Buying 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 just want to hear extra from true rookies. And right this moment we’re bringing on a visitor who has one property that he bought throughout the final yr. 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 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 per week, we carry 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 exhibit and also you went into point out your 19 yr, so what have been you doing earlier than you got 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 fitness center. I do numerous fishing, play video video games typically, however not a lot then. In order that’s sort of why I got here dressed like this and never my swimsuit that I put on on the financial institution to point out I’m not some man with a high hat and a monocle and I’m similar to a traditional child. Most individuals are calling me a child nonetheless, however I’m sort of an grownup now. So I discovered hearth, financially, unbiased, retire early after doing a little digging.

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

Elijah:And I knew throughout once I was doing penny shares and buying and selling all that, I knew there’s no approach all the large cash getters, there’s no approach all the large fish are sitting right here doing this. There must be one thing totally 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 important to sort of discover your personal Why? Simply because actual property was sort of the highest finish. Me beginning off in residential, my finish aim is to be industrial, finally transfer to inns and massive syndications like that. In order that’s the tip aim. However beginning small like this, you bought to appreciate that it’s important to discover love on this. I wouldn’t be doing, there’s the 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 numerous 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 day by day. It’s one thing that I really like. I’m constructing fairly actually an empire. That is an empire. Because of this I adore it.

Tony:Now, Elijah, I’m tremendous curious man, as a result of we’ve got numerous of us who’re, you mentioned you’re 19, however we’ve got numerous of us who’re of their twenties, thirties, forties, fifties, sixties, who haven’t but found out save the capital that’s required to really exit and buy actual property. And these are individuals who have perhaps had two or three many years on you to really save that cash. So I believe the largest query for me proper now’s how did you as an adolescent 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 sort of like a caveat, sort of like a trick query sort of since you bought to think about it like me being so younger, fortunately I took the trail out to study this and I by no means grew up on unhealthy debt. I didn’t have the time to learn to improperly use a bank card or tackle unhealthy debt. After which now I’m in some rabbit gap. I’m essentially the most frugal individual ever. After I go to the grocery retailer, I solely go there to get what I want 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 an alternative of driving to my fishing spot, I’ll go trip 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 once 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 bought my working papers. I labored at Dunkin Donuts for a very long time. Properly, not a very long time, solely two years simply to save lots of up as a lot for my automobile. After which after I purchased my automobile, I used to be like, wow, I simply labored all that point simply to purchase this automobile and now my cash’s gone. I’ve a automobile, however now I’ve no cash.

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

Tony:Elijah, I wish to return to your level although in regards to the saving piece as a result of once more, the preliminary capital is the place numerous 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 just 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 needed to not begin off on the mistaken observe, taking over enormous scholar mortgage debt, taking over enormous bank card debt and doing all this nonsense. I sort of took the trip to actually research and the way I can save as a lot as I probably can from the preliminary place to begin once 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 fuel and meals that I needed to actually get. So I mentioned in my head, I’m saving all the pieces I can to place this cash in as a result of with the intention to earn cash, it’s important to spend cash. So I’m saving essentially the most that I can with the intention to hopefully venture me someplace into wherever I wish to be sooner or later, 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 admittedly 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 sooner or later 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 a terrific agent too? Go to biggerpockets.com/agent. Welcome again to the present. Elijah, while you have been saving, did you have got a quantity in thoughts or did you do any sort 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 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 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 other than the associated fee and why not? So I hoped to get a fourplex, however the market right here in Liverpool was sort of arduous for that. So I settled for the duplex, which going again to figuring out your market sort of, that’s what I imply. You sort 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 sort of once I refine, I didn’t know, okay, what mortgage product do I actually wish to use with the intention 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 obtainable proper now, there was a DL grant for first time dwelling consumers, which my mortgage officer very advisable 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 certain different banks have it. I imply T doesn’t proper now. So it was solely distributed per financial institution for first time dwelling consumers. So I used to be actually fortunate to get part of that.

