My first real estate rental investment, closed August 2019.

22 Replies

Investment Info:

Small multi-family (2-4 units) buy & hold investment in New Richmond.

Purchase price: $400,000
Cash invested: $20,000

My first investment is a 4-plex in New Richmond WI. I wanted to take advantage of the FHA loan option while picking up four "doors" at once. New Richmond Wisconsin is 45 minutes East of St. Paul MN and scheduled to be one of the fastest growing cities inside Wisconsin over the next two decades. After all expenses, the cash flow for this property is currently $800.00. It could be more, because right now the current leases are beneath market value and each could be raised by $100 over the next year based on the neighborhood. Each unit has 2 bedrooms, a living room, a patio in the back.

@Timothy W Hanson Congratulations! Not only does it sound like you got a great deal, but there appears to be upside in market appreciation and rent increases. 5k of your money for each door is great as well. Do you mind sharing what the terms of your FHA product are?

@Nick Rutkowski  Thank you! :) 

@Chad Leton Thank you! And of course. The terms of the FHA loan were 3.5% down, which is great. I also purchased down the interest rate with the seller's credit, so my interest rate is 3.0% which makes up for the PMI fee that comes with FHA loans. I included the PMI fee in my expenses, and honestly I may never re-finance out of the PMI fee because I would lose the 3.0% interest rate making it a wash. I will have to see what interest rates do in the future when it is time to make that decision.

@Anthony Wick Thank you Anthony. You're right, the property taxes are not great in Wisconsin right now either,  in 2018 the total taxes were $5000, but they are held in escrow by the bank with monthly contributions, and they are already calculated into my expenses so will not impact the end of the month cash flow! 

I am now looking for my next property and simultaneously searching for the best finance methods (duplicate FHA after waiting one year / saving up cash to go 25% down commercial loan / or other methods that I will learn about through Bigger Pockets). Thanks for all the feedback everyone I really appreciate you guys!

@Timothy W Hanson

I closed on a duplex this month. My 3rd duplex in the last 18 months. Terms were 20% down, 25 year amort, 4.6% interest, with a 10 year balloon. Just to give you an idea what's possible in the Midwest. This was a commercial loan in my LLC with a local bank. I also have an FHA loan on a prior duplex. And at 3.75% for 30 years fixed the PMI is just a cost of doing business.

Property taxes here are even higher. $285k value duplex comes in at about $6,500 property taxes. No escrow for taxes and insurance in the LLC. Just like capex and the like, just have to be diligent in those reserves every month.

@Collin Cameron

Everybody wanted 25% down, except a local bank that keeps loans in house. They're all commercial loans for LLC, and backed by a guarantee from all partners. So pretty solid loan for the bank. And no 30 year fixed rates to be had. I'm sure the opening deposit for our account helped a bit as well.

That's interesting Anthony. When it comes to a second property, I will have to keep all funding options in mind with FHA likely off the table.. I think building a cash reserve is the popular option to put 20% to 25% down. But also BRRR is popular if one can swing it with a hard money lender, but is risky, and I think relies on looking for flips.

@Timothy W Hanson

I took on partners after I had depleted my personal funds. A couple friends expressed interest after hearing what I was doing. Hired an attorney to make sure it was a good deal in writing. As Brandon Turner likes to say; 33% of a good deal is better than 100% of no deal (or something like that).

It's sorta a bummer that FHA PMI doesn't go away with loan pay down like it used to. If interest rates drop over the next year, maybe you could refinance it without losing much on the rate. Congrats on your purchase. It looks like a newer property.

This was recommended to me and I highly recommend it to you as well. You should purchase and listen to or read more than once "The Book on Managing Rental Properties" as soon as possible before getting or starting to work with tenants. 

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