Beginngers doing something wrong. What is it?

24 Replies

My husband and I have been looking for our first rental - with an 150,000 upper limit.

We wanted to start small, no major risk. We'll put abut 50% down.

We're looking mainly at condos and townhouses as we are afraid that renters in a house a bit above 100,000 might present a higher risk, on average, than renters of condos and townhouses at the same price; plus the issues of kids, yard, roof, mess etc. We just kind of wanted to start by renting to a young, white-collar professional, no kids.

As we both have full-time careers and two children this is not something we want to do "for a living". We can't' drive around for money, approach owners, cold calling, chase deals under market value, etc. 

We are working with an agent and waiting to see what pops up on MLS.

We found 2-3 opportunities so far but not matter how fast we tried to move, by the time we made an offer, someone else had already snatched it. We are at a point where it's kind of like "Good God!". 

We are not even looking for the "deal of a lifetime" as we know we don't have the time and energy to hunt for major bargains under market value when there are professionals doing this for a living.

We just need to place some money in a real estate piece, using some leverage. 

But it looks like any unit in a decent neighborhood goes in a matter of hours, if not minutes.

What in the world?

This is the  North Atlanta area I am talking about. 

Any views and tips would be much appreciated.

Thank you so much.

@Cristina S. Here's what I think you are doing wrong.

1. Putting 50% down.  While this will increase your cash flow, it seriously diminishes your cash.  Why not put down the minimum you can, say 20%, and keep the rest.  You always have the option of using the 30% you kept to pay down the principal.  Let's say you put 50% down and then fall in love with being an investor and wish you only put 20% down so you could buy another property.  Your only option now is likely to refi, incurring additional closing costs.

2. Considering a condo. I might be wrong, but it is tough to make a condo cash flow here with the HOA fees. Maybe it is different there.

3. Not giving yourself room to exit. You said you are not looking for "the deal of a lifetime." But you also seem ambivalent about being an investor. The latter is fine, but you'll need to get at least a good enough deal to be able to exit without losing ANY money. Between paying a realtor commission and other selling costs, plus the buying and financing costs, you'll likely need to buy at no more the 88% ARV in order to be able to exit without harm. It's a frothy market and you don't want to get caught up in it. Consider reaching out to wholesalers and other investors in your area to find deals off market. Maybe deals that need a little work.

On a side note, what's up with your -4 votes?  Maybe you should post a question to the Questions About Bigger Pockets Forum.  I think this is a bug.

Hello @Cristina S. ,

I agree with a lot of what @Larry T. said and think you need to really evaluate your model and numbers.  I live in Johns Creek and work Roswell regularly.  There are properties out there and available and they do require you to move fast but you should be able to find properties for what you are looking for.  I run across what you are describing regularly.  

MAJOR ISSUE - If you are going to be an investor you need to be careful what you say.  Looking for a tenant that is 'young' & 'without children' is a violation of Equal Housing Opportunity and could land you in serious trouble.  

If you are interested in discussing more please send me a PM to discuss.

Either way, good luck and stay diligent!

Larry T and Micah,

Thank you so much for your answers. 

Larry, my husband says that he doesn't want to leverage ourselves to the hilt - this is why we want to put 50% down; so we can make the cash flow work with the HOA fees too.

He's  been cautious about houses at this price level or about getting in debt too much at this point. He wants to start slow to see how it works. If we leverage too much, the monthly expenses would be too high - my husband says. I do see your point though of putting too many eggs in one basket.

Not sure how we can do the trick of 80% ARV when we have so little time to chase deals. It's MLS and our agent or nothing. How could we get in touch with wholesalers and investors in the area? And why would they be willing to sell a unit to us for less than what they could get on MLS. Because we won't buy 10 doors either.

For condos, it is still possible to make some cash flow here but no, it won't be much. If we get 100-150, it will be good. We're doing it more for the equity/investment than cash flow. We are nowhere close to being able to build a life based on cash-flow. We're still relying on our employers for a living (sigh) - thank goodness these are flexible jobs with lots of work-from-home. 

If we had to do the cubicle thing 8 hours a day, I would go full-blown into RE, come what may. 

want to buy and hold for now.


