All Forum Posts by: Leah Tesch

REI will allow us the ability to retire early so we can spend more time with our family, as well as the means to share it with loved ones and help people in need. I appreciate all the doors that opened to us (literally and figuratively) when we started investing!

@Jordan Moorhead and we literally couldn't have done it without you! So crazy to compare the process/what we imagined with what's now the final product. 

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Saint Paul.

Purchase price: $285,000
Cash invested: $90,000

Up/down duplex house hack with significant renovations. Upper unit 4BR, 2Ba rented out to great tenants. Lower unit 2BR, 1Ba still living in and renovating. Appraised in 2022 for $440,000.

What made you interested in investing in this type of deal?

After graduating in college and facing some student loan debt, my now-husband and I became passionate about learning personal finance, financial independence, and real estate investing as a tool to achieve it. The best option for us at the time was to invest in a duplex, house-hack it by living in one unit and renting out the other, and making upgrades to improve the value over time. This allowed us minimal cash up front with opportunity for big rewards down the line.

How did you find this deal and how did you negotiate it?

We searched for an investor-friendly realtor through BiggerPockets and spent a lot of time scouring the MLS, running numbers, scouting neighborhoods, and seeing properties. After several offers on other properties that were beat by better offers, we learned how to "win" this one. We had to be flexible and switch to 5% conv. from FHA due to seller preference & property condition. Negotiated new siding during inspection, split cost 50-50 w/ seller, and wrapped our half into purchase price.

How did you finance this deal?

As I mentioned above, we had to switch from FHA financing to conventional financing for this property, but since we were going to be occupying the property, it was still only 5% down. The seller didn't want to consider FHA offers, which is common for sellers of properties in the condition it was in as there would likely be a lot of big work orders and potential delays before closing. Plus, they had already received multiple offers so we knew we had to make our offer more appealing.

How did you add value to the deal?

Over the last 2+ years we've lived in the property, we've made updates that improve rental income as well as the overall maintenance required. We also chose upgrades that are durable and will continue look nice after tenant wear and tear.

What was the outcome?

While we are still living here, we decided to get a HELOC on the property in order to essentially pay ourselves back for the work that we've put into it. We put nearly $15k down, ~$6k closing costs, and estimated $60-70k of work. Since the appraisal for the HELOC came in at $440k, we are basically able to pay ourselves back for this deal before starting our next.

Lessons learned? Challenges?

The renovation part of this deal took us MUCH longer than expected. Always be conservative in your projections; Add lots of extra time to your projected timeline when you're doing most of the work yourself and also when you're living in the property while renovating. We also learned how to plan projects in a more efficient way.

Also have to say that this was the most ideal way to learn how to manage tenants! We only had one unit and it was on our property, so we learned in small doses.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Doing this deal as a first time investor is how I learned my passion for real estate and decided to make it my career. I highly recommend working with real estate professionals who are not only "investor friendly" but who are investors themselves! The real life experience makes such a difference.

We worked with Tim Swierczek at Celebrity Home Loans for this deal, and I regularly continue to refer and work with him on deals for my clients now. He and his team are great!

Congrats on a successful first rental listing and being a new landlord! 

Check the laws for your state specifically for the best answer. It might depend on the way you worded/explained your application process to potential applicants. For instance, if you explicitly stated that interested applicants must view the property in person before applying in order to be considered. It's also possible that you can choose the most qualified applicant of the ones received first but that you may have to return any application fees collected for the later applicants who were not accepted (or denied based on clear qualification standards shared with all potential applicants).

I'm not qualified for legal advice, nor do I own/manage property in your state, so the best thing you can do for yourself is study up on your local laws and seek legal advice as needed.

Becoming a landlord can sometimes seem like you need to know way more than you ever truly can, but don't forget there's always resources around you and ways to problem solve even if the answer isn't obvious right away. Best of luck and congrats again!

Is your goal to have cashflow right away or would it be ideal to have a bit less work with the potential for cashflow later on? House hacking probably won't earn you cashflow right away, but it sets you up for future cashflow while allowing you an easier way to get there.

Echoing what Forrest said, it sounds like house hacking a duplex could be your best route. That's what I did too and highly recommend for new investors. Brandon's book on Managing Rental Properties was really helpful for learning how to find and manage tenants. It's a lot easier to learn how to be a landlord when you're living in the property, and then you only have to worry about one other unit until you get the hang of it and want to grow your portfolio.

