New Investor Trying to Learn the Right Way

[Harold Felder]

Hello fellow investors.  My name is HC, I live in Charlotte NC,  and I am somewhat new to investing.  I have two single family homes and a fourplex that I own free and clear.  The fourplex is a recent purchase in the final stages of rehab (should be completed this week).  All of my properties are rehabs that I rent out for cash flow.  I would like to purchase more multi-family homes and I am interested in learning from other's mistakes as much as possible :-).

[Harold Felder]

Sure Steve,

My wife and I had basically saved some money when we got a letter from our real estate agent telling us of a property that she knew of that was for sale for 20k. We had that much saved up and decided to jump in. The house was in horrible condition. The person living there had inherited it and performed no upkeep. All the utilities where turned off. Before we closed on the house, a kerosene heater he was using started a fire. Although fire is never a good thing for properties, it worked in our favor since we lowered our asking price to 12k. It was basically a 3/1 gut job. We ended putting in around 20k to get it rentable but we have been renting it out to the same tenant for $750 a month for the last three years. We got a line of credit from our credit union to finance the repairs.

Once we paid off the line of credit, we purchase our second home for around 24k. We financed with a combination of the remaining line of credit and a low interest credit card. It was a 3/2 which cost us around 13k to fix up. We have been renting that out for the last two years for around $800 a month.

This year we bought a fourplex for 91k. I tried to finance it but ran into all kinds of issues. Lenders could not decide on how much it was worth. I didn’t want to loose the deal so I decided to take a loan against my 401k along with my wife who borrowed against her 401k. We rehabbed it with a combination of the low interest credit card and line of credit that we paid off from our first property. The fourplex was really run down so we had to put in about 50k to get it rentable. The rents were previously $375-$425. We are now getting $740-$790 a month. Two units are already occupied. The tenants for the other two units will be moving in within the next week or two.

So, although I say we own the properties free and clear we do have to pay back the line-of-credit, low interest credit cards & 401ks. I guess maybe I should have said that we don’t have mortgages on the properties. That would probably be more accurate.