Is there anything that we could do to NOT miss these better opportunities when they show up? We are moving as far as we can but with two full-time jobs and kids, by the time we get in touch with the agent, she sets up visit, go see and figure out rents in the area to ensure numbers add up...someone snatches it.

I read some investors make offers site unseen - and then inspect the property and back out during the due diligence period if we see problems on inspection.

We haven;t done this and as beginners, feel rather uncomfortable with this "shoot first, ask questions later" strategy; but if this is what it takes to prevent yet another good opportunity from slipping thrugh our hands then I guess that's what we'll have to do.

Regarding the "Fair Housing" aspect, we don't intent so state anything or discriminate against anybody. But we are simply assuming that by buying a certain type of property in a certain type of neighborhood, we would be more likely to attract tenants with the type of lifestyle that we believe would be best for our property. I am sure that our insane society might find ways to read "evil intention" even into this innocent line of thinking, but oh well.

The chances for a family to want to live in a 1 BR 1 bath condo are lower than for a townhouse with several rooms or a single family house. Then again, if a future tenant with children would apply to live in such a place  and all is well, we will go with it. 

But we doubt many would.

@Cristina S. Being cautious and seeing how it goes is fine.  If you can buy for all cash, that is fine.  It will be easier to exit if you find you don't like it and if you find that you do like it, you can refi at that point.

BUT, if you HAVE to put 50% down just to cash flow, that is not a good deal (unless you are speculating on appreciation--that is a different topic).  You will not like it.  And you should have just invested elsewhere.

You need to find investors and wholesalers in your area. Why would they work with you? Because you'd likely be willing to pay more than most of their buyers. And I said 88%, not 80%. Mind you, I'd be looking to pay no more than 80% market value if the property needed no repairs and if I was hungry for a deal. If it needed repairs I'd be looking for something no more than 75% after repair value (ARV) minus the materials and labor cost of repairs. So if a place would be worth $100K fixed up, but needed $10K worth of work, I'd be looking to pay no more than $65K.

Post a question here on BP asking about real estate investment associations near where you want to invest.  Roswell?

Or google "reia rosewell georgia". Or search craigslist for real estate postings with words like "investors," "tlc," "fixer" in the FSBO section. These are often wholesalers. Drive around your target area looking for "we buy houses" bandit signs and call the numbers. Contact landlords and ask them. Lots of ways to find these people.

Have to chime in...just imo, why would you invest in a condo when your closest competition is an apartment? Owned by a huge company? Find a cute 2-1 single family in a great area with something going for it besides schools and try to appeal older people . Some people want low rent and quiet non-shared walls just steps from their car. or target the ones with pets as “kids.” Luxury vinyl or tile floors and maybe a pet door. People rent with their pets happiness in mind and pets dont do as well in apartments. People leave apartments and condos for privacy, quiet, pets.

@Cristina S. ,

Personally, I don't ever look at condos, just because IMO the only reason someone would pick them would be for the amenities, such as a pool, gym, clubhouse, etc.. and those would come with really high wasted HOA fees. HOAs can be very aggressive with tenants too, and not to mention charge the owner whatever they want for a repair, so if I were you, I'd focus on spending a bit more and get a 2bd SFH. In my previous town home, the HOA charged everyone $1700 to replace porch railings, what realistically cost in total about $200 in materials... and ya know what? you don't have a choice but to pay it! I have seen and hear people prefer SFH over attached many times over, people want privacy and the thought of noisy neighbors or thin walls isn't fun for anyone.

Lastly, if you're in a condo, there are a lot of unknown as far as neighbors in very  close proximity ,and you don't know their screening.. granted this isn't specific to condos, but it's just the proximity of neighbors and such... we have a rule about avoiding apartment complexes for this reason!     I'd absolutely push for spending more and getting a 2 or 3bd single family home! 

I do not believe you have the proper out look on investing to be successful. One bad tenant will destroy your investment. You also do not understand the value of money.

Putting 50% down or anything above the absolute minimum DP reduces cash flow, it does not increase cash flow. Dead equity turns a investment into a liability.

If you want to invest your money put it into a REIT rather than brick and mortar. Less risk, less work = less stress.

