First Buy and Hold Success

43 Replies

Hi Everyone,

I finally can say my first rental is rented out. I decided back at the beginning of the year I wanted to get into Rental properties but did not have the money but really wanted to do this. Started cutting out as many expenses as possible and was able to save up enough for my first rental. I went from being the typical person living paycheck to paycheck to now only spending 55% of my paycheck by cutting out all unnecessary expenses.

After putting in around 10 offers I finally had one accepted back in June 2017 and did not close till the first week of August due to lender delays. Since it was a foreclosure there was a little money to put into the property than I initially thought. I did not know I had to pay all transfer taxes could not get any seller help etc.

The details on the property are the below:

-Purchase Price: $80,000

-Closing Cost/Taxes/15% down: $20,575.46

-Interest Rate: 5.25%

-Mortgage/Insurance/Taxes/PMI: $566.09

-Capex (10%): $129.50

-Repairs (5%): $64.75

-Rent Loss (8.33%): $107.92

-Rent: $1,295

-Profit per month: $426.74

-Yearly Cash on Cash Return: 21%

I had to make a few repairs to the home before having it rented out. I had to replace the Windows (x9) in the whole house, refrigerator, stove, light bulbs, paint, flooring in bedrooms and bathroom, few other miscellaneous things around the home which totaled just under $3,500 for all repairs. I actually estimated it would cost around $4,000 in repairs before I bought the home so I was a little under budget in that aspect.

Master bedroom floor before :

Master bedroom floor after:

I had to make a few repairs to the home before having it rented out. I had to replace the Windows (x9) in the whole house, refrigerator, stove, light bulbs, paint, flooring in bedrooms and bathroom, few other miscellaneous things around the home which totaled just under $3,500 for all repairs. I actually estimated it would cost around $4,000 in repairs before I bought the home so I was a little under budget in that aspect.

So far I am all in at $23,991.73 to this property. Now that I learned the whole process from this home I set the goal to have another house under contract by the end of the year. Will be selling my “weekend” car to purchase a second rental as I know I can use the rental income to buy another next year if I choose to.

I always loved reading the beginner posts as I knew they were in the same boat as me so hopefully this helps someone out there take the next step.

Thanks,

Zack

Good morning, Zack. Congrats on feeling the success of your first property. I'm hoping to tell a similar story to yours in the next six months.

Nick

@Zack Clopper Congrats! Having put in the time and money to replace those windows and appliances is going to pay off long-term in lower maintenance costs and happier tenants that stay longer - great job! A lot of first timers try to keep costs as low as possible by leaving in items that are 'good enough' but it ends up costing them later. Sounds like you're on the right track and on your way to REI success. Best of luck!

@Zack Clopper Good work! What part of Baltimore is it in (fellow Marylander here). Did you do all the work yourself? 

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@Zack Clopper. Congratulations on your first of many!!

I spent this weekend seeing three MFHs in person, and am trying to train my eye on how much various renovations cost. 

Your bedroom floors look great--did you do that (and the windows) yourself? How did you get an idea that everything would cost you $4,000? Where did you purchase your materials from? 

Have you done anything with the property's plumbing/electrical? I'm finding that MFHs can easily be 100 years old, and as far as I know those kinds of updates can run about $6,000 each. Did you find it necessary to update those before placing tenants? 

Sorry for all the questions, but I'm 25 with the savings and pre-approval letters in hand, and I'm itching to get started. 

congratulations, what an exciting story and really inspirational to hear. I bought my first rental property this time last year, a duplex. It turned out not to be a good deal and I really was just breaking even. I didn't really know what I was doing at the time, so luckily it's not a bad deal... It's paying for itself. I'm looking forward to 2018 and really doing the math to make a smart investment. Thanks for sharing.

Congrats! If you ever need anything feel free to reach out!

@Zack Clopper congratulations!!! Wishing you much success in all of your future endeavors!!

Sorry for the delay everyone has been a busy week.

@Nicholas Lanni  Thanks, good luck on your first property.

@Clayton Mobley Thanks, I tried to make sure I fixed all issues whether small or large including he windows I figured even though tenants are paying utilities it will help them keep costs lower and happier like you said.

@Dennis L Lewis Jr  Thanks Dennis, It is in Baltimore County in Essex/Dundalk area. I did all the work myself with the help of some family members but I learned a lot along the process.

