HELP!! First possible RE investment (I am terrified)

Member since 2020 · 3 posts · 0 votes

4mo

Hello, I am a 23 year old in Idaho who has been obsessed with real estate since I was 18, always thinking id make a commitment or put effort but bouncing back and forth. I have since become a real estate agent and a builder. I am looking at a house in a location where 4 bed 2 bath homes are currently listed around $350,000. This home is 4 beds 1 bath and listed around $290,000. I have experience in construction and my father is GC, we build cabins together for my main line of work. I really want to put an offer in on this property as an investment property, but I am terrified. I have been trying to crunch the numbers and run through 1000 scenarios both best case and worst case. So far, I have estimated that I could turn this home into a 5 bed 2 bath for less than $15,000 or less since I don't need to pay labor, there might be an issue with the plumbing since the utility room in the basement smells like dirt and feces, obviously I would want to do an inspection and possibly have the seller give seller credit if something major popped up. I would rent by the room in this massive house most likely, and I estimate I could get about $750-800 a room right after adding the bathroom, though I would like to verify with someone local. My tax history is all over the place so I have been talking to specialized lenders in my area instead of standard banks. They say the address is "rural" so I might have to put up to 30-35% down instead of 10%. They might be able to call it suburban and cut me to 10% down payment. I only have 30k available in cash today BUT with a decent check from building cabins coming in at the end of the month. Likely a 15-20K check. My mother is also considering selling her cabin, which me as the listing agent would give me another 15k or so to work with after my company takes a cut. I also have some valuable possessions I can sell but that's just not as liquid, could take a month or two or three to sell those if I wanted. I also am confident my own father might be willing to help with the down payment too, so I can keep more cash reserves instead. I would have to repay him though obviously which is not yet included in this scenario. But after a bridge loan I then I would refinance with the same company into a DSCR, which they said they do rent by the room based.

I am doing a bunch of rambling but here are my basis, I really just want to know this communities thoughts and expertise. Heck, I could do all of this for an offer to be rejected regardless. I'm ok with a deal that gets my foot in the door, doesn't have to be a home run. But I also would rather no deal than a bad deal that puts me at great risk:

Purchase Price: $275,000 with 5k seller credit
Bridge Loan Amount: $192,500
Interest Rate: est 10.75%
Estimated Holding Cost: $1,973.96 until rent ready (rent ready in 1-2 months)

Estimated ARV Value: $350,000+ (4 bed 1 bath into 5 bed 2 bath) ($330,000 ARV CONSERVATIVE)
This lender will reimburse 100% of rehab costs after they are finished. I estimate 15k or less rehab costs though.
I would then refinance into a DSCR 80% LTV based on 350k ARV with the same lender, renting the 5 bedrooms to make $3750-$4000 per month. My area is very lenient on rent by the room and the laws pertaining to it. After the REFI I estimate my total expenses with 5 people living there (vacancy. capex, yatta yatta BP way) to be around $3639/mo, also being conservative. Keep in mind the mortgage would be only around $1816 of that total number. I would also have to account for repaying any money my father lends to me. Though if the property had a 360k or 370k REFI that would put another 15-25k in my pocket.

I could make capex and maintenance 5-7% each instead of 10% but this property was built in 1920. Regardless, this all terrifies me. I don't mind going through a great learning experience even if it costs me some money, it would further my landlord road of experience and teach me a lot. I just do not want to somehow go bankrupt. The worst case scenarios haunt my mind. Any words and advice are appreciated.

My other idea was to send mailers and drive for dollars asking people to split parcels so I could buy land for $40,000 or less, I don't want an acre I want .25 or less. Then build my own little home on my own for about $140,000 in coming years just so I have no mortgage and don't pay rent anymore. I hate paying rent even though its only $600 in my tiny studio.

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Corby GoadeBusiness Member

Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes

4mo

There's a lot of detail here, BUT- it's normal to be terrified on your first few deals. It would be a problem if you weren't!

