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

Ashley:Now we have heard from our rookie viewers that you simply wish to hear extra from true rookies. And as we speak we’re bringing on a visitor who has one property that he bought throughout the final 12 months. After all, he hopes to ultimately 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 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 every week, we carry you the inspiration, motivation, and tales it’s good to hear to kickstart your investing journey. Now Elijah, welcome to the podcast brother. Tremendous excited to be chatting with you as we speak, 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 begin the exhibit and also you went into point out your 19 12 months, so what had been you doing earlier than to procure your first property?

Elijah:A 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 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 swimsuit 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 identical to a traditional child. Most individuals are calling me a child nonetheless, however I’m form of an grownup now. So I realized hearth, financially, impartial, retire early after doing a little digging.

Ashley:So Elijah, simply actual fast, if you found hearth, what made you resolve that you simply had been going to make use of actual property as your automobile to succeed in 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 massive cash getters, there’s no method 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 believe it’s a must to form of discover your personal Why? Simply because actual property was form of the highest finish. Me beginning off in residential, my finish aim is to be business, ultimately transfer to lodges and large syndications like that. In order that’s the tip aim. However beginning small like this, you bought to appreciate that it’s a must to discover love on this. I wouldn’t be doing, there’s the explanation why I stop buying and selling and funding and stuff like that. I didn’t find it irresistible. I had no management over that variable. In actual property, you might have loads of management. It’s much more forgiving and I really find it irresistible. I really like saying that I’m the owner. I really like going to my property, rehabbing it each day. It’s one thing that I really like. I’m constructing fairly actually an empire. That is an empire. Because of this I find it irresistible.

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

Elijah:Yeah, that’s a very good query, Tony, which it’s form of like a caveat, form of like a trick query form of since you acquired to think about 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 discover ways to improperly use a bank card or the best way to tackle dangerous debt. After which now I’m in some rabbit gap. I’m probably the most frugal particular person 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 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’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 really 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 avoid wasting 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 need to return to your level although in regards to the saving piece as a result of once more, the preliminary capital is the place loads of people get caught. So clearly you’re working full-time at 16 years previous, which is wonderful. However possibly what had been some particular private finance suggestions that you simply employed that you would be able to possibly 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 needed to not begin off on the incorrect observe, taking over large scholar mortgage debt, taking over large bank card debt and doing all this nonsense. I form of took the trip to essentially research and the way I can save as a lot as I probably can from the preliminary place to begin 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 needed to essentially get. So I mentioned in my head, I’m saving all the things I can to place this cash in as a result of in an effort to generate income, it’s a must to spend cash. So I’m saving probably the most that I can in an effort to hopefully undertaking me someplace into wherever I need 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 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, if you had been saving, did you might have a quantity in thoughts or did you do any form of analysis, get a pre-approval to know the way a lot capital you really wanted to purchase your first property?

Elijah:So I by no means really had a finances beginning. I spend money on 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 far-off. It’s solely a pair hours. However yeah, I knew I didn’t need to spend money on 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 other than the fee 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 nevertheless a lot you’re going to be placing down.I wanted to have my private reserves, six months of non-public 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 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 need 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 residence consumers, which my mortgage officer very advisable 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 residence 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 might 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 downside or how the realm is that’s going to be out there lease. 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 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 may go to biggerpockets.com/lender. And I believe if you find yourself speaking with lenders, that could be a nice query so as to add to that preliminary session is do you might have any grants obtainable? Nice query so as to add.

Tony:Only one observe 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 purchasing for particularly your first actual property deal, if you go speak to lenders, don’t essentially inform them, Hey, that is the mortgage product that I would like. The aim and the higher technique is to say, Hey, right here’s the aim of what I’m making an attempt to perform. I need to purchase a small multifamily, and if 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 total scenario and say, nicely, hey, Elijah, you’re really a primary time residence purchaser, so we are able to use this and we are able to mix it with this, and now you’ve acquired a very low value mortgage product to make use of. So essential factor you stroll into the financial institution and also you say, right here’s my aim. 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’ve got a way of the purchase field. Now we have a way of the form of debt that you simply used, however I wish to possibly 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 simply shouldn’t do in a second, however Steven, thanks a lot for all the things. 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 need 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 acquired into discovering an agent, one among my employees on the financial institution form of advisable me to an agent, however he was a type 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 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 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 type of brokers, appropriate, and I advised 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 form of simply the opposite brokers form of simply let me stroll by way of. He wasn’t actually exhibiting me, take a look at this dip within the ceiling, that’s going to be an enormous CapEx downside. Take a look at the muse. That’s going to be one other large 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, possibly that’s simply how it’s, possibly 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 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 speak to him they usually need to go view properties and all these items, 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 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.Take 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 do this. And that’s the realtor who I needed. I acquired somewhat 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 need 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 acquired a relationship backlash or that, why are you speaking to this realtor if you’re speaking? You understand what I’m saying? Yeah.

