22 Years Old: First Apartment Building Acquisition Done

[100k]

Well done for taking action.

But why would you risk $300K debt just to get $1K of monthly income ?

You could easily invest $30K into 1 site (in SEO) and have a site that makes you $10K + per month after 6 months and sell it after 12 months for a nice profit!

 

[oddball]

How much are you putting away for future maintenance and unexpected expenses?

 

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[Will]

HOLY Sh##, I just realize I'm 23.........I keep thinking I'm turning 26 for some reason............

 

[21elnegocio]

Great idea. Please do tell us more about it and share links to your sites. How much are you personally making every month? What was your initial investment? How long did it take you to get there? We all would love to hear more, I am sure...

+1 More info please i mean if you dont mind

 

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[The-J]

Great idea. Please do tell us more about it and share links to your sites. How much are you personally making every month? What was your initial investment? How long did it take you to get there? We all would love to hear more, I am sure...

Owned!

 

[LamboMP]

Well done for taking action.

But why would you risk $300K debt just to get $1K of monthly income ?

You could easily invest $30K into 1 site (in SEO) and have a site that makes you $10K + per month after 6 months and sell it after 12 months for a nice profit!

It's possible. But why would you let Google control your destiny? Seems like your suggestion is more risky. Your one algorithm change from broke.

 

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[21elnegocio]

Thank you 21elnegocio. I would suggest reading Stephen Vollucci's and Steve Berges books on apartment investing, and I would also suggest reading Deals on Wheels by Lonnie Scruggs and any finance related books for that matter. While I wouldn't want to steer you off a path you have an interest in, I would suggest that you do not need a real estate license to be a successful investor.

I hired brokers and specialists to take care of things that I didn't want to / I wanted to automate. The key is to focus on what you are good at doing in the business. I value my time more than scouring through MLS ads and drafting up offer documents. There is no reason that you can't start doing smaller deals TOMORROW if you are prepared; even if you have to pool capital. I would spend time reading and learning, and then take the following steps:

1. READY
2. FIRE
3. AIM

Get prepared, pull the trigger, refine as you go. Keep what works and discard what doesn't. Don't sit life on the sidelines wondering what if.



If you go back and read the post on the first page that I made, while the cash flow AND not paying to have a roof over my head are both great...they were not the point of this deal. I am all in at roughly ~$13,500 and if I sold the building tomorrow it would fetch between $290,000 - $305,000. Less my debt and cost basis, that puts my profit at $66,500 - $81,500. If I finish the basement and wait for market recovery, the returns have the potential to be higher (but time and a higher cost basis then factors in). The play was instant equity creation, and I very much like that play.




Will keep a retainer of ~$5,000, but I have access to additional capital if necessary. The building was recently updated almost everywhere, brand new water heaters, furnaces, roof isnt old, new steel support main-beam in the basement with steel support columns, new copper piping, new appliances, new light fixtures, and I just updated all the electrical. I realize anything can happen at any time though, and that is why the retainer will remain in place.

Thanks man, really appreciate your info great, I will definitely not sit on the sideline wondering.

 

[andyredsox]

A good and successful investment for you. Do you plan to have another one like this in the future? You're young but amazing in doing a good business. No wonder if you'll be very rich when you reach 40. Good luck and stay hungry for success!

 

[Rick Grantham]

Congratulations G Alexander.

Its good to see action being taken. Inspiring. :welldone:

Cheers-
Rick

 

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[roc]

Good thread man. One question for you, which I may have missed, you live in one unit. I'm assuming you got FHA funding since it's less then 4 units. Any advice on funding this project? Thanks roc

 

[shane8399]

My non-professional advice is buy a multi-family FHA before anything else. I am guessing I am going to see problems with underwriters, after renovating my current house into 2000 sq feet, and trying to tell the bank I want to owner occupy an apartment in a 4 plex (i currently own two homes).... It may be doable with proof of leases, but I am not hopeful, and expect a dozen hoops to jump through. Therefore if I want more buy and holds at this point, I am probably stuck buying another single family of equal value of my current homes (not good if I am trying to buy a fixer upper), seller financing, or 20% down with either my, or my/private money. I am currently seeking properties to flip to build up my capital/buying power and cash reserves.

 

[21elnegocio]

this is great motivation right ?

 

[T14]

@G_alexander

Phenomenal progress. Congratulations!

Was wondering how you financed the reno. Was this cash you saved up over a period of time? PL? HM? Friends/family?

 

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[Rickson9]

Thanks, T14.