That being said, you've mitigated your risk through experience and your own building skills.

The best advice I can give you is to avoid any deal that doesn't have at least two exit strategies. If it works as a flip, that's great. But if you get in to the deal and it doesn't work as a flip because the market softens or your scope of work gets out of hand, which happens to even the most experienced flippers....

Would it also work as an LTR or STR? Is there a tax strategy you could incorporate in to one of those strategies that would allow you to hold the property for a period if you needed to? Would you have the equity, income and/or cash to refi if you needed to?

Without a lot of experience or resources, having at least one other exit strategy is the best way to get started.

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G. Brian DavisPro Member

Investor · Hatboro, PA · Member since 2016 · 2k+ posts · 842 votes

4mo

Hi @Ethan Tomlinson, The deal itself isn't crazy, but right now it's tight and very assumption heavy. You're relying on rent by room at $750–800, a smooth refinance at your projected ARV, minimal rehab on a 1920 property, and outside capital from multiple sources. If any one of those slips, the margin disappears fast.
Ask does this deal still work if rents come in lower, rehab goes over, and the refi comes in at your conservative value or gets delayed? And can you comfortably carry it for 3–6 months with real reserves? Also double check zoning and local rules on rent by room.

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J CastroBusiness Member

Lender · Florida · Member since 2025 · 661 posts · 239 votes

4mo

Hi @Ethan Tomlinson, welcome to BP!
You’re actually thinking about this the right way — not because you’re trying to “talk yourself into it,” but because you’re stress-testing the downside instead of getting blinded by the upside. That alone puts you ahead of a lot of first-time investors.

That said, a few things here deserve a hard, honest gut-check.

First, the deal can work on paper, but it’s tight in a way that matters more than people usually admit. You’re stacking multiple assumptions on top of each other:

Very low rehab cost on a 1920s property (that sewer smell is a real flag — not a small cosmetic issue)
Fast rent-up at top-of-market per-room pricing
A bridge lender that truly reimburses 100% without friction
A clean DSCR refi at strong ARV with rent-by-the-room underwriting

Any one of those steps slipping slightly turns a “good deal” into a cash drag.

Second, the biggest risk here isn’t the purchase price — it’s liquidity timing. You’re already honest about this, but your available capital is basically:

$30k today
- $15–20k incoming
- possible family support
- possibly delayed asset sales

That’s not necessarily a deal killer, but it does mean you don’t have a wide margin for:

inspection surprises (very likely in a 1920 build)
construction delays (almost guaranteed even on “simple” work)
lender reimbursement timing delays
rent-up taking longer than expected

Third, the rent-by-the-room strategy is where most first-time investors either win big or get stuck. It can work, especially in student-heavy or workforce housing areas, but it’s very sensitive to:

local demand stability
tenant turnover
management intensity
legal/municipal interpretation (even if it’s “allowed,” enforcement can shift)

Now, the part that does stand out positively: you’re not guessing blindly. You’ve got construction experience, family GC support, and you’re actually thinking through exit strategies instead of just acquisition. That matters more than most spreadsheets.

But here’s the real takeaway:

This doesn’t look like a “bad deal” or a “great deal.” It looks like a high-variance deal for someone with limited downside cushion.

And that’s the key question you should answer honestly:
Are you trying to learn through controlled risk… or are you unintentionally stepping into a situation where small delays become financial stress?

Because you’re not far off — but you’re close enough that execution mistakes matter more than strategy.

If I were you, I’d do two things before even thinking about an offer:

Get a very honest contractor scope on the plumbing/sewer situation (that alone can reprice the deal)
Talk to the lender and confirm worst-case timing on rehab reimbursement + refi — not best case

If both of those come back clean, then you may actually have something worth pursuing. If either one gets fuzzy, that’s usually where “learning experiences” get expensive fast.

And for what it’s worth — your alternative idea (buying land and building small, controlled projects over time) is not less ambitious. It’s just lower volatility, which matters a lot when you’re still building capital.

