First Toe Into Real Estate

[Daniel A.]

Investment Info:

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

Purchase price: $76,000

Being new to the real estate scene afforded confidence in my decision to buy this property. I did some quick mental calculations regarding the potential income over the PITI. That was it. The price seemed too good. And I still feel that it is a good buy. I'd live in one unit, rent the other two out at $650. We're just now (as of 4/14/20) getting contractors out and working up estimates. I plan on doing a lot of the work myself to get a true grasp on what it takes.

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

I've had my eye on real estate for quite some time. I've spent a few years educating myself but haven't had the nerve to commit. I feared failure. But there comes a time when you realize your fears are holding you back. Yeah, those fears protect you, but they also afford you little to no growth.

When I found this property for sale, I decided now was the time. It needed work. I knew nothing about construction and I desired personal growth. It was a perfect match.

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

We were in the process of buying a duplex - literally, on site, working with an inspector - when my friend's wife found it. It was listed at about 10k below the duplex price and had 3 units rather than 2. It was also in a better area. Unlike the duplex, however, this triplex needed work in every regard. We phoned the agent and were inside 30 minutes later.

The owner was well aware of the work needed and we settled on 76,500.

How did you finance this deal?

I am fortunate in this regard as I went through the Bank of Dad. I had consulted with a large bank on an HOA loan, and they desired about a 12k down payment. As is the case, and as will continue to be the case for a newbie to real estate, I was baffled at how much they wanted. I phoned the Corporate Office of the Bank of Dad, which had no voice prompts or hold music, and after he verified who I was based on the incoming caller ID and my voice on the line, he offered to finance it for me.

How did you add value to the deal?

Since we're still at the beginning stages, we have high hopes. Working with electricians, plumbers, general contractors is an illuminating process. One contractor wanted 70k for a turnkey project. He has a reputation for reliability, but that was grossly over budget for me. So, I plan on doing as much as I can, which I am eager to do. It will afford me the chance to learn, hands on, what it takes.

We'd like to add a privacy fence around the back with dividers so each tenant has a private yard.

Lessons learned? Challenges?

One lesson that I've learned early on in life and that applies here is that you must be willing to redefine your standards and learn to adapt. What I mean is that, while I may think that an AC job shouldn't cost more than 2k, if all your estimates come in at 7, then that's your new standard. If that's your new standard and you find a cheaper solution (such as putting in wall ac units as opposed to an entire HVAC), the savings will excite you.