My successful first deal!

[Gina Gee]

Hi, I am interested in finding out how your first deal went? What did you learn? What was your biggest mistake or what really worked? How did you market, find your deal?

Thanks and have a happy and prosperous New Year!

[Andrew Davis]

@Gina Gee 

My first deal was a complete disaster!  I found a distressed SF on a large lot zoned for up to 5 units.  I tried to utilize the 203k program to convert it to a 4-plex.  I was going to live in one unit and sit back and collect the cash from my renters, it was a brilliant plan with a few minor issues:

- I chose a mortgage broker who represented himself well, but had no experience with a 203k loan.  It was the blind leading the blind.

- For a project of that scope, there were many costs that I knew nothing about, and that my mortgage broker either didn't know about or didn't tell me about.  The mandated 203k consultant, who you have to pay 1% of the total project cost up front (in my case $4k).  Surveys, engineers, architect to put together plans to submit to the bank in order for them to underwrite the loan (about 10k).

- Time, we had a 60 day contract, but it became apparent that we needed more like 120 days to get this thing done.  In order to secure contract extensions and keep the sellers from backing out I released all the escrow money (4.5K).

- When the bank went to evaluate the loan, which my broker had assured me was already a done deal, it turned out that my income, even with the projected rents from the other 3 units was insufficient to qualify.  I had assumed that the rents would be used to offset the monthly payment, but they were lumped in my overall income, and the mortage payment exceeded the 29% Mortgage Debt to Income ratio that the banks love.

I know the post title is first successful deal, and I actually (3 years later) consider this deal a huge success.  I learned a TON by losing twenty thousand dollars, and I'm still actively investing in RE and loving it.  

I'm currently working on rental rehab that will give a COC return of 30%+ and negotiating on a flip in a great area with fantastic numbers. Never. Give. Up.

@Bryan Henry that sounds like an awesome deal, well done sir!

@Jeremy Tillotson also sounds like a fantastic deal, how did you find it?

@Joseph Ball what would we ever do without the gurus telling us that we can't do it without them and their secret sauce?