It becomes an easy way to add more doors too because once you're ready to move onto the next one, you can house hack again and rent out the unit you just moved out of. Depending on the type of financing you use for the next deal, you should be able to get a low down payment and your rental income from the first property might help you qualify for more. So in other words, house hacking multi-families can really set you up for a lot of future possibilities and an easy way to grow when you're ready.

Hey Luke, congrats on your first property! Thanks for sharing your experience. Sounds like you've built a great foundation to work from now when you move on to each of your next deals in the future. 

I totally agree, it's best to find like-minded and specifically experienced people to be on your "team." You want the people who have your back (your agent, your lender, etc.) to understand the investment strategy you do and be experienced at working within that strategy themselves. And you're also right that you can - and should - take ownership to advocate for yourself and your goals along the way. 

Plus, it always helps to learn from others who have learned the hard way too! So with that, what is the best thing you feel you were able to do your due diligence on in your first deal (or something you wish you had done) that impacted the outcome of the deal?

Keep up the good work!

What are your goals and how does this property help you meet them? If you're planning on holding the property long term as a rental after house hacking, would the property bring in true cash flow? Or do you plan to sell after a few years of house hacking to cash in on any appreciation? Your goals are really important here as it might be a lot harder to realize appreciation if you sell it a few years after purchasing above appraisal value. Trust your research and your numbers to tell you whether this property will work for your family's investing goals and long term plans! And good luck :)

Hi Neil, congrats to you and your wife on the exciting adventure ahead! It's great that you're both ready to dive in and that you essentially know what area you would like to live in. Especially when you're first starting out as a new investor, even if you don't end up living in the investment property, it helps to do it nearby so that you're starting in an area you're much more familiar. It makes it a lot easier to learn the market, physically view the properties and neighborhoods your considering purchasing in, and grow your REI network.

Maybe start by considering what are the reasons that led you and your wife to choose house hacking a duplex? Do you know anyone else in your area that has done that before? If so, reach out to them. Otherwise, what do the majority of investors seem to do in your area? Are single family rental properties more common? What does the buy and hold market look like in your area in general?

As a few others have pointed out, it can be much more expensive to build and it's a lot harder to make the numbers work. Driving for dollars can be a great way to find an investment opportunity as well as a great way to find answers to some of these questions. If you decide a duplex house hack could be successful in your area but you can't find one, could you try converting an existing single family home? Add a mother-in-law suite to rent out as a single family home house hack? What sorts of local ordinances are in place in your state/city that might make it easier or harder to convert a property? 

It's great that you both seem to be flexible on your options! Take your time to do some studying, learning, and planning. I'm sure you'll find the perfect strategy for your situation and goals!

Hey @Edrei Alaban, congrats on taking a step into real estate and considering building a strong financial future at such an early age! You are already a step (or ten!) ahead of many investors were at your point, and you're asking the right questions. 

@Cory Lucas gave some great advice on focusing on house hacking for your first investment when you're ready, as it's often the easiest way to get into real estate. 

As for your question about having high savings, I'd say a lot of it is up to you and your comfort level. Many investors prefer to have large emergency funds for both personal and investing, but many also feel comfortable with less. The more you learn about investment strategies and the one(s) in particular you are interested in pursuing, the more you'll have an idea of the amount you feel most comfortable with having set aside. It also doesn't hurt to practice saving a certain percentage of your earnings from your current job, even if it's just a small amount to start. 

BiggerPockets, as you might already know, is such a great resource for a new investor. Listen to the BP Rookie podcast to hear from other newbie investors, and don't sleep on the BP Money podcast if you want to learn more about how to maximize your income and future investments. 

If you like to read, I also recommend getting into books like Scott Trench's Set For Life, Robert Kiyosaki's Rich Dad Poor Dad, and Brandon Turner's The Book on Investing in Real Estate with No (and Low) Money Down, to name a few. Books like these can really help build the foundation of knowledge for what you're trying to do. Plus, learning and absorbing info is one of the best things you can be doing now (in addition to any saving) while on the road to making your first investment.

Continue asking questions and involving yourself in the investor communities at your disposal! We are all here to help :)

Congrats, Thomas! So exciting to be beginning your real estate journey. Is there any lesson in particular that stands out to you now, or any part you would do differently? Sounds like you got yourself a really great deal!