You Never Forget Your First
Involved In Real Estate · Center Line, MI · Member since 2014 · 39 posts · 24 votes
I was just thinking about the first deal I did a couple of years ago and how it came together.
It was an investor that had bought about 40 homes back in like 2010 and never paid taxes on any of them so it was a fire sale. He had one in particular in Roseville, MI that I liked and I went back and forth with the agent until finally I had him agree to a land contract for $7,000 with a $1,500 down payment and I would catch up the taxes (approx. $4,300). Payments were $500/mo and they did not start for 3 months. Me being a novice went and had to bring people in (my father included) because I did not have all the money for the taxes. That was the beginning of the ending. I ended up having to get rid of the house and took a loss. This was my initiation. I still love it though, it's like that girlfriend you never forget about even though she broke your heart (not that this happened to me before lol). Any other BP members want to share the first time they popped their cherry and if it was all it was cracked up to be.
Thanks for posting this @Alton Williams it's great for newbies like me to see the struggles of successful investors.
As I mentioned in the podcast...I "cheated" in my first deal. It was not a truly no money deal. I wished it was but I did not trust myself nor the book I read enough so I used my good credit (then) to my advantage. Then I sold the house rent to own. What I did not mention during the podcast was I almost quit because of that first deal.
I first tried getting $2,500 a month for that house (my payments were $1800). I figured the house is worth $270,000 so I should get that much in rent. BIG mistake. The house sat for a month with no takers. I lowered it down to $2,300. Still no takers. Then after 3 months, I lowered it to $1995. Finally, I got a tenant/buyer. During those 3 months, I lost $5,400 in mortgage payments plus the costs of marketing (I was doing expensive newspaper ads and bandit signs). The $7K I received from the tenant/buyer just helped me to break-even on the front end.
I almost quit. But good thing, I stuck with it and did what I had to do to survive. After 15 months, my tenant/buyer refinanced the loan in his name and I made $10K on my first deal (after paying all the closing costs). It's definitely not as good as I planned and it was harder than what the gurus say but hey...this is real life. And it started my journey to investing.
A regret that I have though is that I did not buy more properties until I found a tenant/buyer for my first. I was too scared and I focused on the monthly mortgage payments I had to write vs. the money I could be making if I get more properties...
@Alton Williams ...not my first deal, but the first time I gave a contractor money to start rehab...Wow that was a 5K lesson! Ouch...he went on a shopping spree but not for my material...I can look back and laugh today, because I'm still winning!!
My first purchase was my family's home I had grown up in. My parents had moved to another state, I later followed and got a job. My dad got behind on the payments and I sort of loaned him the money catch up and he decided I should just buy it from him. (in other words I had to make all of the payments) Real estate was dead in the town we had moved from, and there was minor vandalism to a vacant property. A few years later we got call from a realtor saying someone wanted to buy the house. (Her first sale in over 6 months) I sold it and put some money in the bank and used it to put money down on land and a trailer house a few years later. I have no idea if I made any money, I don't even know what the purchase price was. At the minimum it was a good savings plan. I did get better at real estate investing.
I consider my first investment house purchase to be the home that I'm still living in right now, 11 years later. It was an REO. Pretty light rehab really with mainly just flooring and paint (and removing some terribly ugly wall-paper). We put about 30K cash down and another 10K or so into it on the repairs. But I was later able to get a HELOC on it with an 80K line of credit. And I learned a LOT and started investing with that HELOC (which I also still have).
Great topic @Alton Williams !
I bought my first property in 2009 as a short sale. I purchased it OO with the first time homebuyer credit (+$8K to start...woo!). I spent the next 3-4 months making the place livable...I was already living there, but it needed a lot of work before I would even tell people I had a house. After it was livable, I took a bit of a break and picked up a roommate and just enjoyed half of my bills/mortgage being covered while I continued doing minor repairs.
I eventually finished fixing it up and decided to rent it out instead of selling. After several bad tenants and another complete rehab (this time with a contractor who knocked it out in a couple weeks vs. a couple years for my rehab) I ended up selling. Altogether I probably netted somewhere between +/-$10K (including all rents, tax credit and forced appreciation).
