All Forum Posts by: Chibuzor Alumba

@Joe Villeneuve good question.

I was in the initial phase of just hearing the great things about real estate.

I had not reached the point of learning how to analyze deals.

To answer your question: we looked at the location (do we want to live there, would others want to live there,etc). We also looked at the purchase price: is it within our “typical home buyer” price range? If yes, buy.

So no real investment analysis was done.

@Steve Vaughan Thanks for the advice and complement. I'll take all this to heart going forward.

@Nathan Gesner That is solid advice, thanks. This is exactly what I need to do because:

1. If i dont make any money (just like I am not making any money now), BUT i have a property manager taking care of the units, at least I don't have to run around like I do right now.

2. If I account for a property manager as part of my expenses for the properties I buy, it weeds out non-cashflowing properties pretty quickly.

My very first deal:

Purchase price: $205,000

Down payment: 11% + 2% closing costs

House Type: Single Family

Sqft: 678 (WHAT? This isn't even a tight market nor a great neighbourhood. How did I get sold this crap lol)

Location: Winnipeg, Canada

How it all started:

My wife and I wanted to get our own home after living with parents and being able to save considerable amounts of money.

At about that time, I started listening to BP and seeing how all of these investors were succeeding with real estate. I almost immediately caught the real estate bug.

I found an agent who prided herself as being 'one of the best'. 

That said, she let us know that she would NOT write lowball offers or negotiate aggressively below the fair market value of a property.

At this point newbies, thank the realtor for their time, go to your local real estate facebook group, and say 'I need recommendations for an investor-friendly realtor to help negotiate aggressively and find me cashflowing investment properties'.

Look at a few of the recommendations you get, contact the realtors, and ask them to give you examples of live deals they've done, when it occurred, and what the purchase price, rehab numbers, cashflow numbers, and after repair value was. If you like what you hear, try them out.

Moving on... we bought the 678sqft home with scratched up hardwood floors, an old kitchen and bathroom, old rugs in the basement, and a green second bathroom in the basement (yes, its green).

This was a great home for just my wife and I. We didn't need much space, we rarely went to the basement, and all was great in the world.

So what's the problem Chibuzor? Life is great, the home is great, right?

WRONG.

Then came the time for us to buy another home and rent out our 678sqft home.

Every single tenant that came in complained about the small size, the narrow kitchen space leading to the basement, the old kitchen layout and style, the old rugs in the basement, etc.

Our plan was to use the home as an Airbnb since it was 5 minutes from the airport.

In reality, we could not use the house as an Airbnb As-is. We had to put 20k in to update the house, most of which we will never get back as equity because the homes in the area have a price cap.

Quick summary of why this was a bad investment:

1. Bought too high, ZERO equity (negative equity really)

2. House is in bad aesthetic condition ( Cannot be used as a regular rental or Airbnb without substantial work done)

3. House does not cashflow by itself. At the price we bought it for, i.e. $205,000, with rents being ~$1100 max in the area, and the house being so small, even if we got $1100 for the property, we would be breaking even on our Mortgage and Property Tax, and would have to pay from our pockets if any repairs need to be made.

For next time (Note: we already bought our second home the exact same way, and only realized our mistake when trying to rent out the first. Someone please help me take out emotions from this real estate journey):

1. I will take a moment to define what I consider to be an acceptable purchase price, equity, and cashflow in my area

2. I will go on my local facebook real estate group and ask for an investor-friendly agent, interview them, find one I like, and tell them my criteria

3. I will tell everyone I meet at local real estate events what I am looking for (Make sure you are pre-approved and can act on a deal, if not people wont trust you or refer deals to you if you cannot close deals)

4. Done

Hope this was helpful. I appreciate any comments.

Investment Info:

Single-family residence other investment in Winnipeg.

Purchase price: $195,000
Cash invested: $22,000

Bought another primary residence.
Tried to rent out my first primary residence.

Rented to a bad corporate tenant who did not communicate nor check on the house.
Came in to find the furnace turned off and the entire home had its pipes frozen.
Insurance wont cover it because i didnt rent it on Airbnb like my coverage specified.

What made you interested in investing in this type of deal?

Easy way to scale as we put 5 - 10% down, upgrade primary residences each year, and avoid the costly 20% down payment typically required

How did you find this deal and how did you negotiate it?

