Shopping for His First Rental at 19 by Doing What Most Newbies Are Afraid to Do

Ashley:
We’ve heard from our rookie viewers that you just want to hear extra from true rookies. And in the present day we’re bringing on a visitor who has one property that he bought throughout the final 12 months. In fact, he hopes to finally retire from actual property, however he’s simply getting began. He’s undoubtedly the inspiration we would all want proper now that purchasing actual property after the low pandemic rate of interest remains to be very doable. That is the Actual Property Rookie podcast. I’m Ashley Kehr, and I’m right here with Tony J Robinson.

Tony:
And welcome to the present the place each week, thrice per week, we convey you the inspiration, motivation, and tales it’s essential hear to kickstart your investing journey. Now Elijah, welcome to the podcast brother. Tremendous excited to be chatting with you in the present day, man.

Elijah:
Hello Tony. Thanks. It’s greater than a pleasure to be right here with you guys

Tony:
At 19 years outdated. It’s an unbelievable accomplishment to already be investing in actual property.

Ashley:
Yeah. Elijah, to start out the exhibit and also you went into point out your 19 12 months, so what have been you doing earlier than you obtain your first property?

Elijah:
A little bit background about me. I work at m and t Financial institution. I’m the vocal custodian there. I’m a boxer, registered boxer inside raised gymnasium. I do plenty of fishing, play video video games typically, however not a lot then. In order that’s form of why I got here dressed like this and never my go well with that I put on on the financial institution to indicate I’m not some man with a high hat and a monocle and I’m similar to a standard child. Most individuals are calling me a child nonetheless, however I’m form of an grownup now. So I discovered fireplace, financially, impartial, retire early after performing some digging.

Ashley:
So Elijah, simply actual fast, once you found fireplace, what made you resolve that you just have been going to make use of actual property as your automobile to achieve that monetary independence?

Elijah:
And I knew throughout after I was doing penny shares and buying and selling all that, I knew there’s no method all the large cash getters, there’s no method all the large fish are sitting right here doing this. There needs to be one thing totally different and it’s actual property, which it’s loopy sufficient to suppose that. And truthfully, with it being actual property, I feel it’s important to form of discover your individual Why? Simply because actual property was form of the highest finish. Me beginning off in residential, my finish objective is to be business, finally transfer to lodges and large syndications like that. In order that’s the top objective. However beginning small like this, you bought to appreciate that it’s important to discover love on this. I wouldn’t be doing, there’s the explanation why I give up buying and selling and funding and stuff like that. I didn’t adore it. I had no management over that variable. In actual property, you’ve gotten plenty of management. It’s much more forgiving and I really adore it. I like saying that I’m the owner. I like going to my property, rehabbing it each day. It’s one thing that I like. I’m constructing fairly actually an empire. That is an empire. Because of this I adore it.

Tony:
Now, Elijah, I’m tremendous curious man, as a result of we now have plenty of of us who’re, you stated you’re 19, however we now have plenty of of us who’re of their twenties, thirties, forties, fifties, sixties, who haven’t but found out the way to save the capital that’s required to truly exit and buy actual property. And these are individuals who have perhaps had two or three many years on you to truly save that cash. So I feel the most important query for me proper now could be how did you as a teen accumulate sufficient capital to truly go on the market and purchase one thing?

Elijah:
Yeah, that’s a extremely good query, Tony, which it’s form of like a caveat, form of like a trick query form of since you obtained to consider it like me being so younger, fortunately I took the trail out to be taught this and I by no means grew up on dangerous debt. I didn’t have the time to learn to improperly use a bank card or the way to tackle dangerous debt. After which now I’m in some rabbit gap. I’m probably the most frugal individual ever. Once I go to the grocery retailer, I solely go there to get what I would like after which I’m out. I’m not getting bag of chips and all this as a result of all that stuff, despite the fact that it’s small, it actually does add up over time. As an alternative of driving to my fishing spot, I’ll go journey my bike to my fishing spot. That’s how frugal that I’ll actually get.
So yeah, I used to be 14. Yeah, I might say I used to be 14 after I first began. I might say a job. I used to be mowing my neighbor’s garden for cash on the weekend, after which at 16 I really obtained my working papers. I labored at Dunkin Donuts for a very long time. Properly, not a very long time, solely two years simply to save lots of up as a lot for my automobile. After which after I purchased my automobile, I used to be like, wow, I simply labored all that point simply to purchase this automobile and now my cash’s gone. I’ve a automobile, however now I’ve no cash.