Either path can work. The difference is whether you want speed with complexity or control with patience. Best of luck!

JCREIG Capital Funding

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Ethan Tomlinson
OP
Member since 2021 · 11 posts · 15 votes
4mo
Quote from @J Castro:
Hi @Ethan Tomlinson, welcome to BP!
You’re actually thinking about this the right way — not because you’re trying to “talk yourself into it,” but because you’re stress-testing the downside instead of getting blinded by the upside. That alone puts you ahead of a lot of first-time investors.

That said, a few things here deserve a hard, honest gut-check.

First, the deal can work on paper, but it’s tight in a way that matters more than people usually admit. You’re stacking multiple assumptions on top of each other:

Very low rehab cost on a 1920s property (that sewer smell is a real flag — not a small cosmetic issue)

Fast rent-up at top-of-market per-room pricing

A bridge lender that truly reimburses 100% without friction

A clean DSCR refi at strong ARV with rent-by-the-room underwriting

Any one of those steps slipping slightly turns a “good deal” into a cash drag.

Second, the biggest risk here isn’t the purchase price — it’s liquidity timing. You’re already honest about this, but your available capital is basically:

$30k today

$15–20k incoming

possible family support

possibly delayed asset sales

That’s not necessarily a deal killer, but it does mean you don’t have a wide margin for:

inspection surprises (very likely in a 1920 build)

construction delays (almost guaranteed even on “simple” work)

lender reimbursement timing delays

rent-up taking longer than expected

Third, the rent-by-the-room strategy is where most first-time investors either win big or get stuck. It can work, especially in student-heavy or workforce housing areas, but it’s very sensitive to:

local demand stability

tenant turnover

management intensity

legal/municipal interpretation (even if it’s “allowed,” enforcement can shift)

Now, the part that does stand out positively: you’re not guessing blindly. You’ve got construction experience, family GC support, and you’re actually thinking through exit strategies instead of just acquisition. That matters more than most spreadsheets.

But here’s the real takeaway:

This doesn’t look like a “bad deal” or a “great deal.” It looks like a high-variance deal for someone with limited downside cushion.

And that’s the key question you should answer honestly:
Are you trying to learn through controlled risk… or are you unintentionally stepping into a situation where small delays become financial stress?

Because you’re not far off — but you’re close enough that execution mistakes matter more than strategy.

If I were you, I’d do two things before even thinking about an offer:

Get a very honest contractor scope on the plumbing/sewer situation (that alone can reprice the deal)

Talk to the lender and confirm worst-case timing on rehab reimbursement + refi — not best case

If both of those come back clean, then you may actually have something worth pursuing. If either one gets fuzzy, that’s usually where “learning experiences” get expensive fast.

And for what it’s worth — your alternative idea (buying land and building small, controlled projects over time) is not less ambitious. It’s just lower volatility, which matters a lot when you’re still building capital.
Either path can work. The difference is whether you want speed with complexity or control with patience. Best of luck!
I really appreciate this reply! Thank you. I value security a lot in investments, even if growth can be a little slower. It makes me reconsider what the numbers would have to be on this deal. Most likely just a lower purchase price, but this is an MLS listing, so it seems quite unlikely I'd get accepted.
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J CastroBusiness Member
Lender · Florida · Member since 2025 · 661 posts · 239 votes
4mo
Quote from @Ethan Tomlinson:
Quote from @J Castro:

Hi @Ethan Tomlinson, welcome to BP!
You’re actually thinking about this the right way — not because you’re trying to “talk yourself into it,” but because you’re stress-testing the downside instead of getting blinded by the upside. That alone puts you ahead of a lot of first-time investors.

That said, a few things here deserve a hard, honest gut-check.

First, the deal can work on paper, but it’s tight in a way that matters more than people usually admit. You’re stacking multiple assumptions on top of each other:

Very low rehab cost on a 1920s property (that sewer smell is a real flag — not a small cosmetic issue)

Fast rent-up at top-of-market per-room pricing

A bridge lender that truly reimburses 100% without friction

A clean DSCR refi at strong ARV with rent-by-the-room underwriting

Any one of those steps slipping slightly turns a “good deal” into a cash drag.