We found this new house on the MLS, it was listed for $199,000.
After taking a look at it, we found mice-remains, and some other damages, and offered $190,000.
We were countered at $195,000 and we accepted (Note: We bought as typically buyers, there is absolutely ZERO equity in this deal)

How did you finance this deal?

Typically bank financing. We put 10% down because we already had one high interest mortgage in our names but had to upgrade homes due to the first being too small

How did you add value to the deal?

Havent done that yet but we plan to fix all of the little things we found during the inspection

What was the outcome?

Still in the middle of it.

Lessons learned? Challenges?

Lessons learned:
1. NEVER buy like a typical buyer. If life hits you hard and you need to sell, you'll go in debt because there is no equity in the deal.
2. Next time, I hope to buy a run-down property that I can add value to by making repairs. If I had put 10% and put in work, I might have increased the property value way past the 20-25% mark, which lets me get a HELOC or re-finance, pull my money out, and do it again

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

NO. My agents and brokers are inexperienced and despite me saying i want an investment, they recommend terrible money-sucking properties my way.
Its definitely NOT their fault. I get anxious to make 'The Next Buy'. I need to get more disciplined with my requirements so I can weed out all properties that do not match what I want.

Hi everyone,

My name is Chibuzor. I am 24 years old.

I am extremely excited to be here and to communicate my intention for the future and the motivation behind it.

I am currently listening to the BiggerPockets Podcast #35 and it says that we should jump onto the forums and ask for help creating a plan that will enable us achieve financial freedom.

Here I am BiggerPockets :)

I am a hardworker and quick implementer. I lack a little of the calmness required to create a detailed life plan. 

I need YOUR help.

My current state

I am a full time Software Developer making  $58k a year (~27 dollars an hour). 

I love creating software, helping people solve problems, and just being a blessing in general.

I currently have a consulting business that I split 50-50 with my brother and business partner. The business brings in about ~$1000 a month each from one major project we have. We charge $85 an hour, which is almost 3 times what I make at work.

My current monthly bills, including life insurance, PITI on my primary residence, cell phone, groceries, and bus pass, all amount to ~$1200 per month

I feel as if my current job is tying down 40 hours of my time and stopping me from taking opportunities to grow my side business, build assets, and relax a little in life. 

Current plan

(Thoughts on this please) I plan to quit my job in April to focus on using a combination of 

1. Airbnb using the basement in my primary residence, and

2. Income from my side business

to pay the bills while I engage in Wholesaling, Flipping (where it makes sense), and BRRRRing, to build assets and a steady income for my family.

My PAIN POINT

The most important thing I hope to get help with is for someone to work with me on creating a plan where I can 

1. Do some lucrative RE activities like Wholesaling (for cash) or performing BPO's (Broker's price opinion for experience),, while working part time on my side business (i.e. ~ 3 hours a day).

2. Gain back some of my time and gain some flexibility in life, and 

3. Build assets to provide passive income for my family.

Another thing I would like to get ideas on is if I should quit my job like I plan to do.

I don't believe my monthly bills are astronomical. My side business enables me to work from home. I can get a bike or take a bus to use to attend networking events. I am not sure why I need to work 40 hours a week making one-third of what I make in my side business, and also do my side business when I require so little to survive each month.

Please be honest. Please "speak some sense into me" if needed. I am open to thoughts, ideas, and direction.

Thanks Matt. That’s an amazing attitude you have about going out there and just doing. Thanks for sharing your approach.

$49k is a lot of gain. Did you work with any realtor or appraiser to figure out what you stand to gain after the Reno? I am trying to get started and just take action doing something. Without a partner and with all the doubts coming from my mind and surroundings, I guess I just need to hear specific steps around success stories like yours so I have concrete ideas on how one might be able to replicate your success (sorry for the long blurb lol)

Good luck in your deal. Please give us updates as you progress :)

@Patrick I believe the 1200+ already includes PITI, Property management, Electricity, garbage and water.

Hi Eric, I agree with what everyone has written so far. Not to branch off from the original conversation, just wondering if you can share the details of your apartment complex purchase. Specifically: 1. How did you finance the deal? Did you save 20% + closing costs and purchase? Did you have some creative financing going on? 2. What was the purchase price? How did you negotiate reducing the purchase price? I am looking for my first deal. Right now I can only find overpriced units in my city that do not even get close to the 1% rule. Any information you can provide will be valuable. Thanks

Hi Matt, how do you plan to answer the potential questions the house owners will ask you about rehabbing the house?