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 simply wish to hear extra from true rookies. And right now we’re bringing on a visitor who has one property that he bought inside 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 per week, we convey you the inspiration, motivation, and tales it’s essential hear to kickstart your investing journey. Now Elijah, welcome to the podcast brother. Tremendous excited to be chatting with you right now, 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 begin the showcase and also you went into point out your 19 12 months, so what had been you doing earlier than you obtain your first property?

Elijah:Just a little 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 gymnasium. I do loads of fishing, play video video games generally, however not a lot then. In order that’s type of why I got here dressed like this and never my swimsuit that I put on on the financial institution to point out I’m not some man with a prime hat and a monocle and I’m identical to a standard child. Most individuals are calling me a child nonetheless, however I’m type of an grownup now. So I discovered fireplace, financially, impartial, retire early after doing a little digging.

Ashley:So Elijah, simply actual fast, once you found fireplace, 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 approach all the massive cash getters, there’s no approach all the massive fish are sitting right here doing this. There must be one thing completely different and it’s actual property, which it’s loopy sufficient to assume that. And actually, with it being actual property, I believe you must type of discover your individual Why? Simply because actual property was type of the highest finish. Me beginning off in residential, my finish aim is to be business, ultimately transfer to motels and massive syndications like that. In order that’s the tip aim. However beginning small like this, you bought to appreciate that you must discover love on this. I wouldn’t be doing, there’s the explanation why I give up 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 have got loads of management. It’s much more forgiving and I really find it irresistible. I like saying that I’m the owner. I like going to my property, rehabbing it every single day. It’s one thing that I like. I’m constructing fairly actually an empire. That is an empire. That is why I find it irresistible.

Tony:Now, Elijah, I’m tremendous curious man, as a result of now we have loads of of us who’re, you mentioned 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 really exit and buy actual property. And these are individuals who have perhaps had two or three a long time on you to really save that cash. So I believe the largest query for me proper now could be 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 type of like a caveat, type of like a trick query type of since you bought to consider it like me being so younger, fortunately I took the trail out to be taught this and I by no means grew up on unhealthy debt. I didn’t have the time to discover ways to improperly use a bank card or easy methods to tackle unhealthy debt. After which now I’m in some rabbit gap. I’m essentially the most frugal particular person ever. Once 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, though it’s small, it actually does add up over time. As an alternative of driving to my fishing spot, I’ll go journey my bike to my fishing spot. That’s how frugal that I’ll actually get.So yeah, I used to be 14. Yeah, I’d say I used to be 14 after I first began. I’d say a job. I used to be mowing my neighbor’s garden for cash on the weekend, after which at 16 I really bought my working papers. I labored at Dunkin Donuts for a very long time. Nicely, not a very long time, solely two years simply to save lots of up as a lot for my automobile. After which after I purchased my automobile, I used to be like, wow, I simply labored all that point simply to purchase this automobile and now my cash’s gone. I’ve a automobile, however now I’ve no cash.

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

Tony:Elijah, I 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 loads of of us get caught. So clearly you’re working full-time at 16 years previous, which is superb. However perhaps what had been some particular private finance suggestions that you simply employed you can perhaps share with the Ricky viewers to assist them save for that first deal?

Elijah:Yeah, so going again to how I mentioned due to my age, I actually wished to not begin off on the improper observe, taking up big pupil mortgage debt, taking up big bank card debt and doing all this nonsense. I type of took the day out to actually examine and the way I can save as a lot as I presumably 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 wished to actually get. So I mentioned in my head, I’m saving every part I can to place this cash in as a result of with a view to earn a living, you must spend cash. So I’m saving essentially the most that I can with a view to hopefully mission me someplace into wherever I wish to be at some point, which is right here. And from that point, I had no clue it was going to be actual property. I had no clue I used to be going to purchase my home, which is 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 at some point to raised myself to now investing in actual property.

Ashley:After a fast break, we’re going to listen to extra about how Elijah sourced his first property with an investor pleasant agent. Do you want an incredible agent too? Go to biggerpockets.com/agent. Welcome again to the present. Elijah, once you had been saving, did you have got a quantity in thoughts or did you do any type of analysis, get a pre-approval to understand how a lot capital you really wanted to purchase your first property?

Elijah:So I by no means really had a price range beginning. I spend money on 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 spend money on a single household I knew wished to go multifamily, actually solely a few 5 or 10% distinction between shopping for a fourplex and shopping for a single household unit and sustaining it and managing it other than the fee and why not? So I hoped to get a fourplex, however the market right here in Liverpool was type of onerous for that. So I settled for the duplex, which going again to understanding your market type of, that’s what I imply. You type 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 non-public reserves. I wished to have 5% reserves for the property in case a heater goes out, no matter goes out, I nonetheless have that preliminary reserve put aside, not counting it inside the cashflow reserve, CapEx, no matter. That’s type of after I refine, I didn’t know, okay, what mortgage product do I actually wish to use with a view to reduce my preliminary down fee, which is on the finish all be all goes to maintain more cash 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 now not accessible 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 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 now 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 residence 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 learn about actual property is you would have an agent who’s probably not 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 world is that’s going to be available in the market hire. So with my lender, I knew I wished to have an actual property investor pleasant landlord lender, which me working on the financial institution, I actually sat proper throughout from her on Wednesdays. So it was rather a lot 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’ll be able to go to biggerpockets.com/lender. And I believe if you end up speaking with lenders, that could be a nice query so as to add to that preliminary session is do you have got any grants accessible? Nice query so as to add.

