First Investment Property

[Michael Tucker]

Well, I closed on my first property last Thursday and signed a lease with my first tenant this morning. I honestly don't know what sparked my interest in real estate investing about 14 months ago. At the time, I had just started working my way through Dave Ramsey's Baby Steps with an ambitious goal to pay off $35k in debt in about 11 months. During my debt-free journey, I was saving about $2,000 a month, but once only my $12k student debt remained, I decided to put all of that on hold and instead of paying off the debt each month, I would invest in some mutual funds. Even if it only made me $500 or so by the time I had invested enough to pay off the student debt it would have been worth it. Sure, I could have lost money but I didn't really care - I thought the reward outweighed the risk. Once I had actually saved up / invested enough to pay off the student loan I decided that I wanted to wait and see if Congress would eventually pass a student loan forgiveness package, so instead of this being my student loan pay off fund it transitioned into my Rental Property down payment fund. It turns out I started investing at a great time. I pulled out before the market hit the bottom in March and put back in at the bottom and have been riding it up ever since. I've been very lucky in this regard. I put fuel on the fire by earning extra income driving for DoorDash and Bite Squad so since March, I've been able save about $4000 per month. 

Okay now to the actual real estate investing side. I started listening to the bigger pockets podcast last summer and bought the book on how to manage rental properties. In February I started making offers and by the time June rolled around, I found a property on the MLS that I knew I could get cheap enough to go ahead and pull the trigger on with an offer I knew would get accepted. The property is a 2 bed/1 bath that I bought for $64k that is move-in ready. My tenants are renting it for $750. I put 20% down on a 30-year mortgage. After the PITI is paid, I'm left with about $378 each month. I'm hoping to have a final cash flow of about $200 or so per month. I went ahead and pulled the trigger knowing that even if I broke even on the deal it would have been worth it to go ahead and get a real-life education (not just numbers on a calculator or spreadsheet) and be able to move on to the next deal. The confidence of getting that first deal underneath you is huge.

With my extreme saving (and a nice beneficiary check from my grandma's life insurance policy) I'm probably going to make an offer on my next property in the next week. My goal is to get 2-3 more properties by this time next year. That'll probably bring me close to my limit on DTI ratio that a bank will be willing to lend to me on so after that I'm probably just going to rack up enough money to pay cash for properties. For the next 10 years, my goal is to just buy as much cash flow as I can. I know I kind of rambled and this has been very stream-of-consciousness but if you're on the fence, go for it! If you've got a deal that's close on the numbers, I think it's worth it to gain confidence and a real-life education.