23 YEARS OLD BUYING MY FIRST INVESTMENT PROPERTY

Buying & Selling Real Estate
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23 YEARS OLD BUYING MY FIRST INVESTMENT PROPERTY

Andres Castaneda
Member since 2018 · 21 posts · 5 votes

Hi BP fam!

Here again with some exciting news... I'm buying a house!! Closing is scheduled for the 27th of this month and things are progressing as they should. I am super excited as well as nervous, but feel more ready than ever. I'm here to ask... What the F*** should I do with it?!?!?! There is SO MUCH potential and a lot of equity on the line and I really want to maximize this as much as possible. This can be potentially life changing for me and I do not want to mess it up. 

Here are the details:

It is a single family ranch in a good neighborhood and hot market. Purchase price is 207,500 with 5k closing credit and 5k cash to me from seller for immediate repairs. I am financing 3.5% as I will occupy it so am total into the house about $12k with all closing costs. I plan on doing the rehab myself with the help of family and friends for about $10-15k.

Here's where it gets fun:

The house across the street on an almost identical footprint sold at 332k last summer. It was fully rehabbed and updated. My GC gave me a quote at 45k to re do the house from top to bottom with all the bells and whistles. After seeing the quote I realized I could cut down thousands of dollars in labor by doing the majority of the work myself. IE painting, flooring, tile, kitchem & demo. I have been shopping for materials and between full kitchen, full bath, interior paint and floor refinishing it will be just shy of 7k before labor(90% of that labor will be my own work, aside from electrical and plumbing which will be licensed and insured professionals). My parents are as excited as I am and have already started looking at color schemes for the home... lol. They will be helping with easy work such as painting and tiling.

The house appraised 63k above accepted offer so I will have a good chunk of equity once I close. 

My question to you all is, what do I do?! Do a very simple 10k rehab and resell at 320? Go all out and push a 350k sales price? 

I have been back and forth between BRRRR or cashing out immediately and holding for another purchase while taking the tax hit.

After it's all said and done there should be about 100k worth of equity I will be looking to repurpose. Either refinaning the home and using that cash to buy a multi that will self sustain itself OR take the lump sum and buy a multi with only 3.5% as I will occupy it. Then keep the rest for a future purchase...

Long story short. I NEED HELP ! Need a list of pros and cons for both, anybody with similar past experiences etc etc.. All constructive feedback is welcome. Thank you all in advance!

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  • Tyler Weaver
    Investor · Cincinnati, OH · Member since 2008 · 319 posts · 243 votes
    7y

    Is there a market for the $320k property with a modest rehab budget?  Some areas really put a premium on everything being done and move in ready. 

    Doing all the labor yourself will take 5-10x longer than you initially plan.  Especially if you are doing this after work.  Some projects scale pretty well if your family is looking to pitch in.  Demo, Laying flooring, and painting are great for having several family members pitch in on the work.  

    If you do the BRRRR approach and refinance at 350k, your mortgage will be close to $1,800 a month, if taxes are close to $750 a month, your personal housing costs may be higher than other options. Where it may be cheaper to sell the property and live elsewhere.

    0Reply
  • Andres Castaneda
    OP
    Member since 2018 · 21 posts · 5 votes
    7y
    Originally posted by @Tyler Weaver:

    Is there a market for the $320k property with a modest rehab budget?  Some areas really put a premium on everything being done and move in ready. 

    Doing all the labor yourself will take 5-10x longer than you initially plan.  Especially if you are doing this after work.  Some projects scale pretty well if your family is looking to pitch in.  Demo, Laying flooring, and painting are great for having several family members pitch in on the work.  

    If you do the BRRRR approach and refinance at 350k, your mortgage will be close to $1,800 a month, if taxes are close to $750 a month, your personal housing costs may be higher than other options. Where it may be cheaper to sell the property and live elsewhere.

    There is a HUGE market at 320k with a light rehab. I have an offer at 300k as is from a friend of mine. I'm planning on living there for about 3 months before deciding to sell or BRRRR so time to do the rehab isn't much concern to me. Taxes are closer to 350 a month in this area. Current mortgage estimate is around $1450 principle, interest, tax, insurance and PMI. So there is room for cash flow monthly if I don't refinance.

    The one thing about selling is I really do not want to get hit with capital gains tax... Only way to avoid that is to 1031 exchange into another property but I've had my reserves about having so much equity in one property. I want some cash aside to purchase another and begin working on a portfolio but I am beside myself as to how approach it.

    I keep leaning towards keeping the single and renting it out and using the refi to buy a multi with 15% down.  Thoughts?

    0Reply
  • Tyler Weaver
    Investor · Cincinnati, OH · Member since 2008 · 319 posts · 243 votes
    7y

    A 300k offer from the 207k purchase price as is?  If that is a viable offer, I would take that 100%. Get some deals under your belt, move on continue finding more deals.  That is an incredible return for simply wholesaling the deal.  

    That will set you up nicely to continue marketing and be able to buy another deal or two.  You could easily roll it into a couple more rentals as opposed to the original one property.

    0Reply
  • Andres Castaneda
    OP
    Member since 2018 · 21 posts · 5 votes
    7y
    Originally posted by @Tyler Weaver:

    A 300k offer from the 207k purchase price as is?  If that is a viable offer, I would take that 100%. Get some deals under your belt, move on continue finding more deals.  That is an incredible return for simply wholesaling the deal.  

    That will set you up nicely to continue marketing and be able to buy another deal or two.  You could easily roll it into a couple more rentals as opposed to the original one property.

     
    I can't do that now as I am buying off a family friend which is why I will need to live in it for some time prior to making a decision on my next move. I also want to be as hands on with this one as possible since it is my first and the owner waited a year for me to be ready. He wants me in it as bad as I do which has made things easy. What type of marketing do you guys do to find deals?

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