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Updated about 7 years ago, 12/04/2017
Regret on First Property?
I'm kind of thinking out loud on this post, and have shared it with some people in real life, but none with real estate experience.
My duplex was supposed to close on the 9th, but as of this morning, is still delayed (why, I don't know, but I gave that bank one huge mulligan for a previous mishap and it probably won't be granted another). But it got me thinking about what I want to do moving forward.
I started reading about real estate in the fall, learned A LOT, but eventually needing to get into the game to move forward as everything started going in one ear and out the other from being overwhelmed.
I chose a duplex for the cash flow. Which, since, I've learned I(severely) overestimated. This duplex has good long term tenants, but that's really where the gravy train ends, unless you want to count equity (which I'm not so sure how much I do, because that's money I could use elsewhere to build a business). Cash flow is very low; I traded higher rent for better tenants.
As I've learned more, I've thought more about rehabbing. It takes a higher REI-IQ, but you will earn larger chunks of cash (I have a job, so a rental's cash flow isn't hugely consequential to me anymore). Plus, it seems much more scalable, at least toward the beginning, than buying-and-holding SFHs and multi-units. Scalability is HUGE for me; I view myself more as an entrepreneur than a real estate investor. I would like to branch out into other industries in the future.
Which leads me to regretting my first property already. I know that will probably come off as negative already, but if I could do it over again I wouldn't. I do gain renting, tenant, and landlording experience, but I'd rather hold off until I can afford apartment complexes than small duplexes than won't net any discerning income. However, a huge chunk of my savings will go away into a property that doesn't serve any purpose other than being a learning tool, which I suppose it already has.
I guess you live and learn.
@Christian Lautenschleger well, shoot, sorry it didn't work out as planned. At least you live in a good market for larger purchases. I was actually in Columbus last Tuesday looking at some properties. Lots of potential there and you will do well next time on a larger property now that you've got these learnings.
Update:
I closed my property today! I'm much more excited than what I thought I'd be. Again, I viewed whatever happened as a win-win in which I'll make the best of the situation. I'm glad I closed it for three reasons: I have equity/property I can use in my advantage in the future; I have a property, so I'm not a person who talks about doing something but who never does; and my relationship with my agent. That last one is important because I view him as an asset who can help me. Of course he has self-interest as well, but his knowledge and contacts have proved to be helpful.
Yeah, I'm pleased with Columbus. And there is development in the 'burbs as well, so if you're into that, we also cater to you. (How do you like Columbus? I've often heard that people think Columbus is just another MW city, but realize it's a really cool place to hang out, that really isn't MW at all.)
Congrats Christian!! That's awesome. I am currently looking at putting an offer or 2 in in Columbus as well. Looking at smaller multi-family but am finding that there is some great opportunity in the larger stuff as well!! Maybe we can share info down the road and help each other out with contacts etc!!
Anyways, glad to hear you got the first one done, I am looking forward to the satisfaction of my first as well!!
@Christian Lautenschleger oh I really like Columbus. So much so that I'm making offers on 2 apt communities this week there!
Congrats Christian. Now your job is to start slowly increasing the cash flow of your property.
1. How soon can you raise the rent about $20/month on your tenants
2. Make sure you have a reserve fund for ...........whatever
3. Any immediate repairs or updates needed?
4. Minimize your expenses. (do you pay any utilities)
5. How are your property taxes. Can you contest them to get them lowered?
6. Start saving and building equity for your next property.
That sounds great! With my first property under my belt, I'm looking for partners, contacts, and general networking. Good luck!
Awesome! That's exactly where I want to be in a few years.
Glad you like Columbus. It's a good town.
1. I have them signed for a year. I suppose that could be a beginner's mistake. Like and learn I suppose.
2. Good advice! I am naturally frugal.
3. Yeah, somethings here and there.
4. I pay water.
5. Never thought about that.
6. I thought about that before ever purchasing a property (although I'm still working on my next move).
Originally posted by @Christian Lautenschleger:
That sounds great! With my first property under my belt, I'm looking for partners, contacts, and general networking. Good luck!
Awesome! That's exactly where I want to be in a few years.
Glad you like Columbus. It's a good town.
1. I have them signed for a year. I suppose that could be a beginner's mistake. Like and learn I suppose.
2. Good advice! I am naturally frugal.
3. Yeah, somethings here and there.
4. I pay water.
5. Never thought about that.
6. I thought about that before ever purchasing a property (although I'm still working on my next move).
If you pay water, you might want to consider installing low flow shower heads and aerators on the faucets.
I know there's a filter connected to the main line that decreases flow. Although the inspector mentioned taking it off, because of your suggestion I might keep it attached.
Thanks for the advice.
To add to a reason why I did want to close, my agent gave me a hand with something at the property yesterday. I figured he'd be worth the price with his knowledge and contacts moving forward.
As I progress, my network and contacts will be more and more important.
I'm sure it has been a fantastic learning experience for you....If you don't like it sell it and do another one...learn from your experiences and don't repeat mistakes.
Don't think that this is the last time you will get a little "buyers remorse" before closing,,,,I don't do it every time, but more often than not I start questioning the deal (or comparing it to deals a few years ago, when there is no comparing those deals to today).
It means your not 'in love' with the property,,that's when people make bad mistakes
andy
@Account Closed
Yeah, that's exactly what it is: a learning experience. I'm not looking to sell it at the moment, or anytime in the near future, but that option's there.
@Andy Collins
At least you're then "thinking" about the investment. If you hadn't, then maybe you'd be blind to its potential. I dunno.
Congrats on your purchase! The first one is always a little scary.
If you are able to cover the costs with the current rents you are already ahead. Nothing better than other people paying a mortgage off for you.
You're not losing money, you are making money! Now take that cash add it with whatever you were putting back before to raise your investment money and save up your next down payment in a faster pace!
What ended up happening with this property?
Will you speak more to the errors you made when estimating the cash flow/value of the investment before you decided to purchase? I am a newbie interested in an occupied duplex and would like to learn how to avoid the same mistake as you.
Christian,
Stumbled across this post somehow, and I'd love to hear how you are doing 3 years later. I just closed on a duplex and after finding out some additional numbers I hadn't included (naivety due to inexperience) post closing. My projected cash flow is significantly less (meaning 6-9% ROI with conservative assumptions). . I would just love to hear if things ended up working out alright.
Thanks!
Jake