Ashley:
You didn’t have that gratification of the form of reward. Yeah.

Tony:
Elijah, I wish to return to your level although in regards to the saving piece as a result of once more, the preliminary capital is the place plenty of of us get caught. So clearly you’re working full-time at 16 years outdated, which is superb. However perhaps what have been some particular private finance ideas that you just employed that you may perhaps share with the Ricky viewers to assist them save for that first deal?

Elijah:
Yeah, so going again to how I stated due to my age, I actually wished to not begin off on the fallacious monitor, taking up enormous pupil mortgage debt, taking up enormous bank card debt and doing all this nonsense. I form of took the day out to essentially research and the way I can save as a lot as I presumably can from the preliminary start line after I purchased my automobile and went from zero in my head was as a result of I’m so younger, I don’t have any payments, I don’t have something, payments my gasoline and meals that I wished to essentially get. So I stated in my head, I’m saving all the pieces I can to place this cash in as a result of with a purpose to earn cash, it’s important to spend cash. So I’m saving probably the most that I can with a purpose to hopefully undertaking me someplace into wherever I wish to be in the future, which is right here. And from that point, I had no clue it was going to be actual property. I had no clue I used to be going to purchase my home, which is basically loopy to consider how in that quick quantity of timeframe that I switched from saving as a lot as I can to hopefully use it in the future to raised myself to now investing in actual property.

Ashley:
After a fast break, we’re going to listen to extra about how Elijah sourced his first property with an investor pleasant agent. Do you want an ideal agent too? Go to biggerpockets.com/agent. Welcome again to the present. Elijah, once you have been saving, did you’ve gotten a quantity in thoughts or did you do any form of analysis, get a pre-approval to understand how a lot capital you really wanted to purchase your first property?

Elijah:
So I by no means really had a finances beginning. I put money into Liverpool, New York, which is correct throughout from Syracuse, New York, not that removed from Buffalo, which is once more, it’s tremendous loopy to be right here, Ashley, and he’s like, you’re not even that distant. It’s solely a pair hours. However yeah, I knew I didn’t wish to put money into a single household I knew wished to go multifamily, actually solely a couple of 5 or 10% distinction between shopping for a fourplex and shopping for a single household unit and sustaining it and managing it aside from the price and why not? So I hoped to get a fourplex, however the market right here in Liverpool was form of onerous for that. So I settled for the duplex, which going again to realizing your market form of, that’s what I imply. You form of need to know your market and the place you’re shopping for as a result of with my DTI knew that I wanted to have the preliminary capital, which relying on what mortgage you’re utilizing, that’s going to be nonetheless a lot you’re going to be placing down.
I wanted to have my private reserves, six months of non-public reserves. I wished to have 5% reserves for the property in case a heater goes out, no matter goes out, I nonetheless have that preliminary reserve put aside, not counting it throughout the cashflow reserve, CapEx, no matter. That’s form of after I refine, I didn’t know, okay, what mortgage product do I actually wish to use with a purpose to reduce my preliminary down cost, which is on the finish all be all goes to maintain more cash in my pocket on the finish of the day. So at the moment, that’s proper. When the brand new Fannie Mae, Freddie Mac, 5% down, that new mortgage got here out.

Ashley:
The standard one?

Elijah:
Yep. Yeah. Yep. Standard 5% down Freddie Mae and Fannie Mac. So we used that. And on the time, which is now not out there proper now, there was a DL grant for first time dwelling consumers, which my mortgage officer very beneficial me to make use of. In any other case my DTI can be method too excessive for me to afford this. So with these two, that’s how we actually initially afforded buying the property utilizing that grant, which is now not, I’m certain different banks have it. I imply T doesn’t proper now. So it was solely distributed per financial institution for first time dwelling consumers. So I used to be actually fortunate to get part of that.

Ashley:
Did your mortgage officer let you know about this grant?

Elijah:
Sure, sure, she did.

Ashley:
Oh, cool. Yeah. Superior.

