first offer on a deal accepted, but then again most deals aren’t viable at asking price.
May 8th I received the inspection report which did not have any major issues that needed to be addressed immediately. There were two concerns; the roof would be ready for replacement in about 5-7 years. The other concern was that one of the water heaters was well past its life expectancy despite being functional. We used this to bring the purchase price down to 86k and have a 1 year home warranty included. All parties agreed and then the waiting game started.
July 14th was the beginning of the rest of my life as an investor. I closed on the duplex below.
8bed/3bath 3810 sqft
Purchase Price: $86,080
30 year Loan with 4.875% Interest and 25% Down Payment
Closing Costs: $4,258
Estimated Repairs: $5,000
Monthly Income: $1,900
Mortgage Expenses: $341.66
Operating Expenses: $895.67 (Taxes, Insurance, Repairs, CapEx, Vacancy, Management, Water)
Cashflow: $662.67
The plan is to get the repairs taken care of over the next few weeks and start marketing both units. If I'm lucky the property will be fully occupied by the end of August. I've continued my education over the last two months by just scouring the forums and listening to all the podcasts (I'm up to episode 74!). The wealth of information in these podcasts has been crucial in learning since it always leads to more questions and research. Once the duplex is stabilized the next step for me will be to spend more time networking whether it's reaching out to local investors for interviews over lunch or REI meetups. WHEN I buy my next property will depend primarily on my experience with this duplex. I'm not opposed to pursuing additional properties in Syracuse or shifting my focus to another city if need be. However, I would like to purchase another buy and hold multifamily by the end of 2018.
Staying motivated prior to closing wasn’t too much of a challenge because of the Success Stories section of the forum. @Megan Greathouse's story about her journey made me realize how many investors take a similar path in learning the business and taking action. It was motivating to see what actions can amount to. That is why I’ve decided to tell my story the way it has developed so far. Hopefully this will serve as another piece of motivation to a BP member who isn’t feeling as inspired as they were yesterday or last week or last month.
I want to close by thanking those dear to me who helped me keep my head on my shoulders through the rough patches and anxiety I experienced. My girlfriend Ashley has been my rock through this journey. It’s also helped to have encouraging friends like @Greg Woodard and @Tashya Tummings. I strongly believe in surrounding myself with like-minded people who have the same focus and drive that I do. I’ve made it this far because I have them to lean on so thank you. Happy Investing!