Breaking Even (First Investmet)

[Kenneth C.]

Hello BP Community,

I live in the Philadelphia area and I'm just getting started with real estate investing. I'm a newbie and I am in search of my first deal. What that in mind, is it a bad thing to break even on a deal just for the experience? I'm looking to purchase a property for under 20K and invest another 40-50K to rehab the property. Houses in the area are selling for 75K - 80K, and if I opt to hold the property, I could get $700-$800 in rent.

Is it unheard of to take out a mortgage on a property for such a small amount with regard to investing? Would it be best to pay cash for the property and only finance the rehab?

An input would be appreciated.

Thanks.

Ken

[Michael Seeker]

@Kenneth C. - you should not go into a purchase with the expectation that you'll break even.  For starters, you will either make money or lose money, the odds of coming out exactly even are near impossible.  As a new investor, you are likely going to make some mistakes along the way and those are going to cost you money.  If you plan on breaking even and are surprised by a $5000 issue, then you've lost money.  If you lose money on your first deal are you going to jump head first into the second?

You should flesh out the numbers both from a buy and hold perspective and a fix and flip perspective and have some options so that if you get stuck with the property you are not in bad shape.  Would you put the same finishes in if you plan to sell it vs. planning to rent it?

If you go into it with the mindset of breaking even, then you are setting the bar too low!