How I Bought My First Rental Property (MY BIGGEST MISTAKE!!)

How I began my real estate investing journey: Spoiler Alert, I made a lot of rookie mistakes!

If you’re looking where to start your real estate investment portfolio, how to buy your first rental property or even if it is worth investing in real estate, you’ll definitely enjoy this video!

I walk you through the step-by-step process of how I was able to buy my first rental property, how the real estate market affected my investment strategy, and made silly rookie mistakes along the way.

How it all started:

When purchasing this home, it was my first investment property. I didn't know what I was doing at the time; I didn't know anything about the various real estate strategies available. I kind of knew what investing for appreciation was, BUT didn't know what investing for cash flow was or the rent to own strategy. Pretty much NOTHING about real estate. I just thought I could buy this rental property, add a few modern finishes such as hardwood floors and then flip it for a quick profit. Man was I wrong!!!

What went wrong:

When I purchased the property, the market cooled suddenly and inventory was not moving not nearly as quickly as it was previously. So I was stuck with this property and had negative cash flow on this property about 1400 a month, even with a tenant in here! I had to figure out how to reduce the burn that I'm taking on this investment property and ran my numbers accordingly. First thing I did was a duplex conversion; took this single-family home with one rental unit, and made renovations to add a second unit. I went to an architect, went through the permitting process and we got a door cut through at the side and made a full one-bedroom one-bathroom apartment in the basement which then I could rent out and reduce my cash burn. Obviously it meant more money going into the rental property, but when I did my cash flow analysis, it was definitely worth it. Then, with both rental units rented out, my monthly cash-flow burn was reduced from 41400 to 300, which was awesome.

MY MISTAKES:

I DIDN’T KNOW WHAT I WAS DOING

I knew that real estate was a good investment and that if you hold long-term you'll make money in real estate but I had no idea what the various strategies in real estate worth. I essentially trusted a realtor that I knew and they told me to purchase this property. They said that if I follow these steps I would make quick profits. If I could go back in time, I would first educate myself on how to invest in real estate before diving into a property; I would understand the key real estate metrics on what makes a good real estate investment; what kind of cash flow can I expect in this market; what kind of appreciation can I see on an annual basis in this market, etc.

NOT HAVING MULTIPLE EXIT STRATEGIES

Although I started with one plan in my mind, which was to flip this house, I should have technically had a buy and hold plan as well as a BRRRR plan. When you're investing in real estate, you need to not only have a Plan A but you should have a Plan B and even sometimes a Plan C; so these would be your multiple exit strategies.

TAKING TOO LONG TO TAKE ACTION

Once I realized I was in the situation, you know it wasn't looking good in terms of flipping to get out, I waited on taking action. You should sit down and analyze what your best plans of action are right away and make a good informed decision. So in my case, for a long time I took on a $1400 cash burn on my investment and definitely hurted my personal savings. Eventually, I had that conversation with myself, figured out what were my best options to implement and move forward. The lesson here is to act fast!

In the end, fast forward a couple of years, with rental property sold, I walked out in the green so over all things worked out. I’m happy from a capital gains perspective. However if you factor in my operating loss on an annual basis as well as my opportunity cost on where I could have invested all that capital somewhere else, I consider this to be a BAD investment!

Hope you enjoyed this video! Make sure to subscribe for more content from Your Finance Boi, PV Rajan.

// F O L L O W //

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Видео How I Bought My First Rental Property (MY BIGGEST MISTAKE!!) канала PV Rajan