First purchased property!

4 Replies

Hello all! First of all i want to thank the bigger pockets community for everything you guys do to help every day people reach financial freedom! I have been listening/reading/studying real estate for the past 2-3 years and have been stuck in some what of analysis paralysis. I am currently a police officer in Indiana in a city with roughly 60k people that has fallen on some hard financial times over the past 20 years when GM left the city. I have found motivation through David Greene and his story for the simple fact we have similar backgrounds. I have set a goal to reach 100 doors in less than five years. Police work takes away from my family and friends and the meaningful parts of life due to its type of scheduled work! I want to be there for my future family and I believe real estate is the route to take! With all that being said I have been giving an opportunity from my father and uncle to purchase 2 of their rental properties on a seller financed contract through them. They ate in one of the netter neighborhoods im the city. By no means are they home run deals, but they are the FIRST deal to get my feet wet. Which every one from bigger pockets states is the most important deal! Both properties are next to each other and are 3 br 1 bath sfh. Currently market has the properties worth around 65k each, they are willing to sell the properties for 100k total to me on seller financing! The rental numbers I am seeing for like properties near this neighborhood are 700-750 each which setting aside 10/5/5/10 for vac,capex,mainten,and management would still cash flow around 180 total on both properties. Both properties need small odds and ends done to them but nothing major, I believe I can do the work I want to on both properties for less than 5k dollars. I have been contacting ins co and receiving quotes still have not decided on a company yet though. I have also not created a checking and savings account for the properties as a business account. I do not plan on creating an llc for now, however when I decide to grow and potentially refinance into a conventional loan I may do so. Some quick questions/ advice would be greatly appreciated: Any suggestions on ins co. In central Indiana area? Any suggestions on where to create a business account in the area? Collecting rent:What’s the best route for a person in my circumstances to collect rent? I do not want to provide my personal address for obvious reasons for them to mail checks. And at thisntime im not sure if i will be able to do some sort of direct deposit. Also, one property is currently vacant and the other has a single male living there who has been there for approximately 5 years and has no plan according to my father to want to leave. He is currently paying $600/mo which is quite a bit lower than what i could receive, however he is a permanent tennant and is basically guarantee to pay every month with no hassles. He is also on month to month lease, should I attempt to raise rent or should I stick with the blessing of having a quality tennant? Any other siggestions i may have missed would be greatly appreciated! Again, I want thank everyone in this community for the past and future knowledge I have gathered and will gather! I am currently 28 and have a goal to be retired by 35! Here’s to the hard work ahead to reach that goal! Greatly appreciated , K. Starkey

Let me be the first to say congrats! 

Since no one is going to steal your deal, then you may want to reveal the city these properties are in so that someone who knows the area can lend their expertise.

My questions are:

Are rents in the area for similar homes 700-750 a month?

What are the tenant/landlord laws in your area? 

Are you sure the properties only need 5k?

Will all the the purchasing and financing be in writing?  (Sunday dinner tastes different when you eat with the person you owe a bunch of money to.)

For the inherited tenant I would put him on a lease for 1 year with a clause of raising rents at the end of the year.   

I only have 1 rental and every time the tenants change the lease gets longer.

@Kevin Starkey Hey Kevin! Congrats on your first purchase! It sounds like you are off to a great start and you’re asking a lot of the right questions. My husband and I are under contract right now for a duplex in Lebanon. It sounds like we have a lot of the same goals as you and I’d love to connect with you. Would it be okay to send you a message and hear a little bit more about your strategy? Also, I am a property manager in Denver. One thing I recommend to people is that if you have great tenants who pay rent on time, and are not a hassle at all - keep them around as long as you can! It will cost you a lot more for him to leave. You will need to do upgrade and repairs, pay for utilities yourself, advertise, and you could miss out on a month (possibly more) of rent. You may want to try raising the rent a bit, but I would suggest only by a small amount. You wouldn’t want to risk losing a great tenant! That’s my thought on it. =] hope this helps! And I hope we can connect soon! Thanks

Congrats on having your first deal! Nice that it gives you two doors as well. Thinking back to when I used to rent, they were always raising rents a little bit with each new year. I didn't love it but it was only like $10-40/month and I loved living where I lived and I knew appreciation was in affect so it had to be done. Sounds like you could raise it quite a bit more than that but a small increase like that might not even be a big deal because it'll be a big deal for him to move too, rather than just paying the increase. You could also pitch that by you doing the improvements + appreciation, it's just par for the course. Congrats again!