SOS need first Investment Property Advice

Buying & Selling Real Estate
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SOS need first Investment Property Advice

Emma Hopegood
New to Real Estate · New York, NY · Member since 2016 · 4 posts · 1 vote

I have been eager to make my first real estate investment for about a year. I’ve read plenty of book, and it seems like the last thing to do, is to just do it. 

I moved to NYC last September and started working and living with a wealthy family, I get paid a salary and was able to save enough money for a down payment on an investment property. 

Of course, I can not afford anything in the city right now, so I put an offer in on a turn key unit in Florida. I used to live there and know the area. 

We are under contract now, but I am worried about a recession, and loosing money. Is this a legitimate concern? Are tenants allowed to not pay, or in other words, not be evicted for non payment? Will there be a recession soon that will tank real estate prices? 

The Purchase price of the unit was $185,000, I knew it was over priced and worth about $170,000-$175,000. We countered back and forth and I accepted $175,000 with $2500/$5500 towards closing costs.

I am in the process of getting a check to the title company and setting up an inspection. There are tenants in the unit until August 1st. They may or may not renew but are paying $1400/mo. With HOA, principal, insurance, everything factored in the total monthly is $1342.

Please advise,

Sincerely,


An eager, young, first time investor, in the middle of a global pandemic

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  • Daniel A.
    Rental Property Investor · Victoria TX / Portland, OR · Member since 2019 · 94 posts · 96 votes
    6y

    First off, congratulations on deciding to take action. And good job reaching out to the Bigger Pockets community for guidance. I doubt I'll be of much help, but I figure I'll toss out a few ideas. Maybe you'll find something of value.

    As to a recession and loosing money, your concerns are reasonable, but there are a few ways to look at it. If you lock yourself into rate X, a recession usually brings with it lower mortgage interest rates. So, it's not out of the question to have your interest rate lowered through a refinance or an adjustment. You should also consider that even though a recession leads to job loss and property values dropping, if you have a fixed rate mortgage, your payments to the lender will remain the same. Rents will always be due. And if your rent covers all your expenses, then you're set. (Evicting a tenant in during COVID is not something on which I can elaborate.) 

    I tell this to all new investors because I myself have taken this route: do what works for you. Sometimes you need to take the leap and see what happens. 

    If you aren't planning on selling your property, then the fluctuating value of the property during a recession shouldn't cause you to lose any money. And I will say this: tenants are the wild card in rental real estate. Times could be good and you'll have a tenant who defaults for whatever reason. Times could be bad yet the tenant makes timely payments. If your property is in a good area, if you have strict tenant qualifying criteria, then you heighten your chances of having a tenant who is financially wise and who will have saved some money for such occurrences as job loss. But again, and I reiterate, someone who seems financially wise could jump ship at the first hint of anything.

    As to the numbers, a $58 profit each month, assuming the numbers are solid, doesn't leave you much wiggle room. Perhaps there are some value-add opportunities with this property. Perhaps you can do some baseline work to get that $1,400 up to $1,600 or even $1,800. Take this into consideration when it comes time to send out the lease renewal. Maybe you don't renew the lease so you can toss in some new flooring, some new appliances, and a nice backsplash.

    Even if the profit margins are small, having a property brings value on many levels. You build equity, you gain appreciation, but above all else, you gain knowledge and experience.

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  • Emma Hopegood
    OP
    New to Real Estate · New York, NY · Member since 2016 · 4 posts · 1 vote
    6y

    Thanks Daniel ! Your words of wisdom really helped settle my nerves and remember to look at real estate investing as a long term game

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  • Ulisses Terriquez
    New to Real Estate · Santa Cruz, CA · Member since 2020 · 22 posts · 19 votes
    6y

    Hello @Emma Hopegood, 

    Congratulation on your first! I am a newbie trying to invest in my first income property, hopefully in the near future. Since I am new to real estate. I don't have experience, or advise to give, but I just want to wish you the best and hopefully everything turns out good for you. Take care and best of luck to you.

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  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    6y

    @Emma Hopegood we are in totally uncharted waters so it's hard to predict what will happen. In answer to your first question, yes, there is a moratorium on evictions due to Covid 19. We're now in to our 3rd month of sheltering at home and I can tell you that we have seen very little uptick in late payments or non payments in Indianapolis and Kansas City where we are active. People understand that they will have to make the payments up and that it's not a free ride. The first month was tough for some but I think this will only get better as unemployment benefits have now kicked in. In fact, some people are making more on unemployment than they were through their jobs due to the extra $600/wk from the Federal government. We also haven't seen an effect on prices in our markets. In fact, median prices are up significantly in April year on year. This is due primarily to a lack of inventory which is the case in several markets. Go on your local real estate boards website and they should have statistics on what your market is doing. The one thing I would caution you on is to get a quote on your insurance upfront. FL is among the highest in the nation for insurance. Make sure you run all your numbers including your insusrance.

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