Elijah:
That’s the one factor I didn’t learn about actual property is you possibly can have an agent who’s not likely an investor agent, they’re going to go to the home and so they’re going to indicate you cupboards and stuff like that. They’re not going to essentially present you the divot within the ceiling. That’s going to be a giant CapEx downside or how the realm is that’s going to be out there hire. So with my lender, I knew I wished to have an actual property investor pleasant landlord lender, which me working on the financial institution, I actually sat proper throughout from her on Wednesdays. So it was quite a bit simpler to speak along with her versus having to do it over e mail or everybody name it like that.

Ashley:
And for anybody who isn’t sitting proper subsequent to a lender, you possibly can go to biggerpockets.com/lender. And I feel if you end up speaking with lenders, that may be a nice query so as to add to that preliminary session is do you’ve gotten any grants out there? Nice query so as to add.

Tony:
Only one comply with as much as that too. And Elijah, you make an ideal level, and Ashley and I’ve talked about this within the podcast earlier than, however as you’re searching for particularly your first actual property deal, once you go speak to lenders, don’t essentially inform them, Hey, that is the mortgage product that I need. The objective and the higher technique is to say, Hey, right here’s the objective of what I’m making an attempt to perform. I wish to purchase a small multifamily, and once you say Liverpool within the Liverpool space, and hey, what do you suppose is the most effective mortgage product for me? After which allow them to assess your complete state of affairs and say, nicely, hey, Elijah, you’re really a primary time dwelling purchaser, so we will use this and we will mix it with this, and now you’ve obtained a extremely low price mortgage product to make use of. So vital factor you stroll into the financial institution and also you say, right here’s my objective. Don’t stroll into the financial institution and say, right here’s a mortgage product that I wish to use.

Elijah:
Precisely. They’re going to stay you with that.

Tony:
Yeah, yeah. They’ll simply give it to you. Proper. So Elijah, we now have a way of the purchase field. We’ve a way of the form of debt that you just used, however I wish to perhaps get into some extra specifics in regards to the property itself. So we all know it’s a duplex. How did you really discover this deal?

Elijah:
Yeah, so it was really by way of my realtor who I discovered on BiggerPockets.

Ashley:
Superior. We love that. Within the boards or on the agent finder?

Elijah:
On the agent finder, what I did is I put in my, okay, I’m going to get into one thing that you just shouldn’t do in a second, however Steven, thanks a lot for all the pieces. I wouldn’t be right here with out you, which I discovered him on the BiggerPockets. So once more, what I did do, which I don’t suppose you must do, is I went on the agent finder and I messaged each single one of many brokers to form of simply discover who I actually wished to work with. As a result of earlier than I obtained into discovering an agent, considered one of my staff on the financial institution form of beneficial me to an agent, however he was a kind of brokers who aren’t actually an actual property investor agent. So after messaging all of these brokers on the BiggerPockets discussion board, I used to be form of like, okay, I wish to go view. How am I going to know?
How are you going to work for me? If we’re simply sitting right here speaking, we’re not really viewing their properties. And I’m really glad I did this, which I’m not recommending once more. So I visited a property with a kind of brokers, appropriate, and I instructed them from the very starting that that is my first property I wish to, and I’m speaking to a number of different brokers simply so I can see how issues go. So viewing the primary property, the primary agent, I’m not going to say any names or something like that. He was form of simply the opposite brokers form of simply let me stroll by way of. He wasn’t actually displaying me, take a look at this dip within the ceiling, that’s going to be an enormous CapEx downside. Have a look at the muse. That’s going to be one other enormous CapEx downside. He was form of simply letting me stroll out and really feel it out the identical.
So I used to be like, okay, perhaps that’s simply how it’s, perhaps it’s not. So I went to go assessment it with the opposite agent. This wasn’t Steven, and it was form of just about the identical factor. And I used to be like, okay. However the second I talked to Steven, it was a sport changer. Inside my first couple sentences, I used to be like, I’m form of making an attempt to flee the rat race. I see my path by way of actual property. And he was like, oh my gosh. Lots of people speak to him and so they wish to go view properties and all these things, however they haven’t even learn a ebook of Wealthy Dad Port Avenue or one thing like that. They haven’t begun to get their first step of self-education earlier than making an attempt to exit and do all these things. So the very second that I even spoke to Steven and walked into the property, he was like, take a look at this, take a look at that.
Have a look at this, take a look at that. You don’t need this, you don’t need that. I wouldn’t purchase this. I wouldn’t try this. And that’s the realtor who I wished. I obtained just a little bit backlash from that as a result of working with Steven after that, the opposite two realtors who I form of was like, okay, to not actually say I don’t wish to work with you anymore, however form of simply terminating the connection, not like that I owe them something. I used to be solely viewing the property. You solely get the cash off of the sale, off of the property, and I form of obtained a relationship backlash or that, why are you speaking to this realtor once you’re speaking? You understand what I’m saying? Yeah.