Second, the biggest risk here isn’t the purchase price — it’s liquidity timing. You’re already honest about this, but your available capital is basically:

$30k today

$15–20k incoming

possible family support

possibly delayed asset sales

That’s not necessarily a deal killer, but it does mean you don’t have a wide margin for:

inspection surprises (very likely in a 1920 build)

construction delays (almost guaranteed even on “simple” work)

lender reimbursement timing delays

rent-up taking longer than expected

Third, the rent-by-the-room strategy is where most first-time investors either win big or get stuck. It can work, especially in student-heavy or workforce housing areas, but it’s very sensitive to:

local demand stability

tenant turnover

management intensity

legal/municipal interpretation (even if it’s “allowed,” enforcement can shift)

Now, the part that does stand out positively: you’re not guessing blindly. You’ve got construction experience, family GC support, and you’re actually thinking through exit strategies instead of just acquisition. That matters more than most spreadsheets.

But here’s the real takeaway:

This doesn’t look like a “bad deal” or a “great deal.” It looks like a high-variance deal for someone with limited downside cushion.

And that’s the key question you should answer honestly:
Are you trying to learn through controlled risk… or are you unintentionally stepping into a situation where small delays become financial stress?

Because you’re not far off — but you’re close enough that execution mistakes matter more than strategy.

If I were you, I’d do two things before even thinking about an offer:

Get a very honest contractor scope on the plumbing/sewer situation (that alone can reprice the deal)

Talk to the lender and confirm worst-case timing on rehab reimbursement + refi — not best case

If both of those come back clean, then you may actually have something worth pursuing. If either one gets fuzzy, that’s usually where “learning experiences” get expensive fast.

And for what it’s worth — your alternative idea (buying land and building small, controlled projects over time) is not less ambitious. It’s just lower volatility, which matters a lot when you’re still building capital.
Either path can work. The difference is whether you want speed with complexity or control with patience. Best of luck!
I really appreciate this reply! Thank you. I value security a lot in investments, even if growth can be a little slower. It makes me reconsider what the numbers would have to be on this deal. Most likely just a lower purchase price, but this is an MLS listing, so it seems quite unlikely I'd get accepted.
That’s a smart approach — being intentional about downside protection will save you a lot of headaches long-term.

Sometimes the real “edge” isn’t just price — it’s terms (inspection period, closing speed, fewer contingencies, or stronger financing certainty). Sellers will often move on structure even when they won’t move much on price.

If this one doesn’t pencil the way you need it to, that discipline will serve you well — the right deal usually shows up where the numbers and risk both line up, not just one or the other.
JCREIG Capital Funding
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Frank PyleBusiness Member

Specialist · USA · Member since 2024 · 279 posts · 130 votes

4mo

I would not buy this unless the deal still works in the 30 to 35 percent down version and you have real reserves left after the rehab, holding costs, and any money owed back to your dad. The part that jumps out is your own math shows 3750 to 4000 in rent but about 3639 in expenses, so you are only giving yourself a few hundred bucks a month before surprises on a 1920 house with possible sewer or plumbing issues. Rent by the room can be great, but this deal is really being carried by the refi actually happening at 80 percent, the room rents being real, and the lender accepting that income exactly the way they said. Your move today is to get the DSCR terms in writing, verify room rents with actual local comps, and do a sewer scope before you get emotionally attached. Also, your 600 rent is cheap, so you do not need to force the first deal just because you hate renting.

What are the taxes, insurance, utility estimate, and final DSCR rate they quoted you after the refi?
IEC would fit here for a quick underwriting and financing structure check before you write the offer.

[email protected]317-501-3467

Frank Pyle at ExP Realty

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HELP!! First possible RE investment (I am terrified)

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