@Suzette Brathwaite  Thank you, can't wait for the next property.

@Dominique Poindexter  Thank you, I hope to be able to write more success stories soon.

@Derek Luttrell I did do all the work myself with a little help from my family. The windows luckily my father had expierence with so I helped him install the windows everything else I was able to do more less. When I first did the walk through I tried to take pictures of everything I noticed and of course I missed stuff that the inspector picked up.I then just priced everything out on Home Depot’s website. After I had a good estimate I added 15% on top of my number which came out to be right around 4,000 since I knew I would miss something and that is what helped me decide if I was going to close on the property or walk away.

I did not do anything to the plumbing however some of the electrical I had to rerun lines and also had to hard wire the smoke detectors in the basement and second floor because of a Baltimore County law. I have a little electrical experience from my primary residence. The home was built in 1956 I believe not sure without looking up but the electrical is not in bad condition honestly looked like someone updated the plumbing and electrical at some point. Since I closed on my rental though I am redoing all the plumbing in my primary so ripped out the walls and this weekend I’ll be running all the lines and using CPVC which is very easy to work with and anyone could do the work just take the measurements and mount correctly. Honestly though I am glad I attempted all of this stuff like most people will say it gives you a better idea how much you are willing to pay in the future for someone else to do the task.

I am around the same age and was in your shoes earlier this year, let me know if you have any other questions and will give you my perspective not as good as some of the guys that have been in it for a while but hope I can help.

@Laticia Braxton thank you, hopefully I am as lucky in future projects as everyone knows hidden costs can arise.

@Michelle D. Thank you

@Diem Tran I ended up building my own calculator in excel but I build financial models for a day job so was easy for me to tweak to how I wanted which helped me greatly. However I thought Bigger Pockets calc was a great help too. Good luck on your next rental, what market are you looking into?

@Stephen Lee Thank you, always good to meet up with local investors as I do not know many currently.

@Eric H. Thank you, wish you the same as well.

@Juan Jimenez Thank you

Way to increase your savings rate to 45% by cutting back on expenses to change your life @Zack Clopper !

I did the same thing and quit the rat race in 2002.

Selling the weekend car for another wealth-building, cash-flow generating asset sounds like an awesome idea and I wish you continued success!

@Zack Clopper Congrats man! Sounds like you got a solid property...very exciting for it being #1. I too bought my first rental earlier this year and posted some of the details a few months ago. Hope yours goes as well as mine has been going so far (fingers crossed haha).

What do you think it's worth now? Would you try to BRRRR it to get your cash back out for #2? That's what I plan to do in the Spring.

Congrats @Zack Clopper !  Looks like a great deal/roi!  Get that cash flow snowballing towards number 2!  good luck to you!

DJ

@Steve Vaughan Thank you, I think I did the right thing as I would love to go full time with this in the next 2 years to have more freedom.  I have read quite a few of your posts as usually don't post too much but hopefully I can change that. 

@Michael Lee Thank you, I hope it goes well also. Homes in the same neighborhood have sold in the past 3 months around 110-125k. I believe mine is one of the nicer ones in the neighborhood with a new Trex deck on the back along with new windows/flooring/etc. So I believe it could appraise easily in the 115-120k range depending on the appraiser. I am planning on doing a HELOC on the home after 6 months but doing a HELOC on my primary first as I found a lender willing to do 100% on your primary with a point added to the rate and I have been fortunate enough that the market has increased in my area in just 3 short years. Good luck with yours when you do the BRRRR on your rental I will have to look out for your next success story.

@Joshua Tobin thank you

Congratulations!!! The place looks great.

I’m learning as much as I can now and will be starting my investments in the Frederick area in 2018. I’m hoping for the same success as you.

Good luck!!!

@Zack Clopper   I would second that ask. What do you think the house is worth now? Can you get any of your money back out if you did a cash out refi? If yes, then what would your cash on cash returns look like.

btw: I know everyone typically only looks at cash on cash returns. But ultimately, the real generator in buy and hold is the combination of the returns. One time Equity capture (we should be buying it for less than retail), Rental profits, Principal paydown, and appreciation.

Its that combination of pieces that generate the actual wealth when buying and holding.

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