Tony:
And Elijah, you stated that you just don’t suggest doing it that method, however truthfully, I feel there’s plenty of worth in getting really feel for an agent earlier than you really resolve to work with them. Now, I’m not an actual property agent, so don’t quote me on this, however clearly with the authorized modifications, the NAR settlement that occurred earlier this 12 months, I’m nearly sure now that earlier than an agent may even present you a property, it’s important to signal a purchaser’s illustration settlement now. In order that precise technique may be just a little bit harder, however there’s nonetheless different methods, I feel, to suss out who the brokers are and which of them you wish to work with. So it feels like Elijah, this investor-friendly agent that you just met by way of bp, they have been those that discovered that duplex for you. And was it simply listed on the MLS?

Elijah:
Yep. We visited, it was each single weekend for that preliminary, it was January in the direction of the start of January the place I used to be like, okay, when am I? I’m carried out ready in time to tug the set off. Met Steven from then till April. We have been visiting properties each single weekend, and so it was this one property, it simply got here in the marketplace. He despatched it to me and he was like, I feel we should always test this out. I used to be like, okay, let’s go test it out. And the second we obtained there, it’s an A category, I might say it’s an A category neighborhood. It’s undoubtedly a category neighborhood. It was superb walkthrough and all that. And on the finish of the walkthrough he was like, yeah, we’re not getting this. There’s no probability. It was simply that good. And he was like, I actually would put a proposal on this in the event you don’t. In order that was form, okay, I obtained to do that. However he was like, we’re not getting this. So he’s like, do you continue to wish to put a proposal on this? I used to be like, yeah, nicely why not?

Ashley:
Yeah, you may as nicely strive

Tony:
Elijah. One fast follow-up query. When did you really shut on this property?

Elijah:
It was July thirty first

Tony:
Of this 12 months?

Elijah:
Sure.

Tony:
Superior. So the explanation why I ask that’s as a result of there’s plenty of actual property traders who say that there aren’t any good offers on the MLS, however I feel you simply proved that relying in your technique, relying in your location, relying in your form of marketing strategy, there are very a lot nonetheless offers out there instantly on the MLS. And kudos to you for utilizing that. It was a straightforward useful resource for you.

Elijah:
Sure, undoubtedly. I do suppose it’s just a little little bit of luck as a result of there was 10 traders who appeared on the property earlier than me, and I’m technically not the primary place winner, the primary place purchaser. His lender couldn’t, or his lender determined, you possibly can’t afford this. So that they backed all the way down to the second place purchaser who was me. So in a roundabout way I feel it was form of luck, however not likely, as a result of I’m the one who put on this time, dedication, training and dedication, blood, sweat, and tears to truly be right here. So in a roundabout way I feel it’s just a little little bit of a mixture.

Tony:
Alright guys, we now have to take our ultimate break, however extra from Elijah on the way to break into in the present day’s market as a rookie proper after this. Alright, let’s leap again in with Elijah.

Ashley:
So what was the precise asking value of this property?

Elijah:
So it was 165,000 and I put in a proposal 180, which was my highest that I used to be going to go.

Ashley:
And did they accepted it immediately or did it’s important to counter with them in any respect?

Elijah:
Yep. So as a result of the primary place winner, I’m undecided how a lot he provided, it was in all probability method above 180, however his lender stated, Nope, you possibly can’t afford this. So that they form of simply went all the way down to the second resolution.

Ashley:
So then they got here again to you. And that’s the reason it’s all the time so vital to place a proposal in since you by no means know what may occur if there may be a proposal larger than you, as a result of I’ve had that occur earlier than too, the place one thing occurs and so they come again to me and say, you realize what? We’d really wish to take your supply. So such an ideal concept. Endurance put in that supply it doesn’t matter what, and thank goodness you probably did. Yeah. Okay. So now you’ve obtained this property. What have been you so far as the rehab? How a lot did you estimate for the rehab and the way a lot did it really price to do the rehab on the property?

