This is my first deal as well as my first post in the forums, so here it goes!
I bought a SFH in St. Paul, MN back in October of 2014. Just a little over 2 years in I wanted to share my success story as an inspiration for those who are just starting out. Hopefully this post will help at least one person better understand that getting that first deal is a process that has plenty of ups and downs and emotion.
The Lead Up
It took me six months of looking at houses to find one that met my criteria. I looked at over 50 different properties all across Minneapolis and St. Paul. I listened to tons of BP podcasts, read all sorts of articles, and generally just got the feel for the market. I wanted to be sure I wasn't making a huge mistake, that I was missing some glaring detail that an experienced investor would have spotted from a mile away. I ran countless properties through my spreadsheets, at the beginning it took me well over an hour to come to a conclusion for each property. The first time i found a house that I thought made sense I was ecstatic. I had already lined up a realtor (talk to a couple before picking yours) and gotten pre-approved for a mortgage through my bank. Slowly over the hundreds of properties I ran numbers on I put in a few offers, most of which were well below asking. I knew they had little chance of success, but I had heard so many times on the BP podcasts to only offer what the property is worth to you, not what they are listing it for. So that's what I did.
The Plan and the Offer
From the start I knew I wanted to live in the house and rent out the remaining rooms until I was sick of having roommates or had enough money to buy another property. I wanted to be able to truly house hack which meant I had to be cash flowing at least the amount of rent I would have charged someone else to live in my room. Long term I would rent the house out as a whole, likely to college students as they were the renters in the area.
A 4BR 1.5BR house in St. Paul near St. Thomas University was listed at $225k
My first offer was 210k with seller paid closing costs. We settled on $217,900 with 6.5k seller paid closing costs.
The Numbers
Purchase: $217900
Down Payment 5%
I took a higher interest rate at 4.15% in order to roll part of my DP into my loan through a MN housing program for first time home buyers.
Total out of Pocket at closing: $7,600
Rent: $2,340/month
Actuals
Over the last 2 years I have averaged roughly $400/month in cash flow. This includes all of my expenses including funds set aside for capital expenditures and vacancy. I currently manage the property myself and plan on continuing to do so until I sell it. However if I were to hire a property manager I believe it would cost me about $120 a month or so
My Cash ROI is 66%
One of the things that has allowed me a lot of flexablity in pursuing my next deal is that my home has appreciated in value by over $30k in the last 2 years. Before moving out, I secured a HELOC for $20k which i will use to help finance my next deal.
Takeaways
Signing the mortgage was also one of the most terrifying things I had ever done, but knowing the market, running conservative numbers, and talking with someone that had done it all before helped calm the fear and got me into my first deal. There are plenty of things I would have done different on this deal, but I am so glad I pulled the trigger. Nothing can replace the value of experience, and you can't get experience without a first deal. I have learned a ton over the last two years, and the majority of it has come from situations that come up at my rental, not books, podcasts, or blogs (all of which are great tools - shout out to BP for being the best in the business!). Treat every challenge as an opportunity to learn!
I'm always looking to network with people, anything from having a second set of eyes on numbers to partnering on deals, more experienced than me or less, it's always fun to come to the table and get everyone a win-win. Feel free to reach out!