@Cristina S. another option would be private lending. Less work and decent returns. Otherwise find a partner to help

Totally agree with @Larry T.

1. Personally I would never buy a condo. You live in Georgia, why condo?!

2. "by the time we made an offer, someone else had already snatched it". Of course, when looking at a condo, you are definitely competing with homeowners.

3. Even though you don't want to do it 'for a living", I suggest that you still educate yourself, read, network, etc, while making decisions to invest in RE. It can only help.

Suggest you have your realtor sending you new listing DOM< 3 days and go make an offer.  Only one of the two needs to be directing the project. If it is hot make an offer subject to inspection later.  In condos they are all the same. Do not want to be on a busy street. Ask your realtor to go there take a few photos.

Another source is on line auction. That you can start low, conditions are mixed and you pay 4-5% add on fee.

Thank you all so much. 

We learned a lot over the past few days - and no, we were not doing the numbers right. 

We were not adding vacancy rate , capital expenditure and repairs as part of expenses. We were considering the cash flow as something that could cover those when needed. 

That means that based on the "correct" property analysis practiced by versed investors who do focus quite a bit on cash flow - NOTHING we've seen on MLS would have worked - even remotely.

(Income - Expenses, with expenses including every single contingency possible).

That also means the only way to do this would be to get a Godzilla-type deal off MLS requiring serious repairs.

This, in itself, would take a serious amount of time and energy (another job) which is not realistic in our position (two full-time demanding professional careers, two kids). 

We thought we could park this money in something other than stock/mutual funds/whatever market where you don't really end up building much over time. 

We were hoping that even with some negative cash flow, the fact that we would be paying off the mortgage on a relatively good property in a good area - would eventually leave us with IT (the property) - which is something more than any REIT or whatever market would be able to leave us with.

Houses are houses. Once they are paid off - they usually don't disappoint. Especially in a nicer area.

But this might not work for us in this market.

Our main regret is that we didn't take 20,000-30,000 dollars just a few years ago when deals were still possible off MLS. Right not, you must make it your main job to find a deal - and we can't do that.

Our question is: could it still be worth it to simply buy a decent property in a good area and just buy and hold for the day when it will be paid off - even with zero or possibly negative cash flow? 

We have 50,000... leverage some.. and then ta, da - you have a property paid off and there's enough cash flow.

If that's a stupid move - then I guess we'll have to give this up. :-(

@Cristina S. I have a little different take than some here.  I flip and hold in Cobb County, primarily in East Cobb, Marietta, and Kennesaw.  I don't particularly like condos, simply because of the HOAs, potential restrictions, etc.  However, I love townhouses and there are plenty here in GA.  I own 4 of them in at least B+ neighborhoods.  They cash flow very well (almost as good as a house), are low maintenance, and have low risk.  I think you should look into these as an option from what I'm hearing you describe.  

Now, one of the problems that I see is definitely the 50% down in this market. Townhouses at the right price go quickly (well I guess anything at the right price does). So, even at 50%, someone is going to come in with cash, quick close, etc. However, if you're willing to go 100% on something (maybe a HELOC or a partner), you can refi it out in 6 months and get your money back. Since you sound a little risk averse, this may make you very uncomfortable. I know several people also say this is not a good way to do it because your cash is gone it doesn't sound as though you are going to be using that cash too fast again anyway. The sad truth for you is that the DOM in East Cobb, Roswell, Alpharetta, etc. is very, very low. It is a very fast market right now and if you don't come in strong and quick, you're going to be out of luck.

@Cristina S. I am also an active investor in Cobb/North Fulton. The price points you are talking about are about as hot as it gets right now. I would recommend networking with people like Kalimah and myself. There's a BP Meetup the last Tuesday of the month that is very good with lots of investors. Unless you find off market properties, or send out a lot of "direct to seller" marketing, it's going to be tough finding something where the numbers are killer. The deals are out there, but be patient. I purchased two rentals in the last month or so, but went several months looking for good deals. Let me know how I can help. Happy to grab coffee sometime. My office is in East Cobb. 

"Our question is: could it still be worth it to simply buy a decent property in a good area and just buy and hold for the day when it will be paid off - even with zero or possibly negative cash flow?"