Ashley:Did your mortgage officer inform you 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 possibly can have an agent who’s not likely an investor agent, they’re going to go to the home and so they’re going to point out you cupboards and stuff like that. They’re not going to actually present you the divot within the ceiling. That’s going to be a giant CapEx drawback or how the realm is that’s going to be available in the market 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 lots 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 believe if you end up speaking with lenders, that may 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 observe as much as that too. And Elijah, you make a terrific 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, while 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 attempting to perform. I wish to purchase a small multifamily, and while you say Liverpool within the Liverpool space, and hey, what do you suppose is the most effective mortgage product for me? After which allow them to assess your total state of affairs and say, effectively, hey, Elijah, you’re truly a primary time dwelling purchaser, so we are able to use this and we are able to mix it with this, and now you’ve bought a very 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 aim. Don’t stroll into the financial institution and say, right here’s a mortgage product that I wish to use.

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

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

Elijah:Yeah, so it was truly via my realtor who I discovered on BiggerPockets.

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

Elijah:On the agent finder, what I did is I put in my, okay, I’m going to get into one thing that you just shouldn’t do in a second, however Steven, thanks a lot for all the pieces. I wouldn’t be right here with out you, which I discovered him on the BiggerPockets. So once more, what I did do, which I don’t suppose you must do, is I went on the agent finder and I messaged each single one of many brokers to sort of simply discover who I actually needed to work with. As a result of earlier than I bought into discovering an agent, certainly one of my employees on the financial institution sort of advisable 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 sort 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 instructed them from the very starting that that is my first property I wish to, and I’m speaking to a number of different brokers simply so I can see how issues go. So viewing the primary property, the primary agent, I’m not going to say any names or something like that. He was sort of simply the opposite brokers sort of simply let me stroll via. He wasn’t actually exhibiting me, take a look at this dip within the ceiling, that’s going to be an enormous CapEx drawback. Have a look at the inspiration. That’s going to be one other enormous CapEx drawback. He was sort 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 evaluation it with the opposite agent. This wasn’t Steven, and it was sort 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 sort of attempting to flee the rat race. I see my path via actual property. And he was like, oh my gosh. Lots of people speak to him and so they wish to go view properties and all these things, however they haven’t even learn a ebook of Wealthy Dad Port Avenue or one thing like that. They haven’t begun to get their first step of self-education earlier than attempting to exit and do all these things. So the very second that I even spoke to Steven and walked into the property, he was like, take a look at this, take a look at that.Have a look at this, take a look at that. You don’t need this, you don’t need that. I wouldn’t purchase this. I wouldn’t do this. And that’s the realtor who I needed. I bought just a little bit backlash from that as a result of working with Steven after that, the opposite two realtors who I sort of was like, okay, to not actually say I don’t wish to work with you anymore, however sort 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 sort of bought a relationship backlash or that, why are you speaking to this realtor while you’re speaking? what I’m saying? Yeah.

Tony:And Elijah, you mentioned that you just don’t suggest doing it that approach, however actually, I believe there’s numerous worth in getting a very good really feel for an agent earlier than you truly 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 yr, I’m nearly sure now that earlier than an agent may even present you a property, it’s important to signal a purchaser’s illustration settlement now. In order that actual technique could be just a little bit harder, however there’s nonetheless different methods, I believe, 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 just met via 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 achieved 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 believe we must always examine this out. I used to be like, okay, let’s go test it out. And the second we bought 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 likelihood. It was simply that good. And he was like, I personally would put a proposal on this when you don’t. In order that was type, okay, I bought to do that. However he was like, we’re not getting this. So he’s like, do you continue to wish to put a proposal on this? I used to be like, yeah, effectively why not?

Ashley:Yeah, you may as effectively 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 yr?

Elijah:Sure.

Tony:Superior. So the rationale why I ask that’s as a result of there’s numerous 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 sort of marketing strategy, there are very a lot nonetheless offers obtainable straight on the MLS. And kudos to you for utilizing that. It was a straightforward useful resource for you.

