First deal done! First rent check in the bank!

First deal done! First rent check in the bank!

Rental Property Investor · MI (michigan) · Member since 2016 · 65 posts · 117 votes

Finally got my first deal done!!! It was a hell of an experience, but I wanted to receive my first rent check before I posted my success story.

Quick background on myself: I am 25, finance degree, work full-time, aspiring to be financially free, father owns a house building company in Houston, TX (moved out of Michigan after the housing crash)

I picked up this SFR property in Westland, MI. It's west of Detroit in the Metro-Detroit area. I bought the place for $76,500. 3 bedroom, 1 bathroom, about 1,000 square feet, 1.5 car garage. It was the least taken care of property on the street.

Updated the kitchen and bathroom. All new paint, installed vinyl plank flooring, updated electrical, new fixtures, misc small things.

I went the conventional mortgage route and put 20% down on the property. I spent about $20,000 in repairs and now have it rented out for $1,175 per month.

When I say it was a hell of an experience that is because I ran into a lot of issues along the way. Finding and house and purchasing was not the issue, but the rehab portion of it did not go as expected... It's a very long story, but I had issues with my first contractor and painter. I knew not to pay them a large portion up front so I luckily did not lose any money because of them.

Things I learned:

  • Process of purchasing a house
  • Process of rehabbing a house
  • Rehab costs
  • The tough process of firing people
  • Additional items to look at when doing a walk through (dead tree that needed to be removed, gutter work)

Advice I can give:

  • Don't be cheap. Sometimes saving as much money as you can, is not actually a good thing. My discount contractor and painter turned out to be a nightmare. 
  • It's OK to make mistakes! I am chalking up my overspending and mistakes to part of the learning process.
  • Use your resources. My father used to build houses in Michigan. He gave me phone numbers of some guys to speak to, but I thought they were too expensive for what I was trying to do. Hindsight is always 20/20 lol..
  • Talk to the neighbors!!! I learned that there was fire started by a mishap with a grow operation someone was running out of the garage lol. This lead me to understanding why the garage looked basically brand new.
  • Dive in! I learned more in a couple of months after "diving in" than I did in the time I had spent researching and reading about how to invest in real estate.

This was a major learning experience for me, but after receiving that first rent check it was all worth it. Knowing that I will be mostly hands off (using a property management company) is an awesome feeling!! I am now reevaluating my investment strategy and am in search of another property to buy!

Before and after pics:

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Property Manager · Metro Detroit, MI · Member since 2008 · 305 posts · 362 votes
8y
Awesome job Denny ! Glad I could be a part of it.
See this reply in the discussion

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  • Rental Property Investor · MI (michigan) · Member since 2016 · 65 posts · 117 votes
    8y

    @Ola Dantis Thanks Ola! I definitely would have considered a flip, but I did not buy it for the right price. I underestimated the amount of work it was going to need. The house is basically worth what I have into it. I am just happy my first SFR rehab didn't put me in the hole lol

  • Rental Property Investor · MI (michigan) · Member since 2016 · 65 posts · 117 votes
    8y

    Thanks @David Schulwitz! I actually went to school at Saginaw Valley State Univ.! I am very familiar with the Saginaw area.

    I had 3 contractors submit bids. I did a walkthrough with the house with them. The contractor was supposed going to handle the whole thing, but I was purchasing the materials so that I could save some money.

    Interview/walkthrough: My father was actually in town so he helped me drill them with questions. As the owner of a house building company, he knew a lot of the things to look out for with contractors. We both agreed upon the best guy for the job. I think my approach to this was spot on. Unfortunately, it is very hard to judge a person's work ethic and morals based off of an interview. His work was fine, but he rarely showed up. This is why so many people on BP encourage to get referrals.

    I ended up firing my first contractor and finding another one. I was so glad I did.

    Payment structure: My father taught me to never pay contractors up front. A lot of them require money to get started so I negotiated minimal amounts and then paid larger chunks as we went along. The first contractor I had only took checks or wire transfers. The second contractor took payment by credit card. He was willing to pay the processing fee as a way to offer protection to his clients. I thought this was very cool.

  • Rental Property Investor · MI (michigan) · Member since 2016 · 65 posts · 117 votes
    8y

    Thanks @Bill E.! I looked around on BP and the internet to find some companies that seemed reputable. I then set up phone call appointments with them and asked around 50 questions. I compiled a list of questions to ask from multiple articles I read here on BP. I made sure each had some sort of property software that documented everything for me (checks, invoices, etc). After the interviews I reviewed their contracts and selected the best one.

    The company charges me 1st months rent as a placement fee and 8% per month of RENT COLLECTED. I negotiated that if the tenant is evicted within the first 6 months, they would replace them for free. This gives them incentive to find a solid tenant. They handle the day to day jobs of being a landlord (rent collections, finding a tenant, service calls, legal issues, etc). They do handle repairs at the property, but I authorized repairs without my consent up to $250. Anything over this dollar amount requires my approval. This allows me to get quotes from other companies if I feel what they are charging me is too high. I have yet to have any issues with the company, but I am allowed to break the contract with them at any time if I feel they are not a good fit for me.

  • East Amherst, NY · Member since 2013 · 16 posts · 1 vote
    8y

    @Denny R. congrats!  I am looking to do my first deal soon in Buffalo, NY and was wondering if you had any tips on how to better estimate the rehab costs upfront going forward!  Also, would you recommend a rehab like this for someone on their first deal or start with more or less rehab and work your way up?

