First deal! No money down! (from 2010)

[Schuyler Witt]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $19,500
Cash invested: $48,000

This was my first property. I intended to buy the property as a fix and flip but underestimated the cost of repair. When selling for a profit became unfeasible, I decided to rent the property instead. I owed investors $23,500.00, due 6 months from the purchase date. I took out a second personal loan with Navy Federal Credit Union to pay off the personal loan. I reported to active duty in the United States Marine Corps in October of 2011 and committed to paying off both loans with the rents and my paycheck—I did so within two years.

When I bought the property, it was gutted of all metal, electrical wires, plumbing, appliances and fixtures. There was also lots of mold, and the house smelled of urine. An older friend who agreed to mentor me helped me manage the project. I hired a friend of his to be the general contractor.

During the rehab, I began to feel that I was paying this general contractor too much. I was 21 years old and unsure if my uneasiness came from writing someone else’s paycheck or if my feelings were valid because I saw the end of my cash.
I ended up running out of cash to pay the general contractor, and I finished the rehab myself. I learned many valuable lessons during this project.

Because i bought the property correctly it's been a great investment. Recently the property appraised for $95K. I took a mortgage out against it and did two more deals from that initial investment.

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

A wholesaler brought me the deal.

How did you finance this deal?

With a personal unsecured loan and hard money.

How did you add value to the deal?

$23,000.00 to rehab.

Lessons learned? Challenges?

#1 Listen to my gut feelings and to my numbers. After about a week of working with my "mentor", I had done cash flow projections and knew that I was paying the contractor too much. My “mentor” said that we were okay, so I ignored my projections and gut. If you've done your homework--listen to your gut!

#2 Be more deliberate about the way I finance deals. I paid way too much in interest for this property.