All Forum Posts by: Matthew L.

I just wrapped up a busy (and cold!) week in Owings Mills (outside of Baltimore), where I was rehabbing my first rental property. Being my first real estate purchase ever, it was exciting and intimidating to go through the underwriting (don’t get me started), closing, and rehabbing processes for the first time. I made a number of newbie mistakes, and thought that I’d share those with others who might be getting ready to make their first purchase.

Stand by your numbers. I made several offers on HUD REOs, always through the listing agent since I didn't have one lined up in the area (also a mistake). While I knew what numbers I needed to hit (70% of ARV after repairs were factored in), the annoyance that I encountered from the listing agents and rejections from HUD led me to soften my stance. On the property I purchased, I offered 70% of ARV without factoring in repairs, and immediately kicked myself when HUD accepted without even countering. Clearly, I left money on the table and also tied up excess capital in the property, since I likely won't be able to get all my cash out when I refi in 6 months.

Build your team first. My initial "team" was the listing agent who became my buyer's agent when I made my offer through her. I'd heard about HUD's "lax" standards for their listing agents, and I'm afraid that in my limited experience, they were absolutely true. My agent was purely interested in her commission, and just about the only time I was able to get her to advance my interests was when it looked like the lender wouldn't finance the deal. Likewise, once I hit the ground in Owings Mills to get the condo into rental condition, I was on my own.

Sweat equity isn’t free. Because I had compromised on my initial numbers, I tried to cut my losses by doing the rehab myself. This meant that for the first three days of my week in OM I was scrubbing walls, applying layer upon layer of primer, and basically working from the moment I got up until I crashed on the floor at night. I was NOT doing the things that would make my next investment more successful: networking, looking at properties, and building a team.

Focus on what you do best. It wasn’t until I realized that I wouldn’t be able to complete the rehab in time that I finally asked for help. And then amazing things started happening. Instead of spending the day with a roller in my hand, I was meeting other investors and rehabbers; I got referrals to great contractors; and I made connections that will enable me to do better deals and scale in the future.

Some lessons you can only learn yourself. I’ve listened to all the podcasts, followed the forums, and read a couple of dozen books. So, I knew what I was supposed to be doing but allowed doubts and other personal weaknesses lead me off course. For those like me, it might take three days of HARD labor and imminent failure to understand why the best practices are the best.

In short, this week completely kicked my ***. But I learned some very valuable lessons and ultimately managed to turn it into a success by reaching out to more experienced investors and contractors for help. Just as importantly, my initial numbers (though not ideal) left me room to make some costly mistakes without losing money on the deal.

For other potential investors who are still in the “book learning” stage, I’d suggest that you probably already know what a good deal is. Find one, stick to your numbers, do it, and take your learning to the next level. ;-)

Happy investing!

@Robin Secord That's fantastic! I'd love to get a copy of the full list.

One of the best book's I've read recently is "Every Landlord's Tax Deduction Guide." Who knew 500 pages on tax law could be so riveting! A lot of REI's seem to focus on wealth creation, but the wealth protection side of the equation deserves just as much attention.

@Micki M. Thanks, that's great info. The condo is in Owings Mills, MD, and in my name. I'll look into an LLC after I get a few properties in the portfolio (this is the first).

Tried searching but can't find much condo-specific info. Assuming the condo project meets FHA requirements (86% owner occupancy), will I be able to cash-out refi for 75% of appraised value after 6 months? Should I anticipate any special restrictions or extra hoops to jump through?

Post-holiday bump. Any PM recommendations in the Owings Mills/Baltimore area? 

Thanks for the info @Dmitriy Fomichenko I was wondering how to use the tagging function. 

Thanks Andy. The HOA fee will certainly eat into my cash flow, but from my perspective it's partially accounted for by the 50% rule. Since the HOA is responsible for maintaining everything from the walls out, my capex will be much lower than an SFR. (I'm not responsible for roof, siding, plumbing, etc.)

First things first. Thank you BP community for sharing your wealth of knowledge and giving me the motivation to take the big leap into real estate investing. I’ve been trolling through posts and listening to podcasts over the last few months, and your insights really helped me define the right numbers for my first deal and, more importantly, gave me the confidence to pursue them. This is an amazing group of people, and I look forward to connecting with other investors here.

My story: Back in October, I was on the couch recovering from a cycling injury and a divorce settlement, trying to figure out how I would afford the life that I want for my future family. I was lucky enough to stumble across Bigger Pockets, after which I’ve listened to just about every podcast and read every book I could get my hands on.

After investigating multiple markets, I began tracking foreclosures locally, in Fishers (IN), and outside of Baltimore (where I went to grad school). I bid on multiple HUD-owned homes, and finally got an offer accepted over the Thanksgiving weekend. This was exciting, but also scary, as it all just got very real!

By the numbers: Paid $87K for an Owings Mills condo with an ARV of $135K. The listing agent seemed annoyed when she heard how low my offer was but placed it anyways. HUD didn't even counter, so I may have left money on the table. That said, I don't know how many other bidders were involved, and the numbers work for me. The only "big" problem discovered during inspections was that the previous owner was a smoker. So, while I anticipated needing paint and carpet, I'll need to increase my paint and clean-up budget. Otherwise, it just needs minor updates; then it should rent quickly for $1300.

I’m flying out next week to get the unit rent ready, and build my team (I know, bass ackwards). Please let me know if you have any recommendations for property managers, painters, handymen, or flooring installers in the area. (All but one room in the house is wood laminate, so I’m going to make that upgrade instead of replacing the carpet.)

It's been a thrilling journey. I didn't know what to expect with bidding on a property across the country without seeing it first, and I've kept waiting for the deal to fall apart. But I've made it through the inspections and HOA due diligence, and everything has fallen into place nicely. Now, I just need to get it rented and managed, and I'll be ready to start looking for the next one. :-)