  • Rental Property Investor · Buffalo, NY · Member since 2017 · 257 posts · 130 votes
    8y

    @Denny R. very nice, good job with completion looks great and I would want to rent it. Next time don't use glossy pain. Flat paint on ceilings and eggshell on the walls, satin at the most. Glossy paint shows all your sins. 

  • Albuquerque, NM · Member since 2018 · 13 posts · 6 votes
    8y

    Nice job Denis! We just finished one of those 3 day seminars that cost a couple grand with promise of more for thousands of dollars more. So yes we are newborns in the REI world! Suffice it to say, we decided to forego spending all that money and are going to spearhead this on our own. Seeing something like this definitely gives me faith that with proper research, networking, and guidance from other folks there really is no reason why with applied knowledge one can't make a profit relatively quickly.

    Stay tuned folks, we may be the next success story. Wish me luck! 

  • Investor · FL · Member since 2014 · 73 posts · 8 votes
    8y

    Congrats Denis!!

    I too am in Dallas and have invested in Detroit last year.  Its a challenging as you learn along the way.  

    Made some mistakes and learn from it.  Misktakes on wrong contractos to finding the right one.  Mistakes with wrong tenants to finding the good ones. Mistakes with even wrong eviction attorneys to the good ones. And also learning how the city official works is another learning process (Wanye County, Taxes, DTE etc..)

    Once again congrats, I see property values going up and up which is another good thing.

  • Investor · Miami, FL · Member since 2015 · 363 posts · 143 votes
    8y

    Congratulations @Denis R. great Job,  keep buying more properties for your portfolio 

  • Rental Property Investor · Plymouth, MI · Member since 2016 · 49 posts · 0 votes
    8y
    Awesome work! Congrats and good luck going forward.
  • Sweet Home, OR · Member since 2018 · 14 posts · 4 votes
    8y

    Congrats Denis, great job.

  • Providence, RI · Member since 2015 · 8 posts · 1 vote
    8y

    @Denny R.,

    Congratulations, this brings lots of motivation,  Like you I am also 25 and looking towards doing my first deal in RI, I really hope it goes well like this. I took lots of notes from this thread thanks and good luck with other deals.

  • Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes
    8y

    @Denny R. Yes, I totally understand. As the saying goes you make money in real estate when you buy. 

    In addition, it can get tricky when estimating rehab costs. In any case, what really matters is that you finished your first project (many never start) 👍

  • Investor · Saginaw, MI · Member since 2015 · 34 posts · 2 votes
    8y

    Excellent! Congrats Denis, Keep up the good job!

  • Rental Property Investor · Detroit, MI · Member since 2012 · 53 posts · 19 votes
    8y

    @Denny R. - SVSU - yep!  Many friends went there and a couple of my buddies played football for the Cards!  I went to Heritage High School off of Center Road. 

    Thank you for the advice.  

    Yes I agree on the referrals.  

    On work ethic:  I've heard a couple of times on BP and the podcasts that you should go to Home Depot when they open to see if you can find contractors there getting their materials for the day.  At first this sounded a little too simple and silly to me, but the more I think about it, it's pretty genius.  I might give it a try to find that contractor who takes pride in his work and works his *** off!  

    Congrats again on the flip.  I'd love to connect with you Detroit investors when I come back this summer.  Grab a beer and talk real estate at a Tigers game.  

    Dave

  • Charleston, WV · Member since 2017 · 113 posts · 50 votes
    8y
    Congrats!
  • Clarksville, TN · Member since 2017 · 12 posts · 9 votes
    8y
    Thanks for sharing this story! Glad to see things work out and best of luck with future endeavors.
  • Saint Cloud, MN · Member since 2017 · 90 posts · 70 votes
    8y

    Awesome, congratulations!

  • San Antonio, TX · Member since 2018 · 4 posts · 1 vote
    8y
    So cool. Thanks for sharing.
  • Philadelphia, PA · Member since 2017 · 8 posts · 0 votes
    8y
    Congrats! Very inspiring. I’m looking to “dive in” by spring!!!
  • Rental Property Investor · Norwalk, Connecticut (CT) · Member since 2016 · 140 posts · 44 votes
    8y
    Nice !!
  • Montgomery Village, MD · Member since 2018 · 28 posts · 7 votes
    8y
    Congratulations Denis, great to hear your journey. It’s definitely a inspirational one. I wish you luck in your next project.
  • Investor · Lansdowne, PA · Member since 2016 · 161 posts · 62 votes
    8y
    Go you!
  • Renter · Richmond , VA · Member since 2015 · 17 posts · 1 vote
    8y
    I just ran out of notifications, stories and news articles to read while on business travel. I’m glad your article was the first to come up as I did my first deal (a duplex house hack) last year. I’ve been slowly investing in the property and it’s old (100 years), but my ambitions may be higher than is needed. This makes me think about some lower quality finishes that might not necessarily reduce the rents I can get. Thanks for posting!
  • Lompoc, CA · Member since 2018 · 22 posts · 5 votes
    8y

    Wow! Congratulations! I’m hoping to do the same. 

  • Rental Property Investor · Las Vegas, NV · Member since 2017 · 15 posts · 6 votes
    8y

    Looks great! Congratulations to your first deal! I'm still looking for mine :)

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