The Journey of My First Real Estate Deal: Challenges & Successes

[Noel Alvarez]

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $770,000
Cash invested: $80,000

I own a two-family home in Westchester, NY, that’s a solid rental property. It’s 2,400 sq. ft. with a 3-bed, 1-bath unit on top of another 3-bed, 1-bath unit. We also finished the basement and turned it into a 1-bedroom space. The property brings in steady rent with a potential cash flow of around $1,000/month. It’s in a great area with strong tenant demand, making it a solid long-term investment.

What made you interested in investing in this type of deal?

I got into this deal after learning about house hacking and realizing it was the perfect strategy for my situation. The goal was to rent out the 2 apts and live in the basement we were finishing. I ran the numbers, and everything checked out—the comps made sense, the cash flow was solid, and the upside was there. On top of that, the deal included not just the house but three total lots, which added even more potential. It was a no-brainer.

How did you find this deal and how did you negotiate it?

I found this deal on Redfin and submitted an offer. The asking price was $799,999, but the numbers didn't work at that price, so we came in lower at $770,000. This was back in September 2022. Initially, we lost the deal to a cash buyer, but when that fell through, the sellers came back to us to see if our offer still stood. We accepted and closed using an FHA loan with 3.5% down.

How did you finance this deal?

My two brothers and I split the deal three ways. We used an FHA loan, putting down 3.5%, and after closing costs and points, our total upfront investment came out to around $80,000. For me, it was literally my entire savings—but I knew it was the right move to get into real estate.

How did you add value to the deal?

We added value to the deal by renovating the basement and turning it into a livable space. This not only increased the overall square footage but also allowed us to add another rental unit, boosting the property’s income potential.

What was the outcome?

We successfully closed on the property and rented out the top floor right away. My brothers and I lived on the first floor while we renovated the basement. As we got closer to finishing the basement, we were able to rent out the first floor as well, maximizing the property's income potential.

Lessons learned? Challenges?

One of the biggest lessons I learned is that doing business with family can be challenging. It’s crucial to have clear legal agreements in place outlining the future of the property and everyone’s roles. I also learned the importance of working with people who share your vision and match your level of drive. I wanted to live in the home for a year, as required by the loan, and then move on to the next property. However, my brothers decided to stay, which led to a difference in expectations.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Yes, I worked with some great real estate professionals throughout this process. If you're looking in this area, feel free to reach out to me, and I'd be happy to share their contact information.