I've been dreaming of the day when I could finally make this post for several years now. I started listening to BP while I was in college, and had analysis paralysis for several years afterwards. Finally, circumstances in my life pushed me to take the leap and after fumbling through running the numbers while working on a ship out in Hawaii, and doing the most due diligence that I could remotely, I'm finally in the process of wrapping up my first rental property, a 3 unit house in Troy, OH.
With my father's (a career house flipper) help, we closed on the house in 12/2024 and have been performing renovations/repairs and getting units rented since then. I'm finally getting the last unit leased and handed off to property management and feel that I'm at a point where I can share a little about it. I've attached my updated analysis for the property so you can see what we're currently working with. It's not a home run, but it appears to be cash flow positive and so I'm grateful for that. Here are some of the lessons I've learned so far.
Lessons Learned:
~Run the numbers more conservatively than you think. I ran my numbers pretty conservatively when calculating my offer, but wish I'd run them with even more margin. I slightly overestimated the rents we could get (I'd asked around & estimated based on Zillow & other listing sites, etc) and slightly underestimated repair costs (some hidden expenses popped up), but luckily I had built enough margin into the purchase price that it still ended up being profitable, just less so than anticipated. I'd say I was about 80-90% accurate with my initial estimates before starting the project. Even so, when things started going wrong with the property, it got expensive quick. If my father hadn't been helping me with repairs and renovations, I think the project would've gone over budget. I believe we put probably $15-20K into the repairs and renovations based on credit card statements and a little extra for items put on my personal card (I should've kept closer track of the expenses during the project).
~Learn your market as best as you can. I have lived in MA my whole life. The property I bought was in OH. In my opinion, I got extremely lucky with how this worked out. I thought I had an understanding of this market going into the deal, looking back I just had way more confidence in myself than I should have. Like I said I was definitely a little off in my estimates when it came to income and expenses. I also didn't realize how slow the rental market could be during the winter months (when we closed) and the property sat vacant for about 4 months while my father and I were performing renovations on the apartments, which ended up working out since there were some big repairs that would have been problematic if the unit had been occupied (in my opinion anyway). Luckily I budgeted enough cash in reserve that this didn't create an issue, but I was starting to sweat during the last couple months wondering whether I was in over my head. We've set up the leases so that they renew at the beginning of the spring/summer so as to hopefully avoid long term vacancies going forward. It was very drastic the amount of applications that were coming in during the winter months compared to around April.
~Consider buying closer to home next time. Like I said, I bought in OH and I am from MA. I had reasons for buying in OH (big consideration was that it was affordable compared to MA). When I first bought the house, I planned on living out there and so I moved into one of the units. I pretty quickly realized I didn't want to live so far from everything I'd ever known, and so it became a race to finish the project and move back. My father still lived in MA though and therefore there was a lot of travelling involved so that he could help me. When we started the project, it took us about 16 hours to drive one way. The last drive we did took just over 13 hours. We got good at travelling, and after a certain point it stopped seeming so daunting and just became a regular event. Yes it definitely cost a good bit in time and gas for us to drive both ways fairly regularly, but I work on ships and have a good amount of free time and this was how we decided to work it this time. Got to see a lot of the country this way and now I'm more familiar with I-70 & I-80 than I ever expected to be in my lifetime. Overall I'm glad we did it this way so I could see that even though it had it's downsides and was miserable to do at some points, it could be done this way if necessary. There are markets in MA with similar price points (Western MA/the Berkshires) and I will likely be looking into property out that way for my next investment. I'm sure the 3 hour drive each way will be a welcome change.
~Set criteria for tenants and stick to it. When I was struggling to find tenants during the winter months, I kept debating if I should ease up on the criteria (700 Credit Score, no criminal history, no eviction history, monthly income greater than 3x monthly rent, no smoking or pets) just to get someone in, but I kept hearing podcast episodes where folks would talk about doing exactly that and regretting it. After discussing with the property manager and him suggested relaxing the criteria down to a 600 credit score, I met him halfway and settled on 650. This seems to be the right fit for me and we've found good qualified people at this benchmark. I'm sure good tenants are able to be found at lower criteria, but this is where we had the best balance with finding qualified folks and getting enough applications to have it be a little competitive.
That about sums up my experience so far. With the property manager handling everything on the ground and all the major renovations we had planned completed, I'm looking forward to checking in with the PM and monitoring the P/L statements at the end of each month. If you have any advice, I'm more than happy to hear it. This was my first investment, and obviously there's a lot to learn, but I'm happy with the way this has turned out overall.
