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

Ashley:
We have now heard from our rookie viewers that you simply want to hear extra from true rookies. And at this time we’re bringing on a visitor who has one property that he bought throughout the final 12 months. After all, he hopes to finally retire from actual property, however he’s simply getting began. He’s positively the inspiration we would all want proper now that purchasing actual property after the low pandemic rate of interest remains to be very attainable. 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, 3 times 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 at this time, man.

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

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

Ashley:
Yeah. Elijah, to start out the showcase and also you went into point out your 19 12 months, so what have been you doing earlier than to procure 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 health club. I do a whole lot of fishing, play video video games generally, however not a lot then. In order that’s type of why I got here dressed like this and never my swimsuit that I put on on the financial institution to indicate I’m not some man with a prime hat and a monocle and I’m identical to a traditional child. Most individuals are calling me a child nonetheless, however I’m type of an grownup now. So I discovered fireplace, financially, unbiased, retire early after performing some digging.

Ashley:
So Elijah, simply actual fast, while you found fireplace, what made you determine that you simply have been going to make use of actual property as your car 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 must be one thing completely different and it’s actual property, which it’s loopy sufficient to suppose that. And truthfully, with it being actual property, I feel you need to type of discover your individual Why? Simply because actual property was type of the highest finish. Me beginning off in residential, my finish purpose is to be business, finally transfer to inns and massive syndications like that. In order that’s the tip purpose. However beginning small like this, you bought to understand that you need to discover love on this. I wouldn’t be doing, there’s the rationale 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 will have a whole lot of management. It’s much more forgiving and I truly adore it. I really like saying that I’m the owner. I really like going to my property, rehabbing it every single day. It’s one thing that I really like. I’m constructing fairly actually an empire. That is an empire. For this reason I adore it.

Tony:
Now, Elijah, I’m tremendous curious man, as a result of we have now a whole lot of of us who’re, you mentioned you’re 19, however we have now a whole lot 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 really exit and buy actual property. And these are individuals who have perhaps had two or three a long time on you to really save that cash. So I feel the most important query for me proper now could be how did you as a youngster accumulate sufficient capital to really go on the market and purchase one thing?

Elijah:
Yeah, that’s a extremely good query, Tony, which it’s type of like a caveat, type of like a trick query type of since you acquired 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. After 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, though 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’d say I used to be 14 after I first began. I’d say a job. I used to be mowing my neighbor’s garden for cash on the weekend, after which at 16 I truly acquired my working papers. I labored at Dunkin Donuts for a very long time. Effectively, 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 type of reward. Yeah.

Tony:
Elijah, I need to return to your level although concerning the saving piece as a result of once more, the preliminary capital is the place a whole lot of of us get caught. So clearly you’re working full-time at 16 years previous, which is wonderful. However perhaps what have been some particular private finance ideas that you simply employed you can perhaps share with the Ricky viewers to assist them save for that first deal?

Elijah:
Yeah, so going again to how I mentioned due to my age, I actually wished to not begin off on the fallacious monitor, taking up large pupil mortgage debt, taking up large bank card debt and doing all this nonsense. I type of took the trip to essentially research and the way I can save as a lot as I probably 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 mentioned in my head, I’m saving every little thing I can to place this cash in as a result of to be able to earn cash, you need to spend cash. So I’m saving probably the most that I can to be able to hopefully mission me someplace into wherever I need to be at some point, 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 actually 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 at some point 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 awesome agent too? Go to biggerpockets.com/agent. Welcome again to the present. Elijah, while you have been saving, did you will have a quantity in thoughts or did you do any type of analysis, get a pre-approval to understand how a lot capital you truly wanted to purchase your first property?

Elijah:
So I by no means truly had a funds 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 need to put money into a single household I knew wished to go multifamily, actually solely a few 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 type of exhausting for that. So I settled for the duplex, which going again to realizing your market type of, that’s what I imply. You type of should 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 nevertheless a lot you’re going to be placing down.
I wanted to have my private reserves, six months of private 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 type of after I refine, I didn’t know, okay, what mortgage product do I actually need to use to be able to reduce my preliminary down fee, which is on the finish all be all goes to maintain extra money 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 not accessible proper now, there was a DL grant for first time house patrons, 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 not, I’m positive different banks have it. I imply T doesn’t proper now. So it was solely distributed per financial institution for first time house patrons. So I used to be actually fortunate to get part of that.

Ashley:
Did your mortgage officer inform you 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 can have an agent who’s not likely an investor agent, they’re going to go to the home they usually’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 an enormous CapEx drawback or how the world is that’s going to be out there lease. 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 so much simpler to speak together 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 may go to biggerpockets.com/lender. And I feel when you’re speaking with lenders, that may be a nice query so as to add to that preliminary session is do you will have any grants accessible? Nice query so as to add.