I used cash from work throughout the construction; while keeping my savings from prior deals in-tact and adding any extra cash earned right back into my fastlane pool of capital for my next set of deals / other projects. I took a look at the financing alternatives for the renovation, but ultimately decided to go with cash due to the fact that I planned to exit the property in approximately 1 - 2 years. I am now torn between selling and holding the property because the interest rates were so low when I purchased. I am locked in at 3.25% which in my eyes is free money. Cash flow is strong and tax benefits are good...I will likely refinance soon, but interest rates have crept up approximately a full point to 4.3% recently. Still, tapping the equity to purchase more properties has always been the goal. I am seeking additional apartment investments and a large scale mobile home investment plan.

Just need to keep my leverage at "sane" levels going forward; have learned first-hand from watching many investors in the past how too much leverage can destroy your empire.

Great thread! Thanks for sharing.

If you don't mind me asking, what would you consider to be "sane" levels? 50% of equity? 75% of equity? Something else?

 

[Determined2012]

Any update here G_Alexander?

 

[Christian949]

Amazing!!

 

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[AntonyS]

Bravo sir!

 

[vitality11]

Thank you for the inspiration friend.
One step forward you take for yourself, helps us take further steps forward as well.
Great job leading by example. God bless.

 

[21elnegocio]

@G_Alexander Thanks for this post, this was one of the ones that got me fired up to take action in Real Estate.

 

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[Scot]

Just found this thread. Incredible how well you've done. Definitely gives me a bit more motivation to look into RE.

 

[FeaRxUnLeAsHeD]

How do you get approved on a 200K+ mortgage at 22?

 

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[Lucid Tech]

How do you get approved on a 200K+ mortgage at 22?

Average starting salary for fresh out of college investment bankers in major metropolitan areas like Chicago/NYC will be over 100k.

Salaries in Investment Banking

 

[ravenspear]

I thought you weren't allowed to use FHA financing to purchase investment properties.

If i can get an investment property with 3.5% down then I've been doing something wrong.

Edit: nm I didn't read the OP well enough to notice he said he was occupying one of the units

 

[FeaRxUnLeAsHeD]

Average starting salary for fresh out of college investment bankers in major metropolitan areas like Chicago/NYC will be over 100k.

Salaries in Investment Banking

Sorry I didn't know the background - did he start at 21 and do a full year as an I-banker? I know you usually need a full year of work income.

Reason I ask is because I'm 23, just graduated college 7 months ago, so this tax year I only reported like 25K - no way I will get approval for an FHA loan on a 200K + property.

If I work for this full year, I should have that number closer to 80-100K depending on a few opportunities in front of me right now in SAAS sales.

 

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[Envision]

Sorry I didn't know the background - did he start at 21 and do a full year as an I-banker? I know you usually need a full year of work income.

Reason I ask is because I'm 23, just graduated college 7 months ago, so this tax year I only reported like 25K - no way I will get approval for an FHA loan on a 200K + property.

If I work for this full year, I should have that number closer to 80-100K depending on a few opportunities in front of me right now in SAAS sales.

You might be able to get by on 25k/year but it depends on your expenses. What they look at is your debt to income ratio when seeing if you can get pre approved. You will need 2 years of consistent income and good credit.

You'd probably get approved for $130-160k at 25k/year keep in mind you're extremely leveraged, have hardly any equity, and are in a risky spot but it gets your foot in the door with low money down.

 

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[FeaRxUnLeAsHeD]

You might be able to get by on 25k/year but it depends on your expenses. What they look at is your debt to income ratio when seeing if you can get pre approved. You will need 2 years of consistent income and good credit.

You'd probably get approved for $130-160k at 25k/year keep in mind you're extremely leveraged, have hardly any equity, and are in a risky spot but it gets your foot in the door with low money down.

If i'm doing between 60-100K reported income and have 40K student loan debt, what do you guess I could get approved for?

The 25K reflected an entry level salary + commission for half the year (was in school the other half) which will nearly double shortly (couple things actively in the works)

My credit is 750

 

[letter9]

Inspirational thread, great job G!

 

[Envision]

To be approved for a conventional Fannie/Freddie loan your back end ratio needs to be less than 45%.

Meaning all of your monthly debt payments including your mortgage payment cannot exceed 45% of your gross income. So take your gross monthly income, if we say 75k/yr that would be 6250/mo. Then multiply by 0.45, we get 2812. Subtract all of your existing monthly debt payments from this amount. The remaining number is the maximum housing payment you can expect to be approved for (consider mortgage + taxes + insurance in this number). Then you can use standard mortgage calculators to determine what purchase price you can be approved for based on interest rate, down payment amount, and that monthly payment.

Im not an underwriter but I believe this explanation is pretty dang good for getting a feeling for what you're looking at. Id recommend finding a good loan officer and seeing what he can workout. I got mine up to 49%.

 

[Angal Faria]

Nice deal gentleman.
Best of luck, just carry on.
Thanks for your great post.