Emotional Gut Check for a Rookie Real Estate Investor

[Richard Davis]

So, I just started listening to the podcasts BiggerPockets and Real Estate Rookies to and from work and any time I am in the car. I read Rich Dad, Poor Dad. Now reading The Multi-Family Millionaire Volume 1. I am about two weeks into believing I can become a real estate investor. I dipped my toes in the water several years ago and made some costly mistakes. After a divorce and some recent changes to my W2 job status ... left my employer of 22 years and now contract directly with the same school districts I have provided IT support to for the past 20+ years ... which increased my annual income by $35,000, of course taxes and health insurance have to come out of that $35k, I feel like I am on the right path.

On the REI side of things I have an overall understanding of getting started. However, not quite ready to fully analyze and close a deal yet. I currently rent a multi-family house, and sublet the second unit. I discussed buying this property with the landlord several years ago. Then I let his health issues and my divorce followed by Chapter 7 Bankruptcy in August of 2019, derail that train. I now have the REI train back on the tracks and I am committed to taking the REI plunge.

My dilemma is, my original landlord sold off his entire portfolio of 30+ doors, maybe more. I mentioned my interest in purchasing this property to the new owners and they were willing to discuss options. I thought I had six to eight months to put together a down payment and prepare (learn the BRRRR methodology) myself to make an offer. Unfortunately they have already begun selling off some of the properties that are either in need of higher rehab costs and or not offering the cash flow they are looking for at this time.

Last night I received a text message informing me that they had an investor scheduled to do a walk through on Friday morning as part of a five property portfolio.

I immediately called and spoke to the current owner and he stated that he was expecting an offer of $175,000 to $180,000 and that he would except an offer from me if I could secure financing. He had no interest in seller financing, I believe the Friday visitors are prepared to make a cash offer. So I understand completely.

My preliminary analysis, without really knowing what I am doing, tells me this could be a great deal. Thus the need for an emotional gut check. The house next door to me is almost an identical build without the third floor studio apartment and it just sold for $245,000. The current appraisal listed by the county on this property is $213,500. I guesstimate $30k-$40k in rehab costs. Which puts the total cost $175,000 + $40,000 at $215,000 and an after rehab value of $250,000 to $300,000.

Having lived in the house for 7+ years and watching the neighborhood change my emotional gut tells me this is a great deal to house hack and jump start my REI adventure. My reality or fear factor side is telling me I don't really have the $6500+ down payment, plus closing costs readily available. I reached out and spoke to a GuaranteedRate lender last night and he indicated that due to my recent bankruptcy and employment status change he could not help me and that most of the online lenders like Quicken Loans, etc, would probably say the same. He suggested I speak with my local bank. I visited my bank this morning but their mortgage person works at branches all over the state and indicated he would try to call me in the morning.

My W2 job is a 40 minute drive from home and most of the branches he works out of, while I have no problem dropping what I am doing and headed his way if necessary, since I only have a "may call back" I am feeling like I am going to miss out on a $50k future equity deal. Plus probably have to move, which emotionally sucks, but in reality would not be completely horrible.

If you made it this far into my mini soap opera novel. Thank you. Any thoughts or suggestions will be greatly appreciated.

Thanks and have a wonderful Wednesday.

Rick Davis