There are two basic problems with your plan. First without cash flow a property will likely cost as much or more than it will ever be worth. In the end the PITA that tenants create will ware you down and breaking even with a paid off property will quickly lose it's shine. Second a down turn in the market, which is always on the horizon, will wipe out your dead equity. Parking cash in a property is very high risk.

Put your money in a REIT or income fund.

@Cristina S. Getting started can be hard. No one path is correct and everyone has different goals and abilities.

At the Meetup I host mentioned above you can meet others in the realestate space and take pieces of what they are doing to build your own right way.

In addition to the suggestions above I would add you may want to look into investing in a syndication. You still own the realestate(or a portion) so it carries all the same benefits you’re looking for. Typically equal or greater returns that a newbie could produce on their own. while letting the pros do all the leg work. It’s work a google.

Hope to see you at the Meetup.

Kalimah, Terry and Julie 

- Thank you for your encouragement - I do need to get in touch with some people here and I will do so soon.


We will continue to look for a little longer to see if we can get something with cash flow, now that we did our homework and know exactly what we must place under expenses (I finished Brandon Turner's book). If numbers don't add up - we might just have to do the REIT.

That being said, I am not sure I understand what you mean by "breaking even with a paid off property will quickly lose it's shine".

We will certainly not break even with a paid off property. Once the property is paid off...there will be at least 400-500$/month coming out after all other expenses are paid. 

The point here is that someone else will be paying off the loan for us. 

But yes, you have a point - we are already thinking about putting less down - not 50%.  More like 25-35%.

It is my understading that people here favor either leveraging to the max or paying 100% cash altogether. Why is 50% cash bad but 100% cash is good?  I am a bit  confused.


I am trying to figure out how to attend the next meeting in November. I have some work-related conflicts in the afternoon-evening on Tuesdays, but I will try to think of a way to make it anyhow.  I hope my husband will be able to accompany me. I look forward too getting to know more people in this this seems to be vital.

Thanks a million, everyone!

Originally posted by @Cristina S. :

Thank you all so much. 


Our question is: could it still be worth it to simply buy a decent property in a good area and just buy and hold for the day when it will be paid off - even with zero or possibly negative cash flow? 

We have 50,000... leverage some.. and then ta, da - you have a property paid off and there's enough cash flow.

If that's a stupid move - then I guess we'll have to give this up. :-(

Could it still be worth it compared to what?  That is the question.  You are not going to do much better than the stock market unless you 1) get a great deal, and  2) leverage.  So if you intend to do neither, then why bother?

[On a side note, the equivalent of a great deal in the stock market is picking the right stocks that will out perform the stock market in general, and you could in fact use leverage.  But it has been shown time and again that only a small minority of financial advisors /  investors have been able to do this.]

@Cristina S.  I'll add a wrinkle to the park money in a home vs. a REIT (or any other paper asset).

One thing you need to consider is your investment timeline, risk tolerance, and current asset diversification. If you already have a lot of money sitting in paper equity right now, then maybe parking money in a rental property isn't so horrible. It really depends on what you are trying to do and your personal situation.

A lot of professional investors (I see @Thomas S. chime in a lot on this) will make arguments about cost of equity and relative performance of RE investments vs. paper assets. He is correct in what he says - but he and other pros might not be you.

If you are in a position where you are trying to diversify and preserve capital - then sitting money in a property (even at a relatively low return) might actually be the best option for you. If you are trying to quickly build wealth/cash flow and have a high risk tolerance then you need those high return deals, using leverage to amplify your CoC.

Define exactly what you want from your investments - then go find an investment that achieves that. It sounds like you have decided on a particular type of asset w/o determining if that kind of deal is appropriate for YOUR needs.

We plan to leverage more now. We were going to do 50% just for safety reasons but it doesn't look like it works this way. We now plan to out 25%-30% down instead of 50%. And yes...we continue to look for a deal but this is no easy task. 

All the advice  here has been extremely educational - plus I finished  my book - so we're learning more. 

We don't want to jump into anything stupid - we're waiting for "the deal" and will leverage, as advised. 

At the same time...time is going by and it already has passed a lot for us. 

