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 simply want to hear extra from true rookies. And right this moment we’re bringing on a visitor who has one property that he bought inside the final yr. In fact, 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 continues to be very potential. 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 every week, we convey you the inspiration, motivation, and tales it is advisable to hear to kickstart your investing journey. Now Elijah, welcome to the podcast brother. Tremendous excited to be chatting with you right this moment, 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 unimaginable 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 yr, so what have been you doing earlier than you purchased your first property?

Elijah:
Slightly 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 fitness center. I do loads of fishing, play video video games generally, 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 hearth, financially, impartial, retire early after doing a little digging.

Ashley:
So Elijah, simply actual fast, once you found hearth, what made you determine that you simply have been going to make use of actual property as your car to succeed in that monetary independence?

Elijah:
And I knew throughout once I was doing penny shares and buying and selling all that, I knew there’s no approach all the massive cash getters, there’s no approach all the massive fish are sitting right here doing this. There needs to be one thing completely different and it’s actual property, which it’s loopy sufficient to suppose that. And actually, with it being actual property, I feel you need 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 inns and massive syndications like that. In order that’s the top objective. However beginning small like this, you bought to comprehend that you need to discover love on this. I wouldn’t be doing, there’s the rationale why I stop 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 have got loads 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 on daily basis. It’s one thing that I really like. I’m constructing fairly actually an empire. That is an empire. This is the reason I adore it.

Tony:
Now, Elijah, I’m tremendous curious man, as a result of now we have loads of of us who’re, you stated you’re 19, however now we have loads of of us who’re of their twenties, thirties, forties, fifties, sixties, who haven’t but discovered easy methods to save the capital that’s required to truly exit and buy actual property. And these are individuals who have possibly had two or three many years on you to truly save that cash. So I feel the largest query for me proper now could be how did you as a youngster 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 received to consider it like me being so younger, fortunately I took the trail out to study 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 easy methods 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, although it’s small, it actually does add up over time. As a substitute 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 once 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 truly received my working papers. I labored at Dunkin Donuts for a very long time. Effectively, not a very long time, solely two years simply to avoid wasting up as a lot for my automotive. After which after I purchased my automotive, I used to be like, wow, I simply labored all that point simply to purchase this automotive and now my cash’s gone. I’ve a automotive, 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 concerning the saving piece as a result of once more, the preliminary capital is the place loads of of us get caught. So clearly you’re working full-time at 16 years previous, which is superb. However possibly what have been some particular private finance suggestions that you simply employed that you may possibly 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 needed to not begin off on the improper observe, taking up enormous pupil mortgage debt, taking up enormous bank card debt and doing all this nonsense. I form of took the outing to essentially examine and the way I can save as a lot as I presumably can from the preliminary start line once I purchased my automotive 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 fuel and meals that I needed to essentially get. So I stated in my head, I’m saving every thing I can to place this cash in as a result of in an effort to earn a living, you need to spend cash. So I’m saving probably the most that I can in an effort to hopefully challenge 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 actually loopy to consider how in that brief quantity of timeframe that I switched from saving as a lot as I can to hopefully use it in the future to higher 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 amazing agent too? Go to biggerpockets.com/agent. Welcome again to the present. Elijah, once you have been saving, did you have got a quantity in thoughts or did you do any form of analysis, get a pre-approval to know the way a lot capital you truly wanted to purchase your first property?

Elijah:
So I by no means truly had a price range beginning. I put money into Liverpool, New York, which is true 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 far-off. It’s solely a pair hours. However yeah, I knew I didn’t wish to put money into a single household I knew needed 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 fee and why not? So I hoped to get a fourplex, however the market right here in Liverpool was form of arduous 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 must 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 needed 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 inside the cashflow reserve, CapEx, no matter. That’s form of once I refine, I didn’t know, okay, what mortgage product do I actually wish to use in an effort to decrease my preliminary down cost, 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 traditional one?

Elijah:
Yep. Yeah. Yep. Typical 5% down Freddie Mae and Fannie Mac. So we used that. And on the time, which is not obtainable proper now, there was a DL grant for first time house patrons, which my mortgage officer very really useful me to make use of. In any other case my DTI could be approach 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 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 find out about actual property is you can have an agent who’s probably not 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 available in the market hire. So with my lender, I knew I needed 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 possibly can go to biggerpockets.com/lender. And I feel if you find yourself speaking with lenders, that could be a nice query so as to add to that preliminary session is do you have got any grants obtainable? Nice query so as to add.

Tony:
Only one comply with as much as that too. And Elijah, you make an amazing level, and Ashley and I’ve talked about this within the podcast earlier than, however as you’re looking for particularly your first actual property deal, once you go discuss to lenders, don’t essentially inform them, Hey, that is the mortgage product that I would like. 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 one of the best mortgage product for me? After which allow them to assess your complete state of affairs and say, properly, 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 received 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, now we have a way of the purchase field. We’ve a way of the form of debt that you simply used, however I prefer to possibly 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 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 is best to 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 needed to work with. As a result of earlier than I received into discovering an agent, considered one of my staff on the financial institution form of really useful 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 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, right, and I informed 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 exhibiting me, have a look at this dip within the ceiling, that’s going to be an enormous CapEx drawback. Take a look at the muse. That’s going to be one other enormous CapEx drawback. He was form of simply letting me stroll out and really feel it out the identical.
So I used to be like, okay, possibly that’s simply how it’s, possibly it’s not. So I went to go evaluation 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 recreation 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 discuss to him they usually wish to go view properties and all these things, 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 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, have a look at this, have a look at that.
Take a look at this, have 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 needed. I received slightly 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 received a relationship backlash or that, why are you speaking to this realtor once you’re speaking? You recognize what I’m saying? Yeah.

