Dear Bigger Pockets, I did EXACTLY what you told me to do!
Tuesday, May 1st 2018 I closed on my first home purchase, became a land lord, got a real estate mentor and started my real estate investing journey and here’s how!
1.) Instead of complaining about my 40-45 minute commute to work, I utilized this time to listen to Bigger Pockets Podcast and listen to real estate audio books.
2.) In order to invest with “No Money Down” I withdrew 100% of my TSP (Thrift Savings Plan) equivalent to a 401k for federal employees. I’m no longer a federal employee and had 30k in my TSP. I paid 20% in taxes and a 10% penalty yielding 21k in cash for investment. If I kept it in there, I’d be making about $700/mo in the year 2049. I can create a much greater ROI if I PROPERLY invest in real estate.
3.) The MLS was not helping so emailing landlords with Craigslist ads and “Driving For Dollars” was my doing.
4.) Found a 2500 sq/ft duplex, 3br/1.5bath each side, built in 1996. Corner lot, 11x17 deck, 2 car driveway, walk-in closet in master bedroom, door to main bathroom from master bedroom, a basement great for my work shop, right next to a park and many amenities. (Most duplexes are 100+ yrs old in my area, this was 90% turn key)
5.) Contacted the LandLord and we hit it off immediately, he’s the owner and one who built the house originally, he listens to bigger pockets and was immediately sharing knowledge with me. The rent was $1100/mo which is high for this area but you don’t see modern homes for rent in this area. The other side was already occupied by good quality tenants, he’s very anal with care to the property and who he rents to.
6.) We agreed on a sales price of $212k, appraisal came in at $185k ;( I hit the lottery as he found great real estate deals in the area he currently invests in and would need the money to do a 1031 exchange into 3 more properties. Note: you CAN 1031 from a multi family rental property into a SFR rental property.
7.) FHA at 3.5% with a 4.625% interest rate. My final mortgage with taxes and insurance escrowed is $1387/mo. Sewer comes out to be $30/mo and garbage is free (landfill in town). Closing costs with down payment came to be $16k.
8.) I put away $300/mo for repairs, vacancies and tenant turnovers totaling $1717. My girlfriend and I “split” the difference and she pays $300. So I went from paying $825/mo rent to $317/mo for a rental property and that covers the cost of ownership.
As of now, I consider this a win and success. I got here by not making excuses and finding ways to make things work. Assuming I don’t live here I would profit $483/mo from a $16k investment.
Thank you BP 👍 ~ Ben