First Investment - Where to go now?

Question

Investment Info:

Single-family residence buy & hold investment in Angus.

Purchase price: $349,000

Cash invested: $21,000

Single family townhouse, 1600sqft.
Currently renting out for $1650 a month, I Put the minimum down of 5%. So total cost of mortgage, PT, insurance, is $1710. No extra cash for profits. Was first home purchase at 20yrs old. Will hope to improve profit margins in future deals.

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

Wanted to get into the market as soon as possible to start building equity

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

Sister was selling, waited out listing agents contract and bought privately at 10% BMV

How did you finance this deal?

Had a 20K truck loan with no lean, sold truck and used cash for down payment

What was the outcome?

Lucked out with great tenants, have been there 2.5 years with not a single issue. Only been there a couple times for walk throughs, and to bring new fire alarms.

Lessons learned? Challenges?

Cash flow isn't high enough, 5% down really limits you for potential cash flow and turn over time for withdrawing equity.

Eddie Espinal · Answer

I agree with @Lexi Teifke. I made the same mistake when I purchased my first property. What end up helping me was that I made large payments to my principal and then did a few Mortgage Recasting to lower my monthly payment.  Maybe that's something you can do in the future.

You can read more about how mortgage recasting works in the link below.

https://www.bankrate.com/finance/mortgages/what-is...

Congrats!

Eddie Espinal

Roy Cleeves · Answer

@Brock Peel

Hi Brock - I understand your market and your plan as I did the same here in Kitchener.

First investments were 5% down and rent barely covered all expenses leading to a small cashflow.

Over the years I have not pulled out equity yet - however within 9 years my equity position moved to 50% loan to value from 95% and my rents moved up from $1200 to $1500. So now I have positive cashflow.

It is good to keep that one as a long term hold for wealth as you put very little equity into it anyway.  Let it grow over the years and rents will go up as well.

The thing is now you need to probably find joint venture partners to work with you for a BRRR or other strategy.  Talk it up with people that you know that can be a good mortgage partner and would have some money to put in as well.

Brock Peel · Answer

@Lexi Teifke I'm here for the advice and knowledge of others, constructive criticism is what I need. My current situation is. You also have to keep in mind I'm from Ontario Canada, where the dollar is much different and prices are very inflated in my area (average home 450-500K) .

Currently I am trying to plan my next move, I owe 318 on the property and it's appraised at approx 430K. So do i sell and cash out, and try to diversify my money better on my next investment. Or leverage myself in other ways and try to keep the property. My fiance and I also just bought a small house together for 399K @ 5% down. So getting another mortgage doesn't seem possible for me. But that's what I'm trying to learn. Experienced investors seem to be very creative.

I will also look into recasting  @Eddie Espinal thank you!

Brock Peel · Answer

@Roy Cleeves  I agree with the benefits of holding onto my current rental.That is my biggest hurdle right now, if I can't find a reliable partner with access to funds. Would it not make more sense to utilize the cash I can get from the sale of my property to take a more aggressive approach on a cheaper property I could BRRRR or just flip?

Just trying to bounce ideas...

@Lexi Teifke

Brock Peel · Answer

@Lexi Teifke that's what I'm leaning towards. Thanks for the advice! I may try my hand at flip, or use the brrr method. I can do most work myself, and anything else my father is a contractor so I can save lots on contractor costs.

Joe White · Answer

@Brock Peel I agree with the others that the numbers aren't a good fit investment wise.....the rents are extremely low given the value.  So either you way over paid for the property, or you quite possibly are under rented. I would check some comps to double check where the rents should be. If you are under rented, you might need to give your tenants notice.

First Investment - Where to go now?

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