In hindsight I could write a laundry list of mistakes I made and things I should have done differently. On the surface, it was a marginal deal at best. But it was the beginning of my investing career and I learned more on that house than I could ever begin to describe. The numbers on it will never impress anybody, but I could probably write a book on the things that I learned which I could not even try to place a value on (probably in line with 4 years tuition at an ivy league college though).
Moral of the story is to get in and get your feet wet. You don't have to make a boatload of cash on every deal to come out way ahead!
I was living in England at the time working as a civilian for the Army. I was looking to buy a property there. I looked at one house and the couple obviously knew immediately I was an American. They mentioned that they had a vacation property in FL. I was about to go on vacation in Fl and I had some interest in obtaining a 2d home there.
Long story short I ended up buying another property in England and the above couple's property in Florida. I closed on consecutive days both remotely.
Did I mention that at the time I was doing these closings there was an air war going over Kosovo and I was working 100 hour plus weeks? If you want to talk about stress sometime....
I ended up making good money on both, but they both doubled soon after I sold them.
My first was our first house. Bought it did everything ourselves. We were trying to pay it off. It was 720 sqft. We lived there 7 years and when we moved we had two kids. We had paid it down 10K but it appreciated to twice the value we paid for it. Took cash out to buy our next primary residence which we rehabbed prior to moving to. Again all our selves. We move there and then turned around and rehabbed the one we moved from. 6 months of non-stop work. W2 job and then rehab nights and weekends. Finally rented it out but didn't do anything right in tenant selection but didn't get burned. After a year, we sold it, took the proceeds bought a fixer to flip and start our investing career. Made the same mistake there trying to do it all myself. Finally hired stuff to eventually get it done, I'm a slow learner. I worked so hard on it we kept it and still have it. It doesn't even breakeven but has also doubled in price and I keep it as a reminder of my lessons about DIY.
Thanks for the first deal horror stories. This will help me once I take the dive.
She was a beauty!
She was built like a brick house, which she was. She had hardwood floors, ceramic tile bathS, and she had a new roof. And she needed no remodeling and was in move in condition. And she was low maintenance too. she was perfect, much better than all the rest that I looked at before her.
I had been looking for months for a personal residence. Everything I liked, I couldn't afford. Everything I could afford I didn't like. I looked at houses, apts up to 4 units, trailers, cottages on rented land, and still could not find the place to buy. My meager salary and less than meager savings were a big handicap. I told everybody I knew that I was looking for a house. A co-worker told me about an auction on his street. I went to the auction and ended up the high bidder. I was able to move in before settlement, and there was a title issue that delayed settlement. I thought it would be a few days, but ended up being 6 months. For that 6 months, I did not pay any mortgage, I did not pay any rent, I did not pay for sewer and trash and did not pay for lawn care. I did get a roommate to pay ME rent.
It was then that I firmly decided that this real estate was a good thing!
My very first rental was a little bit of a crazy story. It was a house 2 hours away from where I lived. I was up there and the applicant lived in NC (I'm in WI) so she sent her dad and brother to view the house. I sat outside because I didn't want to intimidate or follow them around. So the guy and his son call up the applicant while I was outside and tell her how great the house is.
So she filled out an application and emailed it to me. I did all the checks and everything came out okay. So I approved them and their entire family loaded up a semi-truck with all their stuff and drove to WI. My fiance met them in a parking lot in Milwaukee with the keys to the house. He took the security deposit and first month's rent in cash and wrote out a receipt.
I wouldn't recommend this scenario to any other first-time landlord!
But the tenants were great, they lived there for over 3 years and took care of the place. Only minor wear and tear when they moved out and they even freshly painted two of the rooms before they moved. (They were the kids rooms and maybe they didn't want me to see some scuffs on the wall or something.)
My first deal was in 2010 and was an SFR. We bought it with seller financing on a no interest deal for 6 months (he was a motivated seller). We then borrowed from the bank and paid that off. It was cash flowing about $125/month positive from day one as it had a renter in it already. Unfortunately, in month 4, the air conditioner went out and cost over $3.5k. That wiped out profits for a few years. Now, it's 2014, we've raised rent $200 and it cash flows $300+/month now. We also just refinanced it and pulled $1.2k MORE than our down payment back out so not only do we have $0 in it anymore, but we got $1,200 on top of that *AND* it's cash flowing $300/month. One of worst performing properties in the beginning and now it's one of the best. Funny how time works with real estate :)
It's hard to believe that my first deal was over 20 years ago. It was pretty creative for a first, had a few, bumps, but was ultimately profitable. Here's a video about it.
