Why it's fine that your first deal doesn't cashflow that much
Hello guys,
I have been a BP follower and pro member for years. I feel I should share my story as it may help people who are stuck like I was.
Since 2016, I was into buying real estate for investment purposes. I was seduced by the cashflow apartments multifamily thingy that I learnt from good old Grant Cardone (my views on him has changed since, but I appreciate that he opened my mind at the beginning). But until April 2019, I had done NO move because no deal made sense. I was also stuck in the analysis paralysis.
And then, come march 2019, I just said "F*ck it" and I looked at a very good area of Jacksonville FL (I wanted to buy in Jacksonville for its growth etc) and I found a decent townhouse for 179000. For many years, I had built a decent amount of cash on my savings so I bought it cash. Got it. Rented it for $1400 within a week. HOA was $180 covering roof etc. Property management was 10%. Then I decided I should cashout refinance it a few months after.
The experience of being an actual owner/landlord changed everything (even though i had experience in rental property since 2003 via my parents). I do the loan, and at the same time, I see a 1500 sqft house close to my job in GA, in a great area. It looked unappealing (old carpet, old paint etc). I made an offer and got it! I was literally doing 2 loans within the same month and the credit score saw only one. I ended up doing all the floors myself, and handled the project by hiring contractors for tiles and paint. Lots of sweat equity on this one. Purchase price was 173000 (with a new AC at closing for free). Comparable next to the house: 200k! Rented within a month for 1500$. Cashflowing 350$ after all expenses.
And again last month. Same street, same house (even a shy bigger, 100 sqft more) but got it cheaper for 167000! Appraised at 195000 before renovation. Currently doing the reno but this time, I hired people to do all the floors. It will rent also for 1500. Same cashflow, $350.
What I wanted to share is that the first step was crucial. It wasn't a great deal, it was pretty on par with market. But somehow, it just started everything. All the money making happens after the first step.
So ultimately, don't be afraid of making a "eh" deal. Don't buy something stupid too. I had made calculation on the townhome. But if you are looking to enter in the RE investing, a townhome is great as the HOA covers a lot of repair and it's fairly turnkey.
Wishing you best.
Charles
PS: Tips on the first purchase if it's not a perfect deal:
- Buy in an area that is growing
- Buy close to shops/restaurants
- Buy where the population grows
- Buy something not too old, like 2000+
This will avoid to own a property that could potentially go bad. With these criteria, that you can find on "bestplaces.net", it should always keep or grow in value.