What was your first investment?

Question

1.) What was your first real estate investment?

2.) Pros and cons of the route you took?

3.) Would you recommend a beginner investor take the same path you took    to get started as a real estate investor?

Thanks in advance from a noob trying to get a game plan together.

Rich Schmidt · Answer

1. It was the first house we bought to live in.  When we moved 4 years later to a different part of town, it wasn't selling, so we found someone who wanted to "lease to own."  Two years later, they declined to buy it, so we had it back... in worse shape, of course. But we kept the option fee, cleaned it up, and got it sold.

I don't think of that as our first "real" investment, though (even though I know it was). I think of the house next door, a 3br/1ba rental house that we bought when the previous landlord was tired of it. It comes nowhere close to the 50% rule or anything like it (didn't know about those at the time!), but the rent more than covers the mortgage & basic expenses, and we can cover the major upgrades (like the new driveway being put in next week).

2. Pros & cons?  Pro: It's close, easy to manage, lets us choose our neighbors. Con: Not really profitable, but we plan on owning it for life, so it will be once our tenants have finished paying the mortgage for us.  :)

3. Sure, if you can afford it.  But ideally you should learn more about it first.  :)

Dennis Tierney · Answer

My first one was a 36 unit apartment in 2005. It was bought with money I rolled out of the stock market after investing there for 20 yrs. It was bought to utilize the income to pay the mortgage on a lake home we bought. The other option was to put it into equity on the lake home and have a smaller mortgage ,but, I convinced my wife to invest in the apartment instead so that we would eventually own both instead of just have the lake home. (got that idea from Kiyosaki).
 The pro is that it does pay the mortgage. The con is that I probably paid too much but with what we've been able to do with improving the cash flow it makes too much money and outstrips the depreciation so we have to pay taxes on the excess. We'll do a cash out refi in 2017 to get our inital $ out and then reinvest in another apartment so then the cash flow will again be tax free and our return will be infinity. 
 I would do it again, but,  if you can start smaller and learn it would be less risky.
 Dennis

Chris Masons · Answer

My first investment was a 4 family with a 5th basement apartment that I initially planned to occupy the basement apt. and manage teh building on site.

Th eowner I was buying from who built teh basement apartment comes to me a week or so beforeo closing and asks if ihe can continue to live there and rent from me. When I ran the numbers with him there not me it increased my + cashflow enough to convince me to stay home with Mom for a few more years which I did and in turn was able to bank enough money for my next investment.

To this day this property is my cash cow and my biggest property. The rest are all 2 and 3 families.

If I could do it all over I would have went for bigger units making my 4 family my smallest investment.

regards,
Chris

Scott W. · Answer

@ Bill Gulley - it was a primary turned (now) rental property. cost (in 2003 as primary) was $195k.  it's now turned to rental & current value is $147k.  so should be shielded from capital gains up to $195k, no?

Joe Delia · Answer

1.) What was your first real estate investment?

-- 4/1 SFR in North Las Vegas, 43K, 15K rehab.  Was rented for 850, now 750.

2.) Pros and cons of the route you took?

-- Came in all cash for purchase and rehab, which is a pro and con.  No leverage, but less risk as far as cashflow is concerned.

-- Worked with a local investor who also rehabbed.  It got me into real estate but I overpaid on the rehab and I wouldn't do this deal today.

3.) Would you recommend a beginner investor take the same path you took to get started as a real estate investor?

-  Depends on what your long term strategy is.

Bill Gulley · Answer

Not only is you last sentence not applicable, but it's  not entirely true, is your profit in a year over $250,000? I doubt it. Different rules apply to RE as well. We do have a political forum if you'd like to advance any political agenda.....Good luck!

Account Closed · Answer

It was shear luck, but it did motivate me to get involved in real estate investing.

I purchased a water front lake lot, thinking that I was going to eventually retire out there and build. A few years later the lake got very popular and land prices more than doubled. Due to the popularity (lots of people) it made the area undesirable to me. I sold the property and more than doubled my money after 3-4 years. Dang I wish I had bought more than one!

Scott W. · Answer

i forgot to mention, on my 2nd rental (where i had lived in & bought another home to move in for my family) - the pros are I am shielded, from capital gains, up to $48k due to the market. Good thing since Obama's gonna raise them some more.

Steve K · Answer

First investment was a spec house.  First rental investment was a spec house that I couldn't sell due to the market so I was forced into rentals.

I wouldn't recommend starting with specs.

Bill Gulley · Answer

2bdr, 1 bth, single car, nice area of all more expensive homes for 18+K, 1968 on a contract for deed, first house I lived in and sold it making almsot a grand over my costs....big money for a young guy then....LOL COsts included my $150 payment, taxes and insurance for almost 18 months...yes, it's still a good way to start.