Elijah:
In order that’s form of one thing that I’m nonetheless within the center. I’m myself am doing the rehab. I inherited one facet of the unit, so I don’t plan on rehabbing that till the tenants transfer out. The opposite unit, the primary time I walked into there, I used to be like, oh my gosh, I’m going to have to tear down this wall. There’s plenty of cracks within the wall and stuff. I’m going to have to tear up this flooring. The flooring have been utterly shot after I stated, oh my gosh, I’m going to have to tear down all these partitions to all of the cracks and stuff like that. I didn’t notice that the partitions have been plaster and never drywall. So all I needed to do was scrape and joint and no matter. It’s not drywall or it’s water. Rattling drafted tape, take all of it out. And the flooring have been simply extraordinarily nicely worn.
I didn’t need to take ’em up. All I’ve to do is take a drum stander to it. So it’s easy stuff like that, which form of saved me from the second that I bought this property. And I’ve been doing rehab on this each day. I’ve spent in all probability $10 on simply stuff, even solely $10 as a result of a lot of the stuff I’ve already had, or I’m simply getting from my mentor, working below his wing for a very long time. I’m form of simply utilizing his instruments. I assumed I used to be going to have purchase all these sheets of sheet rock, go in there, take all it. However in actuality, it’s only a lot. Nothing’s onerous. It’s simply plenty of tedious work, like scraping the partitions after which taping after which jointing, after which portray over that after which drum sanding, making use of the polyurethane, stuff like that. It’s actually simply tedious work. Nothing’s onerous or actually that costly.

Tony:
Ought to be taught quite a bit Elijah is what it feels like, man.

Elijah:
Yeah, it’s plenty of YouTube college,

Tony:
Plenty of YouTube college, which is nice. I suppose one final comply with up query. You stated the acquisition value was 180, and I do know you had the grant that assisted with the down cost. So Elijah, what was your precise out of pocket expense to buy the property?

Elijah:
Like my money to shut or what my mortgage worth is correct now?

Tony:
Your precise money to shut, how a lot did it’s important to convey to the desk?

Elijah:
So my money to shut was round, it was 19, round 19,000.

Ashley:
And that was with closing prices? All the pieces.

Elijah:
Yep. All the pieces,

Ashley:
Yeah. Very good. For a standard mortgage. And what was your rate of interest on this mortgage?

Elijah:
It was, so I used to be presupposed to have a decrease rate of interest as a result of I’m an worker of the financial institution, however as a result of I used to be capable of get that mortgage, they’re like, nah, you possibly can’t. That’s the humorous factor about underwriters

Ashley:
Can’t double dip.

Elijah:
Yeah. So it was 6.5.

Tony:
That’s really fairly good.

Elijah:
Traditionally, that is what lots of people don’t see is traditionally rates of interest have been quite a bit larger than some six, seven, even 8%. And even worrying about that small rate of interest, the appreciation of your home appreciates by 5% yearly. So when you’re worrying about some 6% rate of interest there, property of your home of the worth goes up by 5% every year. So it doesn’t actually, lots of people don’t actually get that half.

Ashley:
Tony, I feel one takeaway for you right here is that Sean must get his subsequent job on the financial institution whereas he’s in highschool in order that he will get a reduction on rate of interest to purchase homes for you. There you

Tony:
Go. So Elijah, I suppose what would you say, since you’ve taken this deal down in a time when lots of people with perhaps extra life expertise, with perhaps additional cash, with perhaps extra sources have been sitting on the sidelines as a result of they really feel that 2024 isn’t the time to put money into actual property. I suppose, what would you say to these of us you suppose that perhaps proper now is just not the most effective time,

Elijah:
Not the most effective time to be sitting on the sidelines,

Tony:
Not the most effective time to put money into actual property?

