Newbie (3 doors) Needs a Pep Talk

[Fran Pratt]

Ya'll. I need a pep talk. I started investing this past fall and my start has been ROUGH. I'm discouraged, and I don't need tough love - I'm hard enough on myself as it is. I really don't even need advice. I just need to hear some stories from people who have been through similar seasons and come out the other side still wanting to own real estate. 

I purchased my first rental property - a newer home in a high-appreciation market and neighborhood - with a business partner, and she and I have had the hardest time getting it rented. Our town has a small university, and we have been marketing it furnished to students. It's a HCOL area and long-term rentals are not profitable at current interest rates, which is why we went this route.  My partner is a savvy realtor and despite both of our best efforts, we have yet to see a cash flow positive month since we listed it in January. We are working the problem; it's just discouraging. 

My other property which I purchased around the same time is in a nearby town, also high appreciation market. An older (60's) remodeled home I bought via New Western for $223 that has a current tenant who pays $1650/mo; it has an apartment above a detached garage that was billed as needing "$10k in repairs to get to top of market rent." Top of market being around $900-1k/mo. I thought I was being conservative when I estimated the apartment would take $25k to get in order. But no. Turns out the structure is significantly older (1930's) than the main house - this was not disclosed - and it ended up needing more like $55k of work done. Which I have done. it. all.

To top that all off, the insurance company made me put a new roof on both structures (I think the roof had a bit of life left in it, but ok) - another $11k - and the main house needs around $6k worth of electrical that the previous owner didn't do properly ("fully remodeled" my ***). So I'm in for over $70k, which means I'm completely underwater in terms of what the property is worth (which, you guessed it, is currently around what I originally paid. ugh.). I haven't even financed it yet - I've been doing a BRRR strategy which is clearly failing. I've made mistakes, which I try not to beat myself up about and sometimes succeed. Oh, and my insurance agent is telling me my premiums are likely going to double once I rent out the apartment - fun times (Yes we are shopping that around).

At this point my only hope is to run the apartment as a mid-term, which I think is a viable strategy here; so I have furnished it (more $) and made it pretty. I happen to be good at creating inviting spaces. Hoping I can get around $1200 renting to traveling nurses and professionals According to my research on FurnishedFinder, this is reasonable, and I'm planning to list June 1. My other only hope is long-term appreciation. I won't be able to get my money out of it any other way. I guess the good news is I won't have to pay taxes bc LOSSES. 

Anyway, if you read all this: thanks. Tell me how you overcame adversity and it all worked out in the end. 

[Jonathan Greene]

First, you should never post in a public forum and also say "I don't need tough love - I'm hard enough on myself as it is. I really don't even need advice."

You definitely need advice. Your post makes it seem like you are sure you made all the right choices, but gosh darnit, the market is the problem and you and your partner aren't to blame. From the looks of your investments, you have made bad choices or overestimated the metrics so the issue is on the buy side, not the rent or sell side.

You are off to a good start in acquiring, but you haven't met your own expectations on either deal which either means you are trusting the wrong people or overestimating your abilities this early. Do you go to real estate meetups and talk with others who invest in the same markets?

When you say you don't need advice, but you run down a story of how hard it's been, that is a recipe for future disaster. You only want positive reinforcements, but you need to go back and take a hard look at both of those deals you bought and see why they didn't perform as expected.