My wife and I purchased our first rental property in August of 2018 and have just listed it for rent. We learned a lot of lessons, and learned them the hard way. The numbers below aren't super impressive, but I'm very proud of what my wife and I have accomplished and it seems that despite the issues, this property will cashflow nicely. We're excited to do the next one and I believe with what we've learned on this one, we can do it 100x better!

The rehab took WAY too long, but we were attempting to keep from using of our HELOC to cover the rehab, so we were putting about $2,000 a month of our income toward the repairs. In hindsight, I think it would've been better to just get hard money to cover the rehab and downpayment and get done with it as quickly as possible, but I felt nervous about any kind of time constraint considering we basically had no idea what we were doing.

We aren't going to come out of this deal unscathed financially as we'll have some HELOC debt and a small amount of debt to a family member remaining, but it will still cashflow pretty well and fortunately we're in a hot market that has been very forgiving. The rents are strong and appreciation is strong as well. Without those two factors, this could've turned out much worse than it did.

Details:

3BR/2BA 1900 square feet, bult in 1953.
Had a weird layout where what should've been the master suite was sharing a bathroom with another bedroom. We turned it into a real master suite by walling off the bathroom from the other bedroom.
Purchase price of $115,000
Rehab:
- Estimated rehab: $30,000
- Actual Rehab: $50,781
ARV:
- Estimated ARV: $150,000
- Actual ARV: Still waiting on appraisal, but will likely be $160,000 - $170,000.
Bought off of MLS, probably worth $130,000 at the time we purchased it, so not a screaming deal by any stretch.
$35,000 loan from a family member for the down payment and a small portion of rehab ($30K DP, $5K rehab).
Conventional mortgage for the remainder. We will probably not go this route on the next one, may do hard money. I'm feeling more confident in our ability to execute on the rehab and do it quickly, so I'm feeling more comfortable going the hard money route.
We used a HELOC on our primary residence as well as our own cash to fund the rehab. Fortunately we have a good amount of income and have kept our expenses in check, so we could put a lot of cash towards the rehab. We still ended up putting way too much on our HELOC though.
We were hoping to get $1200 a month in rent, but we now have it listed at $1375 and are getting good traffic on it.
After all is said and done and we've completed the refinance, we will likely have a property cashflowing ~ $500 per month before repairs/capex/vacancy.
We will get about $30K from the refi which we have earmarked to pay back the bulk of the loan to our family member. However, I don't think they need the money and we may try to keep it as seed money for our next house.

Lessons Learned:

Good contractors are EVERYTHING. We learned to give a new contractor a chance on a small job and inspect what you expect. Once they've proven they know what they're doing, then give them additional work. We did way too much assuming that people knew what they were doing and it bit us more times than I'd like to admit.
Similarly to renters who want to move in immediately, I learned to beware of any contractor who says they can start today. I now know that I want the contractors who are covered up. The guy who can start today definitely sucks at everything.
When we purchased the house, we didn't anticipate all of the large "under-the-surface" repairs that would be needed that wouldn't impact the appraisal value and those were the biggest expenses that bit us. One important lesson we learned is to pay attention to the type of repairs needed on a house before you buy it. In the future I'll be looking for houses that need the types of repairs that will increase the appraisal value, basically maximizing the dollars we're putting into rehab. Here are the items that bit us:
- Retaining wall, which we built ourselves, even doing it ourselves it still cost us $2,500.
- Replacing old fuse panel with modern breaker box - $3,000. I didn't have any experience with this type of thing, but I will be on the lookout for it in the future.
- Drain pipes for plumbing were old and some were in bad shape. I didn't know going into this that these old style galvanized pipes should've been a red flag. I think we probably paid out $1000 in various repair of galvanized pipe.
- There was also a plumbing situation outside with old clay pipes underground that we couldn't have known about, but that ended up costing us $5,500 to jackhammer up the back porch, replace the line and put in new concrete.
- Water in the basement, we paid someone for a foundation drain to the tune of $2500, and then we put in 2 french drains ourselves, which came to about $1000.

The most important thing I learned from this is that I was stupid to sit on the sidelines watching other people do this for as long as I did. I wish I had done it sooner, and I've found my desire and confidence to do the next one has grown exponentially. You only live once, and if you're reasonably confident in your numbers and you're in the right market, real estate can be very forgiving. For anyone reading this who is sitting on the sidelines, just find a deal and pull the trigger already. As you can see from this, it doesn't have to be the insane deal you hear people bragging about on podcasts (although that should certainly be your goal), but what I'm saying is if it doesn't turn out like you thought it would in your initial analysis, it's probably not going to ruin you financially.

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