Elijah:
Truthfully, you simply query actually why? As a result of in my eyes, 2024 is form of the golden age to be investing in actual property. So there’s individuals who suppose that not investing proper now could be going to get you anyplace as a result of the rates of interest and all these things. Investing in actual property is just not about timing the market, it’s about time out there. So it doesn’t actually make sense to be sitting on the sidelines. And I form of thought that that was my ideology too, is that if I simply wait it out and await the curiosity to go decrease and stuff like that, issues’ are going to get quite a bit higher. However how I simply saying it’s about time out there, that’s the way you take advantage of cash is thru cashflow and appreciation and outweighing all these different stuff that after all goes to have an effect on the market that you just don’t actually have a controllable variable over form of getting over that worry is what is basically going to find out to show the tables. The dialogue I had with my mentor LaShaun is it was like I took a 12 months of simply going by way of monetary training, the way to really handle the property, accounting, insurance coverage, stuff like that. An entire 12 months of simply educating myself earlier than and clearly saving the capital to truly pull the set off to LaShawn. It was form of like, why? What are you ready for?
And the top all be all, it was simply worry. And to him he was like, what are you afraid of? And it’s simply all the opposite variables that everybody like, what if the home burns down? Or what if this goes on and I don’t find the money for saved up? However on the finish of the day, that’s simply worry. So long as you’ve saved, so long as you’ve carried out what you wanted to do in your phrases of due diligence, then that ought to all be taken care of. On the finish of the day, if that ever does come up,

Tony:
Elijah, you convey up worry, which I feel is a crucial factor for us to in all probability shut out with. However worry is typically factor, proper? As a result of in case you are working inside your consolation zone, you’re sometimes not fearful. However in the event you’re working inside your consolation zone, you’re additionally not rising, you’re additionally not getting higher. So if each of these statements are true, then the one method that you may develop as an individual, as an actual property investor, as an entrepreneur is to step exterior of your consolation zone, which all the time induces just a little little bit of worry. And I feel the query for the Ricks which are listening is what sort of individual do you really wish to be? Do you wish to be the one that continues to let their fears counsel the motion, the actions that they do or that they don’t take? Or do you wish to let your objectives and your visions be the factor that drives the next move? So I do know plenty of of us are sitting on the sideline, they’ve that worry, however guys, worry is an efficient factor as a result of it means you’re getting into one thing new. And for you, Elijah, once more, tremendous spectacular. You’re capable of break previous that and try this scary factor, and clearly it’s labored out fairly nicely for you.

Elijah:
Sure. So as to add on to that actually fast, Tony, me being a boxer, there’s not likely something scarier than getting up into that ring and realizing the man throughout from you is making an attempt to knock your head off. So how Mike Tyson’s coach Cusato stated, everyone has worry, and in the event you don’t have worry, then both you’re mendacity or one thing’s fallacious and you must go to the hospital like a deer. Yeah, like a deer in the midst of the woods. As soon as he hears that twig of a snap, he’s gone. That worry retains him alive. Identical to the way it retains us people alive. It’s a pure intuition like what try to be utilizing. And that’s how Mike Tyson actually turned who Mike Tyson was. He used that worry like a fireplace and fireplace can both burn your home down or you possibly can cook dinner your meals. In order that’s form of how I take advantage of my worry.

Ashley:
Elijah, thanks a lot for becoming a member of us in the present day. We’re going to hyperlink your data into the present notes. For those who’re watching on YouTube, it’ll be within the description. Thanks a lot for taking the time, giving again, and sharing your journey and offering a lot data to the rookies which are listening in the present day.

Elijah:
Sure, I’m actually glad that you just guys have been capable of hearken to me in the present day. Hopefully I might be that beacon of sunshine to individuals round my age or individuals of all ages who’re form of simply misplaced at nighttime and really want that push of motivation. On the finish of the day, I’m not that lion who’s up high. I’m nonetheless that lion. I nonetheless have that starvation. I’m nonetheless climbing the hill. When you’re up high, you’re up high. So I’m nonetheless climbing that hill. You all the time obtained to be hungry. You all the time need to attempt. You all the time obtained to raised your self.

Ashley:
I feel anybody who’s over the age of 19 might be pondering proper now. I want I might’ve began after I was 19,

Elijah:
And that’s what everyone seems to be saying to me, which is why I’m

Ashley:
There. Is likely to be just a little regret and remorse listening to this episode too. However Elijah, congratulations on making such sensible selections at such a younger age. Thanks once more for coming onto the episode. I’m Ashley, and he’s Tony. Thanks a lot for listening to this episode of Actual Property Ricky.