We had those 25% or so a few years ago but we kept thinking that we should wait for me to get over some career milestone and then decide what we want to do, maybe save more, etc; but it was a bad idea to wait. 

So waiting  a lot longer while prices continue to climb and the market heat up even more...will take us AGAIN on the wrong part of the "pyramid" game.


Our goal is to accumulate 5-6 properties over the next 10-15 years, get them paid off so that they will generate some good cash flow to supplement retirement income and even allow for earlier semi-retirement ; over the long-term, possibly build a small company that our kids could take over and expand later.

For us it is too late to build anything BIG - FAST; but for them, it might not be - especially if they will take over the little we could build over the next 10-20 years. One thing I know is I am not going to make the mistake of raising my kids with the "slave/poor dad" mentality - get good grades, get a job, keep head down, don't step on toes, meet deadlines, sit in cubicle.

That's toxic. Very, very bad stuff. 

Not that I don't insist on good grades in the meantime - but YKWIM. 

So our goal is NOT to generate a lot of cash flow NOW, so we can quit our jobs asap. 

My career, at least, has a very nice side to it that I would not give up even as a hundred million dollar lottery winner. Fun stuff - but that would mean working part-time only. Working full-time includes a side I could VERY MUCH do without - but I have no choice right now; so I tolerate the "not so great part". 

We thought that with the RE investments I might be able to get rid of the FT sooner and switch to PT in 5-10 years or so.

These are largely the goals. 

We are already putting money in diversified paper assets every month through our employers; and I have had enough of those. 

Never mind that I don't feel like I really "own" something - just some cash that can be wiped  out by God knows what kind of "mystery market machinations" that big wigs pull strings for to "manage the economy".

When I check these investment accounts periodically, I can't help thinking of that saying: 

"If you set aside a little bit each month, you'll be surprised to see at the end of the hear... how little you have".

The concrete nature of the RE appeals to me. 

My parents have 2-3 properties and in their 70's they still manage them on their own - in a very tenant-friendly place on this Earth. Yet this has been their saving grace in retirement.

I agree with the concerns most of the other posters were having, but it sounds like you are on board with all of those now too and understand them, so no need to go into details about why some of those plans/thoughts may be a bit off. 

To me, it feels like you are willing to throw the dart as soon as any part of the board comes into your sights....rather than choosing a more direct aim spot (bullseye) and learning what it will take to hit that bullseye. In my opinion, there's enough room for things to go wrong with the most thought-out highest-potential investment property. So if you just aim kind of 'anywhere', there is significantly more room for things to go wrong. There are extremely easy ways to mitigate risk and appease personal preferences and comforts and find a property that matches whatever that is, so I don't think it's necessary to not have a more focused plan. 

You have done this to a good extent....decide your spend some time learning what makes a good rental property, what factors to be aware of, what the actual options are (and where....Roswell really isn't it unless there's a crash in prices sometime soon), etc. Try to define that bullseye a little more. if you don't, I worry that when you throw the dart it could go who knows where.

@Cristina S. Sounds like you have some good clarity on what you want: 5-6 houses with "good" cash flow that you can pay off in a 10-15 year timeframe.

Now comes the fun part: What do those deals have to look like to get you there? I don't know what your yearly "investable" money is, but if you can afford a 20% down payment a year, 6 houses takes you 6 years. Then you need to look at what return you need per year to pay them all off in another 9 years to hit your 15yr payoff goal. Adjust based on starting capital and yearly capital allocation.

If that number comes out way more aggressive than you expected, then you need to look at maximum leverage, possible value adds, etc. If that number comes out lower than you expect, then you can adjust your strategy accordingly.

Leverage is simply a multiplier - both on the upside and the downside. If you are more risk tolerant, leverage higher. If you are less risk tolerant, leverage less - regardless of what some people say about cost of capital. The property and the leverage should be de-coupled completely. It sounds like you know what kind of property you are looking for, and you got some great feedback here on that property type. The financial strategy (leverage) needs to be purposeful and tailored to your situation, not some rule because someone on BP said cash purchases (or max leverage) are bad.

Best of luck to you! I know you'll get there.

"Beginngers"-   Newby Gingers

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