Tony:
Only one comply with as much as that too. And Elijah, you make an awesome 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, while you go speak to lenders, don’t essentially inform them, Hey, that is the mortgage product that I would like. The purpose and the higher technique is to say, Hey, right here’s the purpose of what I’m attempting to perform. I need to purchase a small multifamily, and while you say Liverpool within the Liverpool space, and hey, what do you suppose is the very best mortgage product for me? After which allow them to assess your whole scenario and say, nicely, hey, Elijah, you’re truly a primary time house purchaser, so we are able to use this and we are able to mix it with this, and now you’ve acquired a extremely low price mortgage product to make use of. So essential factor you stroll into the financial institution and also you say, right here’s my purpose. Don’t stroll into the financial institution and say, right here’s a mortgage product that I need 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 have now a way of the purchase field. We have now a way of the type of debt that you simply used, however I wish to perhaps get into some extra specifics concerning the property itself. So we all know it’s a duplex. How did you truly discover this deal?

Elijah:
Yeah, so it was truly 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 simply shouldn’t do in a second, however Steven, thanks a lot for every little thing. 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 it’s best to do, is I went on the agent finder and I messaged each single one of many brokers to type of simply discover who I actually wished to work with. As a result of earlier than I acquired into discovering an agent, certainly one of my employees on the financial institution type 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 type of like, okay, I need 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 truly viewing their properties. And I’m truly glad I did this, which I’m not recommending once more. So I visited a property with a kind of brokers, appropriate, and I informed them from the very starting that that is my first property I need 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 type of simply the opposite brokers type 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 drawback. Have a look at the muse. That’s going to be one other large CapEx drawback. He was type 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 evaluate it with the opposite agent. This wasn’t Steven, and it was type 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 type of attempting 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 they usually need to go view properties and all these items, however they haven’t even learn a e book of Wealthy Dad Port Avenue or one thing like that. They haven’t begun to get their first step of self-education earlier than attempting to exit and do all these items. 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 acquired a bit bit backlash from that as a result of working with Steven after that, the opposite two realtors who I type of was like, okay, to not actually say I don’t need to work with you anymore, however type 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 type of acquired a relationship backlash or that, why are you speaking to this realtor while you’re speaking? You understand what I’m saying? Yeah.

Tony:
And Elijah, you mentioned that you simply don’t suggest doing it that method, however truthfully, I feel there’s a whole lot of worth in getting an excellent really feel for an agent earlier than you truly determine 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, you need to signal a purchaser’s illustration settlement now. In order that precise technique could be a bit bit tougher, however there’s nonetheless different methods, I feel, to suss out who the brokers are and which of them you need to work with. So it seems like Elijah, this investor-friendly agent that you simply 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 accomplished 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 acquired there, it’s an A category, I’d say it’s an A category neighborhood. It’s positively 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 should you don’t. In order that was variety, okay, I acquired to do that. However he was like, we’re not getting this. So he’s like, do you continue to need to put a proposal on this? I used to be like, yeah, nicely why not?

Ashley:
Yeah, you would possibly as nicely strive

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

Elijah:
It was July thirty first

Tony:
Of this 12 months?

Elijah:
Sure.

Tony:
Superior. So the rationale why I ask that’s as a result of there’s a whole lot of actual property buyers who say that there are not any good offers on the MLS, however I feel you simply proved that relying in your technique, relying in your location, relying in your type of marketing strategy, there are very a lot nonetheless offers accessible instantly on the MLS. And kudos to you for utilizing that. It was a simple useful resource for you.

Elijah:
Sure, positively. I do suppose it’s a bit little bit of luck as a result of there was 10 buyers who seemed 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 may’t afford this. So that they backed right down to the second place purchaser who was me. So indirectly I feel it was type of luck, however not likely, as a result of I’m the one who put on this time, dedication, schooling and dedication, blood, sweat, and tears to really be right here. So indirectly I feel it’s a bit little bit of a combination.

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

Ashley:
So what was the precise asking worth 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 you need to counter with them in any respect?

Elijah:
Yep. So as a result of the primary place winner, I’m unsure how a lot he provided, it was in all probability method above 180, however his lender mentioned, Nope, you may’t afford this. So that they type of simply went right 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 essential to place a proposal in since you by no means know what may occur if there may be a proposal greater than you, as a result of I’ve had that occur earlier than too, the place one thing occurs they usually come again to me and say, you recognize what? We’d truly wish to take your provide. So such an awesome thought. Endurance put in that provide it doesn’t matter what, and thank goodness you probably did. Yeah. Okay. So now you’ve acquired this property. What have been you taking a look at so far as the rehab? How a lot did you estimate for the rehab and the way a lot did it truly price to do the rehab on the property?