Elijah:Sure, positively. I do suppose it’s just a little 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. In order that they backed all the way down to the second place purchaser who was me. So not directly I believe it was sort of luck, however not likely, as a result of I’m the one who put on this time, dedication, training and willpower, blood, sweat, and tears to really be right here. So not directly I believe it’s just a little little bit of a combination.

Tony:Alright guys, we’ve got to take our remaining break, however extra from Elijah on 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 value of this property?

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

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

Elijah:Yep. So as a result of the primary place winner, I’m undecided how a lot he supplied, it was in all probability approach above 180, however his lender mentioned, Nope, you may’t afford this. In order that they sort of simply went all the way down to the second answer.

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 larger than you, as a result of I’ve had that occur earlier than too, the place one thing occurs and so they come again to me and say, you understand what? We’d truly wish to take your supply. So such a terrific concept. Persistence put in that supply it doesn’t matter what, and thank goodness you probably did. Yeah. Okay. So now you’ve bought this property. What have been you so far as the rehab? How a lot did you estimate for the rehab and the way a lot did it truly price to do the rehab on the property?

Elijah:In order that’s sort 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 numerous cracks within the wall and stuff. I’m going to have to tear up this flooring. The flooring have been utterly shot once 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 effectively 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 sort of saved me from the second that I bought this property. And I’ve been doing rehab on this day by day. I’ve spent in all probability $10 on simply stuff, even solely $10 as a result of a lot of the stuff I’ve already had, or I’m simply getting from my mentor, working beneath his wing for a very long time. I’m sort 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 numerous 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 lots Elijah is what it appears like, man.

Elijah:Yeah, it’s numerous YouTube college,

Tony:A whole lot of YouTube college, which is sweet. 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 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 it’s important 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? Every little thing.

Elijah:Yep. Every little thing,

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 presupposed to have a decrease rate of interest as a result of I’m an worker of the financial institution, however as a result of I used to be capable of get that mortgage, they’re like, nah, you 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 lots larger 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% 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 perhaps extra life expertise, with perhaps more money, 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 assume, what would you say to these of us you suppose that perhaps proper now just isn’t the most effective time,

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

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

Elijah:Actually, you simply query actually why? As a result of in my eyes, 2024 is sort 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 wherever as a result of the rates of interest and all these things. Investing in actual property just 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 sort of thought that that was my ideology too, is that if I simply wait it out and anticipate the curiosity to go decrease and stuff like that, issues’ are going to get lots 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 after all goes to have an effect on the market that you just don’t actually have a controllable variable over sort of getting over that concern is what is admittedly 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 via monetary training, 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 really pull the set off to LaShawn. It was sort 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 manage to pay 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 achieved 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 crucial factor for us to in all probability shut out with. However concern is typically a very good factor, proper? As a result of in case you are working within your consolation zone, you’re usually not fearful. However when 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 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 just a little little bit of concern. And I believe the query for the Ricks which are 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 step? So I do know numerous of us are sitting on the sideline, they’ve that concern, however guys, concern is an effective factor as a result of it means you’re moving 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 effectively 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 figuring out the man throughout from you is attempting to knock your head off. So how Mike Tyson’s coach Cusato mentioned, all people has concern, and when you don’t have concern, then both you’re mendacity or one thing’s mistaken and you must 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 try 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 own home down or you may cook dinner your meals. In order that’s sort of how I take advantage of my concern.

Ashley:Elijah, thanks a lot for becoming a member of us right this moment. We’re going to hyperlink your info into the present notes. In case 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 info to the rookies which are listening right this moment.

Elijah:Sure, I’m actually glad that you just guys have been capable of take heed to me right this moment. Hopefully I could be that beacon of sunshine to individuals round my age or individuals of all ages who’re sort of simply misplaced in the dead of night 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 bought to be hungry. You all the time need to try. You all the time bought 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 once I was 19,

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

Ashley:There. May be just a little regret and remorse listening to this episode too. However Elijah, congratulations on making such sensible 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.