My First Buy and Hold -- Out of State Investing
Hey BP Members,
I am officially a buy and hold investor!!!! Well, as of November 30th.
Back Story
Three years ago, my wife wanted to start a business together. The idea was to find a business where we didn't know a lot, but we each had strong attributes in which to contribute to the whole. After searching, she found real estate investing. She is a former plant manager and LEAN process manfacturer. I have a background in Journalism, marketing and I work for a printing and design company.
Like a lot of newbies, we started in wholesaling. Not only that, but we started in virtual wholesaling. We've worked in Ohio, Houston, Dallas-Fort Worth, Kansas City, Phoenix and St. Louis. -- We live in Scottsdale, Ariz.
We knew wholesaling wasn't the path to financial freedom, but it was a start to get us into the business and learn. So we trudged through the past couple of years. She's at home with our two sons full time and I work full time, so this was very much a side gig for us.
About two years in, I decided we needed to start looking for a rental property. Arizona was out of the question, as the Cap rates weren't what we wanted. However, I knew the numbers could work in my hometown of Springfield, Illinois. Not a sprawling metropolitian by ANY stretch, but the numbers worked and I grew up there.
So I connected with a Realtor, got set up with MLS alerts and waited for a deal. And waited. And waited.
All the while, I was sharing my real estate journey with a family member, as I knew they had money sitting in the bank doing nothing. So when they came out to visit, I asked. "If I come across a deal, would you like to buy property with me?" And they said Yes!
I wanted to buy a multi-family deal and finally came across a duplex in an up and coming neighborhood.
THE DEAL:
Duplex built in 1900
Totally gutted and remodeled seven years ago
2/1 on top of each other
We purchased rent ready with very little repairs needed
Purchase Price - $71,000
Down Payment and Closing Costs - $18,000
Repairs - $1,500 ($1,000 credit to us at closing)
Budget
Rent - $1,200 - $600 per unit
PITI - $472
Repairs - 6% - $72
Vacancy - 5% - $60
CapEx - 8% - $96
Property Management - 9% - $108
TOTAL - $808
$392 Cash Flow, $196 per unit
$4,704 a year
26% COC Return
Here's the best part .... ZERO dollars out of my pocket. My PML put down all the money and is taking 50%, so his COC is 13%, better than the 3% he was getting and mine is infinity.
Did I strike gold? Nope, far from it. But I did break a lot of barriers.
WHAT I LEARNED
- Stop being scared. Thousands of other people do this EVERY SINGLE DAY. If they can, so can you.
- When you think you can't, you can. Just push a little harder.
- Trust your referral network. It all started with a Realtor and he referred me the mortgage banker, insurance guy and property management.
- Stop watching TV at night and start analyzing deals. Dancing with the Stars will always be there, that deal might not!