I am 21 years old. A little nervous.. Should I go for it or wait?

Question

I am looking at a 5 unit apartment complex. I've been getting all the info I can on this place for the past couple weeks. Got the seller down to a nice price of 60k. Appraisal value on this property is 120k. All units are occupied and building/units are in fair condition. I got approved at the bank with no co signer last week. 4.75% interest fixed for 5 years then fluctuating there on for a 15 year mortgage. 20% down payment. So I will owe 48k. I am putting 12k skin into the game and expect a minimum of 8k return per year and maximum of 12k depending on repairs/vacancies. I don't have a house. Still live with family, want to get my hands dirty with real estate and build a nice portfolio. I have a very good constructuon background and plan to put some decent sweat equity into this building. My father is a building contractor, I do carpentry full time and also have an associates degree in Building Construction Technology. I feel the ball is in my court on this opportunity. I am a little nervous on what to expect and whether I am in the condition to go for this big move in my life. My biggest move I have ever made was a 12k loan on my 25k pickup... Should I go for this?

Mindy Jensen · Answer

@Andrew Michaud , what is holding you back? I read your story, am SUPREMELY JEALOUS of your numbers (I couldnt buy a 5-plex for $60k a door in my area) and if anything goes wrong, you seem to know how to fix it or perhaps your dad could. If neither of you could, working in the industry would get you contacts for reputable people who could make the repairs.

I don't see any negatives, especially since the whole thing is only $60k. There are people who have spent $60k on guru seminars that taught them nothing. You're going to be learning as you earn.

You live at home. The next time a unit opens up in your 5-plex, move into it. Live for free.

Austin Fruechting · Answer

What rents are you getting per unit?  It sound like a good deal and you should go for it.

Those rates seem reasonable for a loan under $50k.

I would pick this one up and since you have the experience do some fix ups over the following year as units become vacant and add some value.  You'll also learn first hand about property management over that time.  Once the value is added refinance it and pull on your money plus some out and go on to the next.  You could be a mogul by 30 if you do things well!

Jonathon Garcia · Answer

It sounds like you have done your research and the numbers sound good. You can wait and continue to learn more or pull the trigger and start building a portfolio that is going to be very impressive before you even hit 30! I would go for it, don't let the fear hold you back.

The only thing I would work out is that bank loan, I feel like you could get a better rate and terms if you shop around.

Jordan Lorne · Answer

Andrew, I am new to this forum and am happy to see people my age getting into REIs. I'm jumping into it full-time as we speak. Just moved down to Dallas from Toronto to pursue it. As for for your post, you're educated with the numbers and have experience with construction/carpentry to go through with this deal. Now whether or not you should go for it, well I think if this seed of investment was in the negative you wouldn't post a thread asking if you should go for it, I think you really want to do it. The numbers work, and your skill set comes in handy with the real estate investment, so the only real validation you need is yes from yourself. You got it! Excited to hear what this future investment does for you!

David Dachtera · Answer

@Andrew Michaud,

I'm with Mindy - you've got a cherry deal! Go for it!

Austin Fruechting · Answer

Assuming there's no monster expenses such as foundational, needing all new electrical, etc that should do quite well for you!  Maybe that commercial space becomes your property management office!

Jonathon Garcia · Answer

Yes, I agree with @Austin Fruechting. It sounds like a great deal with meat still left on the bone, after you make some updates. I can see you easily getting more out of the 2bdrm and the commercial space.

But definitely look into that bank loan, with 20% down and even a decent credit rating as a 21yr old, I can't see why they couldn't approve you with a 30yr fixed at a standard 4% to 4.3% rate

Andrew Michaud · Answer

Three units are 1 bed 1 bath at $500/mo and one unit is 2 bed 1 bath at $500/mo. Commercial space is also $500/mo. I feel I can get more out of the commercial space and 2 bedroom unit but after the fact, I am expecting to see $2500/mo income before expenses

I am 21 years old. A little nervous.. Should I go for it or wait?

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