Elijah:
In order that’s type 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 a whole lot of cracks within the wall and stuff. I’m going to have to tear up this flooring. The flooring have been fully shot after I mentioned, 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 should take ’em up. All I’ve to do is take a drum stander to it. So it’s easy stuff like that, which type of saved me from the second that I bought this property. And I’ve been doing rehab on this every single day. I’ve spent in all probability $10 on simply stuff, even solely $10 as a result of many of the stuff I’ve already had, or I’m simply getting from my mentor, working beneath his wing for a very long time. I’m type 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 exhausting. It’s simply a whole lot 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 exhausting or actually that costly.

Tony:
Ought to be taught so much Elijah is what it seems like, man.

Elijah:
Yeah, it’s a whole lot of YouTube college,

Tony:
A number of YouTube college, which is sweet. I suppose one final comply with up query. You mentioned the acquisition worth was 180, and I do know you had the grant that assisted with the down fee. 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 you need 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 things.

Elijah:
Yep. All the things,

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

Elijah:
It was, so I used to be speculated 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 in a position to get that mortgage, they’re like, nah, you may’t. That’s the humorous factor about underwriters

Ashley:
Can’t double dip.

Elijah:
Yeah. So it was 6.5.

Tony:
That’s truly fairly good.

Elijah:
Traditionally, that is what lots of people don’t see is traditionally rates of interest have been so much greater 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% annually. 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 extra 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 very best time,

Elijah:
Not the very best time to be sitting on the sidelines,

Tony:
Not the very best time to put money into actual property?

Elijah:
Actually, you simply query actually why? As a result of in my eyes, 2024 is type 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 wherever as a result of the rates of interest and all these items. 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 type of thought that that was my ideology too, is that if I simply wait it out and watch for the curiosity to go decrease and stuff like that, issues’ are going to get so much 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 simply don’t actually have a controllable variable over type of getting over that worry is what is actually 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 schooling, the way to truly handle the property, accounting, insurance coverage, stuff like that. A complete 12 months of simply educating myself earlier than and clearly saving the capital to really pull the set off to LaShawn. It was type of like, why? What are you ready for?
And the tip 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 manage to pay 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 accomplished 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 vital factor for us to in all probability shut out with. However worry is typically an excellent factor, proper? As a result of in case you are working within your consolation zone, you’re usually not fearful. However should you’re working within 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 you can 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 a bit little bit of worry. And I feel the query for the Ricks which can be listening is what sort of individual do you truly need to be? Do you need to be the one who continues to let their fears counsel the motion, the actions that they do or that they don’t take? Or do you need to let your targets and your visions be the factor that drives the next step? So I do know a whole lot of of us are sitting on the sideline, they’ve that worry, however guys, worry is an effective factor as a result of it means you’re entering into one thing new. And for you, Elijah, once more, tremendous spectacular. You’re in a position to 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 basically 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 attempting to knock your head off. So how Mike Tyson’s coach Cusato mentioned, everyone has worry, and should you don’t have worry, then both you’re mendacity or one thing’s fallacious and it’s best to go to the hospital like a deer. Yeah, like a deer in the course of the woods. As soon as he hears that twig of a snap, he’s gone. That worry retains him alive. Similar to the way it retains us people alive. It’s a pure intuition like what you ought to be utilizing. And that’s how Mike Tyson actually grew to become who Mike Tyson was. He used that worry like a hearth and fireplace can both burn your home down or you may cook dinner your meals. In order that’s type of how I take advantage of my worry.

Ashley:
Elijah, thanks a lot for becoming a member of us at this time. We’re going to hyperlink your data into the present notes. In the event you’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 can be listening at this time.

Elijah:
Sure, I’m actually glad that you simply guys have been in a position to take heed to me at this time. Hopefully I could be that beacon of sunshine to individuals round my age or individuals of all ages who’re type 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 prime. I’m nonetheless that lion. I nonetheless have that starvation. I’m nonetheless climbing the hill. When you’re up prime, you’re up prime. So I’m nonetheless climbing that hill. You all the time acquired to be hungry. You all the time should try. You all the time acquired to raised your self.

Ashley:
I feel anybody who’s over the age of 19 might be considering proper now. I want I’d’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 a bit regret and remorse listening to this episode too. However Elijah, congratulations on making such good choices 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.