New Real Estate Investor with 2 Deals in 5 months

[D'Andre B.]

Hello BP Community,  

Please allow me to introduce myself and to say thank you to each and everyone member for helping me discover a way to escape the ball and chain of having to spend life in a cubicle.

My name is D'Andre and on 10/10/2016 my wife and I closed on our first home. It was a nice duplex in the Cincinnati area(B+/B area) which required no work. Both units were 2 beds/1 bath and currently rented for $650/month. The Sellers were asking $134K. We agreed on a sales price of $123,250, some seller paid closing cost, and a seller paid one year home warranty. The downstairs tenants were forced to move out which wasn't an issue because they were a young family buying a home so the timing was perfect. 

Deal 1....How we made the dream a reality

1) I qualified for an FHA loan as an owner occupant which allowed us to use a 3.5% down payment. 30 year fixed @3.875% ( wife isn't on the loan)

2) I also attended a first time home buyer course and learned about down payment assistance programs that were available to home buyers in ohio. I was able to qualify for a grant grads program that gave me $6,162.50 in grant funds to be used for the purchase of a SFH home (1-4 units).

"http://ohiohome.org/  Grants for Grads includes 2.5% or 5% down payment assistance. Down payment assistance which is forgiven after five years as long as you remain in the state of Ohio. If you sell your home and out of Ohio within five years, you must repay some or all of the assistance provided."   (You do not need to live in the home for 5 years) 

3) Seller gave me $3,500 toward closing cost.

4) I essentially only paid a grand total of $1,500 of my own money for to complete the deal and that 1500 was spread across the following items.....(Appraisal, home inspection, and earnest money of $500)

5) Received funds back at closing( rent deposits, prorated rent for the inherited a great tenant paying $650)

6) I also received the MCC tax credit: The Ohio Housing Finance Agency's (OHFA) Mortgage Tax Credit provides home buyers with a direct federal tax credit on a portion of the mortgage interest, lowering the tax liability by up to 40%. The tax credit cannot be larger than the owner's annual federal income tax liability, after deductions, exemptions and other credits.

PITI is currently $950 - PMI does suck and is 83 bucks a month, I've recently learned that my insurance was maybe a tad bit to high and I have since reduced it by $22/month but wont go into effect until 10/2017. (I did receive a prorated refund check from the insurance company.)

Deal #2 ....SFR Contract Closing Date 3/24

The story of the second deal won't be as glamorous as the first but I hope that I'll share something that someone else can learn from. It's a 2 bed/1 bath home and the sellers were asking 49K. The place is rental move in ready and in a B-/C+ area of Cincinnati. The area grade could be higher depending on who you ask....its not Detroit, and hell I'm originally from the south side of Chicago so this place is great by my standards! The median rent amount for the area is $760. I plan on asking for $1,000 but will take $850 in monthly rents

1) We agreed on a sales price of 44.5K, seller paid closing cost of 2%, and agreed to purchase a 1 year home warranty.

2) Wright Patt Credit Union agreed to finance the deal. Going with a conventional loan 30 years fixed @ 4.75%, I had to put down 15% and 3 month PITI placed in escrow. Most banks turned me a way because of the size of the loan.

3) I tried to push for some minor tuck pointing of the chimney but the seller pushed back and this wasn't worth losing the deal over so only a few items were going to be addressed by the seller before closing. My agent is a licensed appraiser and his report stated that it is valued at 49.5K- 50K. The bank appraisal comes back today so i will update this post later.

4) Funded the deal using savings, and I liquidated some investment accounts.

5) The contract close date is 3/24/17, I'm pushing for 3/17/17 and I plan on having a tenant in the place by the middle of April.

Lessons Learned So Far...

I should have started sooner, I should have maybe looked at more duplexes because there were some cheaper duplexes that were available and could have met our requirements. 

Don't wait!!! Go for it!!! 

HUGE THANKS TO THE BIGGER POCKETS TEAM AND COMMUNITY