Newbie buys in a D Class Neighborhood and Goes Section 8-Success!

[Jonathan R.]

Hello all,

I have been a member for about a month and have been too afraid to throw out an introduction until now, it is time for me to jump in. Roughly five months ago I bought my first investment property and I'm hooked. I didn't discover Bigger Pockets until after I purchased the property and am learning that I took a bigger gamble than I thought I was according to Brandon Turner and many others. I bought a cheap investment property because that was all I could afford, and I barely could afforded it. I had to take out a $3,500 loan at a 25% interest rate to pay for unexpected rehab costs post a loan on my 401k and a 10k loan from my local credit union at an 8.5% interest rate. I'm 32. I bought in a D class neighborhood, the two bedroom 1 bath house is not surrounded by vacant houses but I certainly wouldn't call it a working class neighborhood. We decided to go Section 8. Today I got my first check deposited, I'm pretty happy about it and am bold enough to post today as a success story in low-end property investing as a newbie (be that dumb luck or what have you). We purchased the home in Wichita, KS in the inner city for 18k, we put 14k into it and it is rented for $675 a month. The home was very easy to rent as there is a huge demand for Section 8 homes in my area. I learned some lessons; always make sure the utilities can be turned on before the purchase, I had to have a weatherhead and riser put on the home to get electricity, there was a rough 2 grand lesson. I also put in a new hvac and furnace which I am glad I did as this home is a long term play. I got lucky because I saw if you are going to buy in a rough area that it is important to buy on the outskirts of the rough area, I did that by dumb luck as we are close to an interstate and on the fringe of the rough area.

I have caught the real estate bug and am thinking about getting a heloc on my primary residence which has about 25k worth of equity in it to buy another one in March of next year. I did start an LLC and will put the next one in the LLC name too. After purchase number two I'll have to navigate how to get additional financing through a commercial or portfolio lender or put a property in my personal name, looking for advise there as to which will be smoothest. I am hoping after four properties that the cashflow will snowball and I can keep buying at least one a year with no financing. I love the podcasts and the website, I have since read Rich Dad Poor Dad, The Millionaire Next Door, The Richest Man in Babylon and am about to start The Secrets of the Millionaire Mind. I think I am crazy enough to do a similar deal again post lessons learned. Thanks for having me.

[Jonathan R.]

@Jared Viernes thank you for your reply! The renovation went fairly smoothly. We tiled the bathroom floor and shower, refinished the floors, fixed several leaking pipes, painted, and brought the house up to Section 8's standards. We used a contractor, he was a one man operation and fairly slow but affordable. He was recommended by a friend I work with that has a few rental properties. I think I'd use him again but there were certainly frustrations with having productive days/weeks as well as getting in contact with him.  We purchased at 13th and Hydraulic. 770 square foot home with a 2 car detached garage. We are self managing for now.