@Alton Williams - my first was in 2009 and it was a single family home in DFW. I was fortunate to buy at the right place at the right time. It is the least creative deal I've ever done (I put 20% down and have a traditional mortgage on it) but it cash flows for me every month.
I first tried getting $2,500 a month for that house (my payments were $1800). I figured the house is worth $270,000 so I should get that much in rent. BIG mistake. The house sat for a month with no takers. I lowered it down to $2,300. Still no takers. Then after 3 months, I lowered it to $1995. Finally, I got a tenant/buyer. During those 3 months, I lost $5,400 in mortgage payments plus the costs of marketing (I was doing expensive newspaper ads and bandit signs). The $7K I received from the tenant/buyer just helped me to break-even on the front end.
I almost quit. But good thing, I stuck with it and did what I had to do to survive. After 15 months, my tenant/buyer refinanced the loan in his name and I made $10K on my first deal (after paying all the closing costs). It's definitely not as good as I planned and it was harder than what the gurus say but hey...this is real life. And it started my journey to investing.
A regret that I have though is that I did not buy more properties until I found a tenant/buyer for my first. I was too scared and I focused on the monthly mortgage payments I had to write vs. the money I could be making if I get more properties...
HA! I love it! Now that's a seminar huh? (An expensive education). Hey you still made out though! Yeah, mine was a $1500 assignment fee. It was the most important check of my career. It gave me confidence! I knew I could do it now. The first deal is so important! Great thread!
My first was one of those accidental things. When prices were going up through the roof in 2006, my son was looking for a place for his spouse and two daughters. I brilliantly (read stupidly) thought, why don't we take out a line of credit on our house and build a house for them on one of the lots the city was selling cheaply. So we bought the lot, and started working on building this house with the help of our local Menards store. We selected a plan from the books they offer and the contractor desk does all of your refinement of the plans and materials lists/pricing. For anyone who has ever built a house even with an experienced general contractor, you know how these things go. Needless to say, we were flying by the seat of our pants. Thankfully there was a retired home builder working at Menards contractor desk just for something to do. His advice and recommended contractors was invaluable. We had hiccups along the way. Biggest was that the plumbers put in some rough work that broke after the water was turned on. Upstairs of course over a weekend when no one was at the site for a few days. Thankfully we did not have the drywall in yet, but had to replace the wood flooring in dining room. Fast forward to today and the 3bd 2.5 bath house is still their home and we were able to put it on its own mortgage and use the equity line to buy other investment properties.
My first was a duplex in Dallas. It was a foreclosure with one side liveable and already rented out, and one side vacant and a complete disaster. I learned a lot on this deal, including an expensive $15k lesson about finding the right contractors. Thankfully we had enough cash reserves to pay for our mistakes, and it now cash flows around $700/month.
wow, these stories are real eye openers! Thanks for sharing, it really helps first timers like myself realize that everyone struggles at the beginning, but can still come out on top with perseverance and determination.
My first was in 2006. I paid $17,000 for a one bedroom condo in my hometown. I 100% financed it and closing cost through a private family investor. As I drove my husband to see it the first time we passed all the boarded up 4 plexes that had just been raided by the local police department for tenants dealing drugs out of them, I think a tear came out of my husband's eye. I liked the deal cause if it was a complete failure it would not put us in bankruptcy. It has been a good rental for me and has taught me a ton. Last week I was a little bored and wanted to get my toe wet on the owner financing side (my ultimate cash flow goal) so I decided to list it on Craig's list. To my surprise I got about 5 calls and signed a contract this morning for $5,000 down, financing $20,000 at 11.4% over 10 years. My little ole first deal is still making me money.
Great topic! My first "deal" ... ugh... http://www.biggerpockets.com/blogs/5486/blog_posts...