Being a 23 year old real estate investor is tough, especially when you purchase you first rental property that is a 6 hour drive away from where you live! I am going to talk about the first rental property i purchased and talk about how i found this cash flow beauty, how i manage it, what i learned from this experience for my future properties, and everything else that comes in between.
I am a young guy who was actively looking for a way to make money through passive income, even though what i stumbled upon isn’t really that passive, but it was worth it. I was talking to my mother who informed me that her friends said that Buffalo, NY is a great place to purchase property for rental income and flips. To me this was a little weird since i went to Buffalo in 2011 and didn’t really see much of a potential there. I did a bit of a research about what my mothers friend talked about because she stated a few things that caught my interest. One of the main things were that a lot of Bangladeshis were moving out to Buffalo from NYC because of the low property values there. I actually found a lot of news articles online to back her statement and i saw the rise in property value and rental income so i knew i had to grab this opportunity and not miss this gold rush.
I went out to Buffalo with my parents and met up with a few real estate investors. They were all very nice but, majority of them stated different things in terms of rental income, property value, expenses, etc. This was my first lesson that i had to be sure i do not get dismayed by their words because their job is to sell you a property. They will try anything in their power to sell it to you. They live off a commission base salary so i can understand the way they work. I actually found myself a really good realtor whose policy was to get you the best house for the cheapest price so you can keep on coming back to him and using him more often.
After i found my new realtor, who i still use up to this date, he started showing me a lot of properties that were in really good condition. He would focus on a few aspects of the house which were the foundation, plumbing and roof. The reason being is because these are the main issues that need to be addressed and cost the most in terms of fixing it. A good example would be roofing. If the house you purchased cost $30,000 and you had to do the roofing, your estimate would be around $15,000-20,000. Doesn’t seem worth paying almost the same value you purchased the house for.
while our search was going on, we finally stumbled upon the first house i purchased. This was near the southern campus of UB (University of Buffalo). The house i purchased was for $55,000, it was a 2 family 4 bedroom house. The first floor was 2 bedrooms and 1 bathroom and the second floor was 2 bedroom and 1 bathroom. I rented both apartments for $650 a month, my total rental income excluding expenses was $15,600. The insurance for the year is $800, my water bill is around $800, and my taxes for year are $1,200. I did hire a property manager who charges $50 a unit so my expenses for that is $1,200 a year. The repairs i did on that house in the beginning when i purchased costed around $2,500. I will explain the repairs down below of this post. My total net income after all the expenses for the year was $9,100. That is close to a 20% return on my investment. Like i said above, a cash flow beauty that this house is!
The repairs that this specific house needed were hardly anything. The only main thing i had to do was tell my old tenants to leave so i could make this apartment up to date. I painted the whole house and fixed anything that was broken such as kitchen cabinets, windows, door locks, etc.The labor over there varies, if you can find yourself a good contractor or worker stay with them if possible. A lot of companies out there charge a lot of money for simple things. I had quotes from $5,000-8,000 for the work i got done in $2,500.
The reason i got it done for such a low price was because i was there looking for the best deals myself. As everyone states on forums and even in person, a property manager will not be in your best interest when it is to fix your house. They might use their company or try to increase their profit or simply not care about the cost. This is why, for me specifically, it is a very hectic job since it is a 6 hour drive to buffalo. If i was not that far i wouldn’t have hired a property manager since i do majority of the construction work myself!.
This was just the start for me, the next few properties i purchased have a lot of new things that happened in them which i will talk about or explain in my next blog post. I will try to update you guys with everything you would like to know. I will also try to explain which neighborhoods to go for, where to get financing from, which realtor and property manager to use and where to get access to all this information.
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