I don't normally create these kinds of posts / discussions in any segment of my life, but I feel like something as big as real estate investing with how frustratingly impossible it can appear at times, warranted one.
What first attracted me to real estate investing, like many, came when shopping for my first home in Boston. My girlfriend at the time and I ended up getting a 950 sq. ft. condo just outside the city in Medford where we live with our dog and two cats. Once the whole process was completed, I became obsessed. I read every book I could get my hands on and listened to the BP Podcast constantly while on the train, driving, cooking, etc. I had three big problems when starting out...
1) Money. Real estate in Boston is EXPENSIVE. My condo in Medford was listed at $299,000, and the only reason we were able to secure it was by bidding $332,000 and waiving our inspection contingency. "Competitive" here would be an understatement. Clearly. There are very few affordable properties in the Boston area, especially when taking into consideration the fact that I needed 20-25% to put down.
2) Knowledge. I didn't know **** about rehabbing, construction, none of that. Everything I've ever learned in my life was pretty much self taught, so I had no pre-existing skills when it came to remodeling or repairing a property.
3) Fear. Nothing was as big a roadblock as my fear. The usual things would continue pinging me like going broke buying something I couldn't afford, what to do if I got a ****** tenant, never having enough time, etc.
Finally I decided that I was going to start making calls, getting my old "team" ready and informed of my plans (lawyer, agent, loan officer) and kept shopping every day. What I ended up finding was a tiny 450 sq. ft. place just south of the city in Dorchester, about a 5 minute walk to the train. The neighborhood is roughly a B-, still has a little ways to go but surrounded by great places to eat, public transit, parks, and the highway. The only work the unit needed was a new bathroom, some paint, new outlets, things like that... the bathroom obviously being the biggest thing to tackle. Kitchen was already updated, it had new windows, new roof (and roof deck), pretty good water heater, and hardwood floors. It was listed at $195k, with a lot of interest, mostly from small families or single parents. So after putting in a lower bid + higher down payment, we ended up later negotiating and closing the deal at $197k with 25% down. Most of the money came from a Roth IRA account I cleared out, and money I had been diligently saving up over the last two years. I own a small production company with a partner, so we took on some more work this year and I also freelanced a little more than usual to bring in some side income as well. The closing was originally set for the beginning of August, but due to a complication with the HOA docs and delayed transfer of those papers, we didn't close until 8/28, missing the big September renter rush in Boston.
The bathroom ended up taking a couple weeks. Like I said... learned as I went along :) After about a month on the market, I just secured a tenant as of yesterday for a 10/15 move in date. We took a small haircut on the rental price due to the fact that we missed September and were looking for either a 10/1 or 11/1 lease, but I'm happy we found a great tenant. The rent is $1500/mo. which gives us a cashflow number of about $450 every month. My plan is to set aside the first few months worth of rent into an "emergency and vacancy" fund to account for any unexpected expenses and turnover. Because this lease will end 8/31 of next year, we'll have the opportunity to attract a much better pool of renters and also a rental price of somewhere between $1600-1700/mo. Yes, it's somewhat of a large amount of capital tied into one unit, but I plan to take a short break and collect myself after this whole process and take my time finding a great opportunity the next go around. While property appreciation was never part of my equation, here in Boston it's almost a certainty that I will get some great equity out of this place in the future at some point. With tons of schools here, and the proximity of this unit to downtown, rental rates will only creep up year after year. So in the end, even though it's not the deal of the century, it got my feet wet and I learned a lot, so it was well worth it in my opinion.
For those curious, I posted some of the before / after pictures of the unit and of the bathroom to give you a sense of what someone with no experience and almost no skills can do if you just say, "**** it."
Before:
After:
