Some lessons learned from my first deal (buy and hold)

[Matt John]

1) Don't put 20% down. Especially if you are just starting out and don't have tons of cash and therefore won't be able to move on your next deal if you do put 20% down. Lenders love that 20%, but it just isn't necessary. There are plenty of lenders out there that don't require 20% down and so many ways to make the deal happen without it. The more you put down, the less you are able to leverage, and the lower your cash on cash return. Also, the less you put down on one deal, the quicker you can move on subsequent deals.

2) If you put a fridge/washer/dryer/etc in the home, tell the tenant that you have (insert appliance) that you plan to put in the unit if they want to use it, or you can take (insert appliance) out if the tenant doesn't want it. Don't tell the tenant that you will provide appliances and make it very clear to the tenant that you will not be maintaining or replacing appliances if they break. Maybe even that you expect appliances to be in the same working state when the tenant leaves that they are in when the tenant arrives... but whatever you do, DON'T sign yourself up for maintaining them. In the first 4 months I've spent many hours and multiple trips to the house and stores and internet shopping and researching to replace parts on the dryer and the ice machine in the freezer. It has been the worst part of REI so far.

3) As soon as possible, spend time putting a system in place rather than spending time within the system. I understand that early on you may need to be a cog in the wheel so that you are gaining sweat equity rather than spending cash, but as soon as you can remove yourself from the system. Your time is limited, so you won't be able to scale up until you have a good system in place.

4) If you are rehabbing yourself, Youtube is your friend. There is such a wealth of knowledge there. I watched tons of how-to videos that walked me step by step through many things I had never done.

5) If you are rehabbing and on the fence about hiring out some of the work, get to know some of the maintenance folks at large apartment complexes nearby. Often times they have lots of experience with all sorts of repairs. As a bonus, they generally aren't paid very well at their regular job, so they may be willing to work with you at a price that is great for them and great for you.

6) You WILL learn lessons. After you get over the frustration, take your notes, laugh about how ridiculous it was, and then never make that mistake again. (For me, one example was confusing the Insinkerator gasket with a splash guard. They look about the same, but there is a slight difference in size that makes a HUGE deal. After watching multiple Youtube videos, I bought the splash guard for $6 at Lowe's and removed the Insinkerator. I then spent 90 minutes on a 60 second job trying to re-attach the Insinkerator. I eventually grabbed the old gasket out of the trash and tah-dah! It attached in 10 seconds. I left the splash guard in the drain of the sink where it belongs. Unfortunately in all the commotion I broke a pipe down there. Since I had already reached my last straw I called a plumber to come fix it.)

7) If it ain't broke, don't fix it. See gasket-vs-splash guard story above. Another example was a small dent in a wall that didn't need to be filled in that I puttied anyway... then realized that was one of the few walls in the house that I wasn't going to repaint and I didn't have the original paint color. It wasn't even in a good spot to hang a picture over it. 

I hope this info adds value for you, gives you a little more confidence to push forward, and that you learn not to make the mistakes I made the easy way rather than the hard way.

-Matt