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Updated over 3 years ago, 06/21/2021
Closed on my first 4-family! The numbers and how I got there...
After years of interest in real estate, I found BiggerPockets in February of this year... and today, I closed on my first 4-family rental property. Here are the numbers and some photos... plus four things that helped me do my first deal!
THE DEAL
I found the deal on the MLS through my Realtor. It took a while of searching, running numbers, visiting properties, and making offers. It was completely frustrating at times, but finally I found a 4-family in a neighborhood in South St. Louis City that didn't need much work and already had three of four units rented. Two units are 2/1, and two are 1/1. Here are the numbers:
- Purchase Price: $139,000
- Estimated Repairs: $10,000
- Financing: Conventional, 30-year fixed at 5% with 25% down
- Monthly Income: $2,235 (as soon as we fill the fourth unit... and more room to increase income as tenants turn over)
- Monthly Expenses: $1,696 (included PITI, vacancy, utilities, property management, repairs, capex, etc.)
- Monthly Cash Flow: $539 (I expect this to increase to closer to $700 as tenants turn over. It will all be reinvested into further buy and hold investments.)
- Cash on Cash ROI: 13%
FOUR THINGS THAT HELPED ME GET MY FIRST DEAL
1. Listening to BiggerPockets podcasts.
Not long after joining BiggerPockets, a colleague suggested I start listening to the podcasts, starting from episode 1. So @Joshua Dorkin and @Brandon Turner have been accompanying me to and from work every day since. (My one-year-old daughter hears it, too, so I won't be surprised if some of her first words are "deals" and "cash flow"... it won't bother me, just keep the language clean, gents.) I plan to focus on buy and holds, and may mix in some flips to build capital, and not every podcast focuses on those topics. But I learn something valuable (usually several valuable things) from every podcast, and I'm increasing my knowledge of the industry overall. That knowledge also helped me build my business plan. It's nothing fancy... just three pages outlining my vision, goals, criteria, etc... but it's given me much needed clarity. If you haven't started listening, start now! Top 40 Hits can wait.
2. Networking, networking, networking.
I know... it can be awkward sometimes. It's not the most natural thing in the world, and sometimes you feel a little bit like a stalker. (No? Just me?) Seriously, though... it doesn't always feel natural, but it's worth it. Through networking on BiggerPockets, I met my agent and property manager @Peter MacKercher. He's been great to work with so far, and I definitely recommend him for anyone interested in investment properties in St. Louis City! Of course, I'm also networking elsewhere. When I wanted to learn more about a neighborhood, I searched around online and eventually found the name of the neighborhood association's president. I tracked him down on LinkedIn and arranged to meet for coffee. He's not a real estate investor himself, but he's definitely invested in the continued development of his neighborhood, and is happy to connect with quality investors with that shared goal. He even sent me an email not long after with a lead on a house that would be going up for sale soon! It didn't meet my criteria, but I was excited to have an opportunity coming to me instead of the other way around. I will definitely be keeping in touch with this gentleman going forward. Bottom line, network... just make sure you do it in a genuine way with a purpose in mind.
3. Running - and rerunning - the BiggerPockets calculators.
I upgraded to Pro pretty early on to get unlimited access to the BiggerPockets calculators. I'm a big believer in scenario planning - what's the best case scenario, and what's the worst? What do I think is the most realistic scenario, and why? More seasoned investors probably don't need to run multiple scenarios, but as I newbie I feel more comfortable exploring a few possibilities. And the process helps me learn and internalize the math. The BiggerPockets calculators make it easy to run the scenarios quickly. If the cost of Pro is too much for your budget, there are certainly other ways to do this... but if you have the money, and you're serious about investing, I recommend Pro!
4. Ignoring the knots in my stomach and jumping in.
At the end of the day, I know that my goal of achieving financial freedom before I'm too old to enjoy it requires that I start acting NOW. Part of me is very risk averse. But another part of me is used to jumping right into a challenge... and that's the part of me that has led to my best experiences. It's how I ended up serving in the Marine Corps for 4 years, how I ended up with an MBA and a good paying job that followed, and now how I've closed on my first cash flowing multi-family property. These things all made me nervous, but one quote always reminds me not to let fear drive my decisions: "A ship in harbor is safe - but that's not what ships are built for." (John A. Shedd).
Hope this post was helpful, or at least mildly entertaining. Good luck, fellow newbies. Go do what you were built for! Can't wait to read your stories.
Awesome, congrats! Very inspiring.
@David Lichtenstadter waiting for a reply
can i call you ?
Eluzer Weiss it's not allowed to post personal numbers on public forums (also it's not recommended) The way to do it is you sent a colleague request,
Thanks,
Just read this, very inspirational... Much success to you!!!
Hi Megan, loved reading your story, congrats! I'm new to BP as well, not a pro member as of yet, (learned some weird life lessons this year, financially) : ( however, I'm determined to rebound and hopefully go pro by the new year : )
I'm mostly interested in the networking aspect as of right now, and was wondering if you could please explain more about the neighborhood association networking website you found. I've never heard of that title before and I'm eager to learn more about the community I would love to invest in.
P.S. Thanks for serving our country.
@Daniel P., thank you!
@Crystal Presnell, thanks much, I appreciate it. The neighborhood association wasn't part of a networking website. I was simply doing a lot of internet research on the neighborhood where I planned to buy, and I came across a website with information about the neighborhood association. Not every neighborhood will have an active neighborhood association, but when they do, you might be able to find a simple website that lists the names of the officers in the association. In my case I searched "Benton Park West" online and eventually found the website for the Benton Park West Neighborhood Association. Their website had a page with the names of their association officers, so I did a LinkedIn search for the name of the association president and was able to find him! I sent him a message on LinkedIn, and that's how I was able to connect with him and learn more about his neighborhood. I hope that helps!
Congratulations!! I am very excited for you. Thanks for the encouragement and listing out all the things that really helped you.
@Megan Greathouse, thanks! I'm searching my area market right now!! I cant wait to get started...... : P
@Megan Greathouse I just read your post on buying 1st multi unit in St. Louis. Congrats!!!! Your post inspired me to start searching for multi family units as well. I just purchased a turnkey SFH in KC and now looking for multi family. Thanks for providing your agent and PM info. I will definitely email him to see if he has any listings that match my criteria.
Thanks,
Elaine
@Elaine Liao, that's great! Best of luck with your search. Please feel free to reach out with any questions.
What a pretty building! and a great deal. Much luck with your investing!
I just recently started getting involved with BP and this is hands down the best post I’ve read to date. Extremely in-depth on how someone goes from nothing to something in terms of investing. Great post!
@Megan Greathouse I just ran across this post. Great work Marine! I have no doubt the discipline required in service to your country has carried over and expect much success for you.
Thank you, @Jill F. and @Account Closed, I'm certainly hoping some of those lessons will pay off in real estate. Thanks very much!
Just ran into your post.
I just started and yes, I am scared but ready to make the move. I am watching videos and running numbers so I can be ready when the right one comes my way.
Thank you for sharing.