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As someone who's been in the real estate game for awhile now, I've learned that every deal has its own unique story. And let me tell you, the story behind my second rental property is one for the books.
It all started when I stumbled across the listing on Zillow. It had been on the market for 120 days, which usually means either the property is overpriced or has some major issues.
But the numbers checked out -- the asking price was $104,746 and the rent estimate was around $1,000, meeting a common rule of thumb of real estate investing, the 1% Rule.
I contacted the seller, who was also the realtor, and learned that another buyer had made an offer that was the same as mine, except they were putting 50% down while I was only putting 25% down.
I was feeling pretty discouraged until the seller revealed that they had seen a video of me online talking about the importance of leadership training and decided to give me the nod because they liked the idea of helping a young, ambitious real estate investor.
This is an example of one of the big reasons why having a strong social media presence is an amazing resource. There was just one catch -- I didn't have the full down payment.
As luck would have it, I found a like-minded friend who was eager to invest with me. We both put down $13,098 with an interest rate of 4.125%. The mortgage payment at the time was $380.69 and we were able to rent the property out for $1,000 right away.
Just like that, we were proud co-owners of our second rental property... But as with any deal, there were some mistakes and lessons learned along the way.
For starters, we both put our names on the mortgage, not realizing that the government only allows you to put your name on 10 traditional mortgages each. As a result, this is the only house where we both have our names on the mortgage.
Hey, you gotta learn somehow, right?
We also made the mistake of opting out of escrowing taxes and insurance. At first, I thought I was being clever by paying monthly into the escrow account, thinking I was giving an interest-free loan to the mortgage company.
Boy, was I wrong!
It turned out to be a hassle to have the taxes and insurance separated, and I even forgot to pay once, Which resulted in a penalty. Lesson learned -- just let the mortgage company take care of the taxes and insurance.
The good news is that despite these missteps, our little rental property is still standing tall.
In fact, as of 2023, the property is worth a whopping $226,000 and is being rented for $1,499 with the same tenant for the past three years.
It's amazing how a little bit of hard work and putting yourself out there can have massive returns! Cheers to the next adventure.