Tony:
And Elijah, you stated that you simply don’t advocate doing it that approach, however actually, I feel there’s loads of worth in getting 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 adjustments, the NAR settlement that occurred earlier this yr, I’m virtually 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 actual technique may be slightly 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 appears 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 direction of the start of January the place I used to be like, okay, when am I? I’m accomplished ready in time to drag 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 verify this out. I used to be like, okay, let’s go test it out. And the second we received there, it’s an A category, I might say it’s an A category neighborhood. It’s positively a category neighborhood. It was excellent walkthrough and all that. And on the finish of the walkthrough he was like, yeah, we’re not getting this. There’s no likelihood. It was simply that good. And he was like, I actually would put a suggestion on this in case you don’t. In order that was type, okay, I received to do that. However he was like, we’re not getting this. So he’s like, do you continue to wish to put a suggestion on this? I used to be like, yeah, properly why not?

Ashley:
Yeah, you may as properly attempt

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

Elijah:
It was July thirty first

Tony:
Of this yr?

Elijah:
Sure.

Tony:
Superior. So the rationale why I ask that’s as a result of there’s loads 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 obtainable 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 slightly little bit of luck as a result of there was 10 traders 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 possibly can’t afford this. In order that they backed all the way down to the second place purchaser who was me. So ultimately I feel it was form of luck, however probably not, as a result of I’m the one who put on this time, dedication, schooling and dedication, blood, sweat, and tears to truly be right here. So ultimately I feel it’s slightly little bit of a mixture.

Tony:
Alright guys, now we have to take our closing break, however extra from Elijah on easy methods to break into right this moment’s market as a rookie proper after this. Alright, let’s bounce 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 suggestion 180, which was my highest that I used to be going to go.

Ashley:
And did they accepted it straight away or did you need 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 approach above 180, however his lender stated, Nope, you possibly can’t afford this. In order 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 suggestion in since you by no means know what may occur if there’s a suggestion 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 already know what? We’d truly prefer to take your supply. So such an amazing thought. Persistence put in that supply it doesn’t matter what, and thank goodness you probably did. Yeah. Okay. So now you’ve received 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 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 loads of cracks within the wall and stuff. I’m going to have to tear up this ground. The flooring have been utterly shot once 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 properly worn.
I didn’t must 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 on daily basis. 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 underneath his wing for a very long time. I’m form of simply utilizing his instruments. I believed 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 arduous. It’s simply loads 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 arduous or actually that costly.

Tony:
Ought to study so much Elijah is what it appears like, man.

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

Tony:
Numerous YouTube college, which is nice. I assume one final comply with up query. You stated the acquisition worth 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 true 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? Every little thing.

Elijah:
Yep. Every little thing,

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 purported 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 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 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 own home appreciates by 5% yearly. So when you’re worrying about some 6% rate of interest there, property of your own 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 assume what would you say, since you’ve taken this deal down in a time when lots of people with possibly extra life expertise, with possibly additional cash, with possibly extra assets 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 assume, what would you say to these of us you suppose that possibly proper now isn’t one of the best time,

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

Tony:
Not one of the best 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 isn’t about timing the market, it’s about time available in the market. 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 look forward to 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 available in the market, that’s the way you take advantage of cash is thru cashflow and appreciation and outweighing all these different stuff that in fact goes to have an effect on the market that you simply don’t actually have a controllable variable over form of getting over that concern 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 yr of simply going by way of monetary schooling, easy methods to truly handle the property, accounting, insurance coverage, stuff like that. A complete yr 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 concern. 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 have the funds for saved up? However on the finish of the day, that’s simply concern. 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 concern, which I feel is a vital factor for us to in all probability shut out with. However concern is usually factor, proper? As a result of in case you are working within your consolation zone, you’re usually not fearful. However in case 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 approach that you may develop as an individual, as an actual property investor, as an entrepreneur is to step outdoors of your consolation zone, which all the time induces slightly little bit of concern. And I feel the query for the Ricks which might be listening is what sort of individual do you truly 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 loads of of us are sitting on the sideline, they’ve that concern, however guys, concern is an efficient 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 properly for you.

Elijah:
Sure. So as to add on to that basically fast, Tony, me being a boxer, there’s probably not 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, all people has concern, and in case you don’t have concern, then both you’re mendacity or one thing’s improper and it is 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 concern retains him alive. Similar to the way it retains us people alive. It’s a pure intuition like what you have to be utilizing. And that’s how Mike Tyson actually turned who Mike Tyson was. He used that concern like a fireplace and hearth can both burn your own home down or you possibly can cook dinner your meals. In order that’s form of how I exploit my concern.

Ashley:
Elijah, thanks a lot for becoming a member of us right this moment. We’re going to hyperlink your data into the present notes. When 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 might be listening right this moment.

Elijah:
Sure, I’m actually glad that you simply guys have been in a position to take heed to me right this moment. Hopefully I could be that beacon of sunshine to folks round my age or folks of all ages who’re form of simply misplaced at nighttime and actually need 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 received to be hungry. You all the time must attempt. You all the time received to higher your self.

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

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

Ashley:
There. Is perhaps slightly regret and remorse listening to this episode too. However Elijah, congratulations on making such good 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.