My First Deal!
Hey all, I've been studying real estate for about 2 years and just finally was able to put together my first deal. I found a nice townhouse in Flagstaff, AZ about a mile off off the NAU campus. I know personally that these townhomes are in high demand for renters because all of the college students like to congregate to that area. I lived in one of these properties myself when I went to school there and talked to our landlord about the ups and downs of the tiny market.
Although renting to college students may end up being a little bit of a headache, there are also huge upsides to the high demand. Plus, I hired a property manager to take care of the nuances, since I don't live in AZ now. Because the market is so backwards, after paying the mortgage, insurance, HOA, management fees and taxes we should be left with a $950 cash flow. I ended up doing a short sale and bought the property for $168,000 and got a second appraisal and it rang in at $190,000. Although we won't be selling or refinancing right away, I'm glad the appraisers opinion is that I got the property for less than what he believes it is worth. It's just a little bit of a pick-me-up.
We are also adding a wall/bathroom to the upstairs bonus room, which should increase our rents by $500 a month. In this market, each bedroom is worth around $400-500/month and by turning a bonus room into a bedroom, we will capitalize on this fact.
Securing financing for the deal was very difficult. I definitely have skin in the game, like my life savings, but I had to go to family members and present a plan of action and was countlessly turned down. My family all thought I was crazy for trying to get into real estate investing at age 21 but after reading enough about the industry and after so many rich dad poor dad books, you feel compelled to act. Finally I was able to convince a friend to lend me money, and some family members to help me with the loan, because I would never be qualified by a bank. We did a traditional 30 year loan with 20% down. I won't be seeing profit right away, because we put money out of pocket into the deal, but after about 2 1/2 years, we will see our first profits and if we choose to refinance, I'm sure we could see some of that money back that we put in. Never the less, we will be making a profit each month, which makes me smile.
The short sale process was a total disaster, I used an agent because I didn't know how to do it myself quite yet, but being out of state and having multiple people on the title made it complicated. Also, choosing Wells Fargo for the financing was a mistake that will never be made again on my part.
I'm very excited about this, and I can officially call myself a real estate investor! YES!! If you've read this far I thank you and I hope my story sounds good and hopeful. Good luck to you all!