Hello Bigger Pockets members!
My name is Christopher Platt and this is my first post on the BP forum. I am 22 years old, currently in my final semester of architecture school at Alfred State College (two hours south of Buffalo) and I will be attending UB for a Masters of urban planning in the fall of 2019.
I grew up on a hay farm in Florence, New York. From a young age I learned to appreciate good work ethic and had the mindset of "If something brakes, you fix it" instilled in me throughout my life. I was exposed to the idea of real estate investing as a child, but didn't really understand what that meant or have any interest in being a real estate investor until a couple years ago. My father used to rent a trailer (mobile home) down the road from his farm to low income tenants for $100 per month. The impression I got from that arrangement at the time was that dealing with tenants is a hassle: many didn't pay on time, damaged the property, and the last one ultimately caused my father to go to court to get unpaid rent. I did make $40 off that tenant by returning the beer cans he left behind, but the lesson I should have learned was that trailer and property had been paid off long before it was rented out and the maintenance was minimal so that money was earned for doing little work, especially compared to labor on the farm or my parents full time jobs.
I discovered Bigger Pockets somewhat by accident. I wanted to listen to something productive on my hour and a half drive to a friend's house for a new years eve party and downloaded the final episode of 2018 for the Bigger Pockets Money podcast. Since then I've switched to the original Bigger Pockets podcast and listed to over 20 episodes, read "The Richest Man in Babylon" and gotten a lot more serious about real estate investing.
My path into real estate investing is a little unusual, so I thought I would share it with you all.
At the end of the fall 2018 semester, I was having lunch with a professor and mentor who is a Buffalo native. He asked me, "Where will you live while you attend grad school?" Without hesitation, I responded by saying "In an apartment." Then he encouraged me to look into buying a house instead, to which I responded by saying I have very little money and can't afford a house. He went on to tell me about a friend of his who bought a house in Buffalo for $1 through the "Buffalo Homestead Program" with the following terms: the property had to be your primary residence for 3 years and all code violations had to be resolved in 18 months. He also told me about a different friend of his who bought a house directly from the city without being a part of any program.
At this point, only one other architecture student from Alfred State was planning to go to UB for grad school in the fall and agreed that we should pursue buying a house opposed to each of us paying someone else $400-$500/month in rent for the next year (or two in my case). Our goal was to buy a really cheap duplex before the spring semester ended in May, live in one unit while fixing it up during the summer, rent the newly renovated unit to someone else and move into the other side and fix it up - all while going to college or working full time.
I went home and looked into purchasing city owned property directly. I scoured the Buffalo city property information site for days and created a spread sheet of 50 interesting properties. These are properties the city took ownership of after the previous owner got behind on taxes so many of them are derelict and have been vacant for years. The application to purchase city owned property requires proof of $5,000 in a bank account - which I didn't have - so I convinced my Mom that this plan was better than renting and she gave me a loan for $5,000. I later learned that the process of buying city owned property is lengthy, challenging, and required a lot more money than we had. We did have the opportunity to meet the director of real estate for the City of Buffalo in person in January and she told us that we would need to show proof of the purchase price of a house and all the entire renovation budget up front in order to buy property directly from the city. Plus, it would take months to get a city inspector to the property, assess the value, complete a report of code violations, determine the cost to fix those violations and make the house habitable, get the potential sale approved by other city departments, then have our application reviewed - the whole process could take six months or more which didn't fit our schedule and she said we were not likely to be approved.
The Homestead program no longer exists and has been replaced by the "Homegrown" Program which has much stricter terms - few houses to choose from (less than 10), higher purchase price ($6k-$50k) minimum occupancy is 10 years, all work must be completed by a licensed contractor prior to moving in, applicants must be between 50%-80% of the area median income, etc. Regardless, we decided to apply anyway - we got denied based on income. Combined, our income from seasonal work and a little work during the academic year wasn't enough to meet the minimum income requirement.
The Director of Real Estate for the City of Buffalo also gave me the contact information for a director at Habitat for Humanity. At the end of a long phone call, he also determined that we weren't the right fit for their services either.
I also scoured the 2018 results of the annual In Rem auction just to find out that the auction is held in October, again, outside our schedule.
My partner had excellent credit and a more stable employment history than me, so we figured we would talk to a realtor and buy a house with a mortgage (which would still be cheaper than paying rent each month). We met a realtor, she showed us four duplexes but none were going to work for us. We also spoke a mortgage representative from a bank who told us that we would probably need a cosigner and neither of us have parents or relatives willing to take on that liability. Shorty after that, my partner decided he didn't want to go grad school and bailed on the endeavor.
Regardless, I continued to talk to lenders and gave them my financial information to get a more accurate answer. The verdict with every lender was this "You have a really good idea, and even if 85% of the potential rental income would cover the mortgage, we can't lend to someone without a full time job." At this point I had tried about everything I could and was getting disappointed. Then I found a new partner; another fellow architecture student at Alfred, one with experience and steady income as a property manager in Buffalo, a plan to start working full time after graduation, and who shares my goal of reaching financial independence by age 35.
I am still hopeful that we will work something out, are in the process of discussing the terms of out partnership given the fact that I only $5,000 to contribute, but nothing is finalized at this point. I hope you found this introduction interesting and I'd be glad to answer any questions or to listen to any advice you have.
