Buying first Property. having 2nd thoughts... educated myself

[Brian Sullivan]

Hello BP community,

Ok, I posted on here 4 months ago asking about my first rental property I was looking at purchasing. I'm back on here to admit that I went into real estate investing with no education about real estate investing and no plan on how where I was going or how to get there. I'm now under contract to purchase said property and I'm having second thoughts. I'm having second thoughts because before I was running on hopium and now I've started to educate myself on real estate investing. I've done this through the bigger pockets podcasts and through a couple of books I've read since then. 

Before I ask my question here are the details. The property wouldn't start to make COCROI until year 5 (1.18%) and year 10 (5.07%) start to make some better cash. The cost to purchase the property (it's a brand new build) is 289,000 w/ 15% down and it's located in Florida close to the beach. My thoughts, before my light and continuing education, were if someone paid the mortgage and insurance I was using the property as a retirement fund that I would sell in 30yrs. I didn't put into account all the CapEx that would later come down the road. Now with both our incomes we wouldn't be stretched thin between the house we live in and this one but it does take away from money we could invest in future properties. Now if we left this deal we'd be leaving 11k on the table but we wouldn't have this property holding us back from future buys. If we bought it we'd have equity in the property and would be able to use that in the future.

My question is should I go through with this purchase or pop smoke and bail? I've been writing and formulating our goals (my fiance and mine) for real estate investing and this doesn't allow for us to maximize our 1 property a year at least every year. We'd have to worry about the possibility of dumping money into this possible purchase. I've come to this forum hoping that I could make sense of my choices from the BP community. Ultimately the choice is mine, but I'd hate to not use guidance from the best real estate forum out there. I know there are probably other details that might be needed and I'll produce those to help paint the investment picture for you. Thank you all in advance.

Respectfully,

Sully

[Joe Villeneuve]

Originally posted by @Brian Sullivan:

@Joe Villeneuve  

This statement puts you miles ahead of many investors. The problem is, in 30 years, can you be sure what the property will be worth?

No, you can't be positive on what anything is going to be worth in the future. Through answering this I see your point or at  least one I came to. Waiting for 30 yrs for a solid profit when other properties could have got me there sooner without having to wait for just appreciation.

How did you arrive at this number?

It's the amount that we'd lose from escrow, granite we upgraded to and the cabinets. Actually, now that I think about this more and reexamine the numbers, They did include an allotment budget. which would put the loss at just under 9k.

Where's the equity?   

Wouldn't there be equity from our down payment and then the monthly payments towards the principle and interest?

How did you come up with "1 property a year" scenario?...and why? 

That's the goal I set out for us to make as a baseline. My mission statement, 5 year and 10 year goals for us has yet to be finalized. I wanted to have ten properties by year ten. I think we can do better but want to keep this manageable too.

Bad, very bad, path to take. What you may not realize, is the visible paper losses you see, are hiding (in plain sight), compounding losses from many things...such as lost opportunities.

I know. I'm just disappointed in myself for getting this far. I have to let some people down for pulling out of this deal which is supposed to close next week. It doesn't match up with what I want to be able for us to cash flow and how I'd like us to grow.

Do you have any advice on how to word that email to all parties involved? Thank you for taking the time to help me realize things from someone else's point of view.

 Don't mistake equity you pay for, as equity you gain.  Equity you pay for is just your money transferred from your bank to the property...where it dies.

"Buying 1 property..etc...." isn't a plan.  At best, it can be described as part of the execution of a small part of the plan.

Your mission statement is the same as above...just an extended version of it.

A plan, is based on specific financial goals (accomplishments).  The development of the plan, is a series of specific events, one leading to and through the next, eventually leading to (and accomplishing) the Specific Financial Goals.  Keep in mind that each step along the way, has a different set of criteria needed to accomplish the specific mini-accomplishments at that time (or timeline) in your plan.  This means, at each step along the way, you would/should be focused on a different series of events, in order to reach the accomplishments at the timeline you are at in your plan.

Now, to design this plan, you reverse engineer it.  Start at the end (your specific financial goals), and work you way backwards through the prerequisites (much like going through college) until you arrive at where you are at now.  Then turn around, and follow the breadcrumbs back to where you started...at the end.

It appears as though you already have the mindset for this...you just don't realize this...yet.