Do you have any regrets about your first real estate deal?

[Ben Stevenson]

Hi there,

My name is Ben Stevenson, I am a 22 y/o electrical engineering tech outside of the GTA. My significant other and I attempted to purchase our first home/investment property in April but couldn't conquer the stress test put in place January 1st. A major element of the failure was due to her being in school and working retail part time (non-management), so the banks and private lenders only looked at my income. Although we had 20%, I was not personally approved for the loan that we required - the house prices are ridiculous in the Barrie-Orillia area.

She's finishing up her last year and we are looking to purchase our first home/duplex. 

My question is... if you could have gone back in time, what would you have changed about your first deal? Do you have any regrets about a certain aspect of the deal, is there something you wish you had done differently? I am eager to learn.

Thanks for your time, have a wonderful day.

-Ben

[Nicole Heasley Beitenman]

I bought my first home knowing I was going to rent the spare bedrooms in order to cover the mortgage. I bought a house I liked and then figured out how much I could get out of each bedroom. 

At the time, I had no idea I'd enjoy land-lording so much that I would want to turn it into a career. I thought I'd be staying in my house at least 5 years. My top priority was finding something I liked rather than looking for the best deal. 

I don't consider this an "error" on my part; unless I had a crystal ball, there's really no way I could have known how things were going to work out. But if I had, I would have used my FHA loan on a MFH and started plowing cash away to hack my way into another home the following year.

[Ben Stevenson]

@Matt K. that’s a great po

[Ben Stevenson]

@Terry M. @Brian Ploszay @Account Closed how do you stop from over renovating, when do you know that you’ve done enough? Do you have any tips on managing contractors now?

Thank you all!

[Matthew McNeil]

My introduction to real estate investing happened in 2008 when I bought two SFHs.  Absolutely no regrets and I learned a lot; primarily when my RE agent, title officer, attorney and property management company took the time to teach me about the industry.  I've bought and sold and bought and held since then.  Ready to invest in more properties, but this crazy market is... well, its a little crazy right now.

[Nicole Heasley Beitenman]

@Ben Stevenson FHA requires you to live in the home for only one year, and, with very few exceptions, you can only have one FHA loan at a time. But having an FHA loan in your name doesn't prevent you from having another home loan in your name. You can still have a conventional loan in your name even with an FHA loan. I don't think the home equity line of credit is relevant to buying a new home in my case, although I do plan to utilize is as soon as I have the required 20% in. Lenders are much more lenient when it comes to owner-occupied homes. I likely won't need to put down 20% if I'm going to live in the house, even without an FHA loan. I probably won't find another loan that only requires 3.5%, though. I'm hoping to put down 5%.

[Ben Stevenson]

@Nicole Heasley Beitenman Okay, I think I understand what you mean. So on your second investment, you are likely going to live in it and then rent out the unit/room you are currently occupying?

Thanks Nicole.

[Dave G.]

Capitol reserves! Capitol reserves!

Inadequate (read-zero) capitol reserves were my downfall early on in my investing career deals. Make sure you have some reserves set aside to address "surprise" maintenance issues. Things will break, and you'll need to address them, sometimes very quickly (think heating in the winter, or for me AC in the summer).

You'll want to budget the reserve amount based on factors like property type, age and condition at inspection. And budget it for material and labor (hiring a professional), not just material as if you would always be the plumber or electrician. 

Also, don't rule out condos or townhomes...that's pretty much all I own for rentals. You just have to fully read (lot's of caffeine) the HOA CC&Rs to ensure you know upfront what you're getting into.

And if you've listened to the podcasts, you may have heard Brandon Turner talk about the educational value of the first deal an investor does. Even if it is barely a base-hit of a deal, it will surely enlighten & motivate the investor, paying off in deal #2, 3 and so on. 

Best of luck to you!

[Rachel H.]

@Ben Stevenson Great question! But no, I wouldn't change a thing. The mistakes I made helped me to learn and get me where I am today. Hope that helps! 

[Terrell Garren]

No regrets on my first SFH (buy, repair, hold) bought in 2009. It has been a cash cow and most anyone could have done it. Several pain points on my 17th bought a couple months ago. Due to a tough really tough market - bought at auction, probably overpaid, difficult eviction process, inside was a mess. Lesson - It is easy to make money in a buyers market, young investors beware in a sellers market.

[Brian Ellis]

I wouldn’t change a thing. Learned so much. I took on a massive project without even realizing it. Now I’m confident in what to look for, what I can handle and what I can’t. It taught me everything not to do.

It also taught me some projects that may seem too big are actually small, and what I thought would be small projects ended up being the biggest. Like someone mentioned earlier about trees, I had to take down 13 pine trees and Re-grade the entire lawn... never again. Nature has been the trickiest of them all. I can’t even get grass to grow right.

[Hai Loc]

I regret selling it. Price rose 25% in 3 years.

[Hai Loc]

But on my second transaction I relied too much on my home inspector. Plumbing was working fine but old and in 18 months busted and frozen pipes. Had to replace most and access to them was a nightmare to patch up.

[Johnny Kang]

@Ben Stevenson

I wouldn't be able to give you advice on whether buying out of state is for you or not, since I don't know your situation. 

Only thing I can say is, why I'm keen on buying out of state.

- Eviction laws are unfavorable for landlords in NY

- NY properties are almost always an appreciation play; something I'll do at a later stage in my career, but not to start off

- I know the towns I'd buy in Pennsylvania because I've been going down there for 15 years 

[Nicole Heasley Beitenman]

@Ben Stevenson Correct. That will bring my total to 3 properties with 4 units, one of which I will be occupying (the 1st unit of the MFH). 

[Ben Stevenson]

@Dave G. Thanks for your fantastic answer Dave! HOA seems like an intimidating beast but you're right, if I find a good deal... no point in letting it get away.

I can do electrical myself, however I would never want to touch the plumbing... I do however have some friends in the trade. I understand your point though, it's easy to spend all of the capital up front and then be screwed when something happens i.e. a furnace or any other major repair/replacement.

Thanks Dave, hope you have a great day.

[Ben Stevenson]

@Terrell Garren well you definitely purchased your first investment at the right time, haha.

Thanks for your reply!

[Ben Stevenson]

@Hai Loc appreciate your reply Hai. Just curious, why did you decide to sell?

And sorry to hear about the frozen/busted pipes... the weather here is so unpredictable.

[Patrick James]

@Ben Stevenson No regrets at all! Just a few minor issues as others have stated above. Underestimating the scope of work to be done being the biggest. Fortunately we went the live-in route with 3.5% FHA. We did most of the improvements ourselves, except for the capital items that needed to be done. We paid $260k+, put about $60k into it in 1.5yrs, refi'd w/ appraisal value at $500k. Then went and got a HELOC from our credit union, turned around and bought a rental that cash flows nicely. If you find the right house, typically the ugliest in a nice neighborhood, do a lot of work yourself the payoff can be awesome.

If I could go back in time, I would probably have hired contractors to do some of the work to speed up the timeline of moving to the next house. We wanted to do it in two years but it took about three, so now we are in our second live-in BRRRR if you will.

If it is your first time, I cannot stress enough how important it is to attend the inspections and ask questions. Most of them get annoyed when you follow them around, but it is the only way you are going to get your eyes on what they are looking for and at. The knowledge you gain for down the road inspections is invaluable. $0.02

[Hai Loc]

Originally posted by @Ben Stevenson:

@Hai Loc appreciate your reply Hai. Just curious, why did you decide to sell?

And sorry to hear about the frozen/busted pipes... the weather here is so unpredictable.

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