Tony:And Elijah, you mentioned that you simply don’t advocate doing it that method, however actually, I believe there’s loads of worth in getting a great 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 adjustments, 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 a must to signal a purchaser’s illustration settlement now. In order that actual technique is perhaps somewhat bit tougher, however there’s nonetheless different methods, I believe, to suss out who the brokers are and which of them you need to work with. So it appears like Elijah, this investor-friendly agent that you simply met by way of bp, they had 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 completed ready in time to drag the set off. Met Steven from then till April. We had 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 believe we must always verify 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 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 proposal on this should you don’t. In order that was sort, 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 may as nicely attempt

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 loads of actual property buyers who say that there are not any good offers on the MLS, however I believe 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 immediately 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 somewhat little bit of luck as a result of there was 10 buyers 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 may’t afford this. In order that they backed all the way down to the second place purchaser who was me. So not directly I believe it was form 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 not directly I believe it’s somewhat little bit of a combination.

Tony:Alright guys, we’ve got to take our last break, however extra from Elijah on the best way to break into as we speak’s market as a rookie proper after this. Alright, let’s bounce 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 a must 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 most likely method above 180, however his lender mentioned, Nope, you may’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 essential to place a proposal in since you by no means know what might occur if there’s 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 realize what? We’d really wish to take your provide. So such an amazing concept. 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 had been you so far as the rehab? How a lot did you estimate for the rehab and the way a lot did it really value 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 aspect 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 flooring. The flooring had been utterly 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 understand that the partitions had 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 had 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 most likely $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 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 onerous or actually that costly.

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

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

Tony:A whole lot of YouTube college, which is nice. I assume one final observe up query. You mentioned 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 a must to carry to the desk?

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

Ashley:And that was with closing prices? The whole lot.

Elijah:Yep. The whole lot,

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 capable of 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 really fairly good.

Elijah:Traditionally, that is what lots of people don’t see is traditionally rates of interest had 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% every year. So it doesn’t actually, lots of people don’t actually get that half.

Ashley:Tony, I believe 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 spend money on actual property. I assume, what would you say to these people you suppose that possibly proper now is just not 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 spend money on 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’s going to get you anyplace 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 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 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 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 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 schooling, the best way to really 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 form of like, why? What are you ready for?And the tip 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 find the money 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 completed 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 carry up concern, which I believe is a vital factor for us to most likely shut out with. However concern is typically a great factor, proper? As a result of in case you are working inside your consolation zone, you’re sometimes not fearful. However should 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 would be able to 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 somewhat little bit of concern. And I believe the query for the Ricks which are listening is what sort of particular person do you really 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 objectives and your visions be the factor that drives the next step? So I do know loads of people are sitting on the sideline, they’ve that concern, however guys, concern is an effective 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 do 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 mentioned, all people has concern, and should you don’t have concern, then both you’re mendacity or one thing’s incorrect and you need to 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 concern retains him alive. Similar to the way it retains us people alive. It’s a pure intuition like what you need to be utilizing. And that’s how Mike Tyson actually grew to become who Mike Tyson was. He used that concern like a fireplace and hearth can both burn your home down or you may prepare dinner your meals. In order that’s form of how I take advantage of my concern.

Ashley:Elijah, thanks a lot for becoming a member of us as we speak. We’re going to hyperlink your info into the present notes. If you happen to’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 info to the rookies which are listening as we speak.

Elijah:Sure, I’m actually glad that you simply guys had been capable of take heed to me as we speak. Hopefully I will be that beacon of sunshine to individuals round my age or individuals 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 acquired to be hungry. You all the time need to try. You all the time acquired to higher your self.

Ashley:I believe anybody who’s over the age of 19 might be pondering 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. Could be somewhat 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.