Tony:Only one comply with as much as that too. And Elijah, you make an incredible level, and Ashley and I’ve talked about this within the podcast earlier than, however as you’re searching for particularly your first actual property deal, once you go speak to lenders, don’t essentially inform them, Hey, that is the mortgage product that I need. 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 once you say Liverpool within the Liverpool space, and hey, what do you assume is the most effective mortgage product for me? After which allow them to assess your complete scenario and say, nicely, hey, Elijah, you’re really a primary time residence purchaser, so we will use this and we will mix it with this, and now you’ve bought 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 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. Now we have a way of the type of debt that you simply used, however I prefer to perhaps 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 every part. 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 assume it is best to do, is I went on the agent finder and I messaged each single one of many brokers to type of simply discover who I actually wished to work with. As a result of earlier than I bought into discovering an agent, considered one of my employees on the financial institution type 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 type 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 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 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 type of simply the opposite brokers type of simply let me stroll by way of. He wasn’t actually displaying me, have a look at this dip within the ceiling, that’s going to be an enormous CapEx drawback. Have a look at the muse. That’s going to be one other big CapEx drawback. He was type of simply letting me stroll out and really feel it out the identical.So I used to be like, okay, perhaps that’s simply how it’s, perhaps it’s not. So I went to go evaluate it with the opposite agent. This wasn’t Steven, and it was type of just about the identical factor. And I used to be like, okay. However the second I talked to Steven, it was a recreation changer. Inside my first couple sentences, I used to be like, I’m type of attempting to flee the rat race. I see my path by way of actual property. And he was like, oh my gosh. Lots of people speak to him and so they wish to go view properties and all these items, however they haven’t even learn a e-book of Wealthy Dad Port Avenue or one thing like that. They haven’t begun to get their first step of self-education earlier than attempting to exit and do all these items. So the very second that I even spoke to Steven and walked into the property, he was like, have a look at this, have a look at that.Have 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 do this. And that’s the realtor who I wished. I bought slightly bit backlash from that as a result of working with Steven after that, the opposite two realtors who I type of was like, okay, to not actually say I don’t wish to work with you anymore, however type of simply terminating the connection, not like that I owe them something. I used to be solely viewing the property. You solely get the cash off of the sale, off of the property, and I type of bought a relationship backlash or that, why are you speaking to this realtor once you’re speaking? You already know what I’m saying? Yeah.

Tony:And Elijah, you mentioned that you simply don’t suggest doing it that approach, however actually, I believe there’s loads of worth in getting an excellent 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, you must signal a purchaser’s illustration settlement now. In order that actual technique could be slightly 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 seems 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 executed ready in time to tug 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 available on the market. 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 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 probability. It was simply that good. And he was like, I actually would put a suggestion on this in the event you don’t. In order that was variety, 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 suggestion on this? I used to be like, yeah, nicely why not?

Ashley:Yeah, you may as nicely strive

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 traders who say that there aren’t any good offers on the MLS, however I believe you simply proved that relying in your technique, relying in your location, relying in your type of marketing strategy, there are very a lot nonetheless offers accessible instantly on the MLS. And kudos to you for utilizing that. It was a straightforward useful resource for you.

Elijah:Sure, positively. I do assume it’s slightly little bit of luck as a result of there was 10 traders who regarded 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’ll be able to’t afford this. So that they backed right down to the second place purchaser who was me. So in a roundabout way I believe it was type 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 really be right here. So in a roundabout way I believe it’s slightly little bit of a mixture.

Tony:Alright guys, now we have to take our remaining break, however extra from Elijah on easy methods to break into right now’s market as a rookie proper after this. Alright, let’s leap 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 must counter with them in any respect?

Elijah:Yep. So as a result of the primary place winner, I’m unsure how a lot he provided, it was most likely approach above 180, however his lender mentioned, Nope, you’ll be able to’t afford this. So that they type of simply went right down to the second resolution.

Ashley:So then they got here again to you. And that’s the reason it’s at all times so essential to place a suggestion in since you by no means know what might occur if there’s a suggestion increased 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, what? We’d really prefer to take your provide. So such an incredible concept. Endurance put in that provide it doesn’t matter what, and thank goodness you probably did. Yeah. Okay. So now you’ve bought 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 type of one thing that I’m nonetheless within the center. I’m myself am doing the rehab. I inherited one facet of the unit, so I don’t plan on rehabbing that till the tenants transfer out. The opposite unit, the primary time I walked into there, I used to be like, oh my gosh, I’m going to have to tear down this wall. There’s loads of cracks within the wall and stuff. I’m going to have to tear up this ground. 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 notice 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 must take ’em up. All I’ve to do is take a drum stander to it. So it’s easy stuff like that, which type of saved me from the second that I bought this property. And I’ve been doing rehab on this every single day. I’ve spent 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 type 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 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 rather a lot Elijah is what it seems like, man.

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

Tony:A whole lot of YouTube college, which is sweet. I suppose one final comply with up query. You mentioned the acquisition worth was 180, and I do know you had the grant that assisted with the down fee. So Elijah, what was your precise out of pocket expense to buy the property?

Elijah:Like my money to shut or what my mortgage worth is true now?

Tony:Your precise money to shut, how a lot did you must convey to the desk?

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

Ashley:And that was with closing prices? All the things.

Elijah:Yep. All the things,

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

Elijah:It was, so I used to be imagined 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’ll be able to’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 rather a lot increased 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 whilst 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 suppose what would you say, since you’ve taken this deal down in a time when lots of people with perhaps extra life expertise, with perhaps extra cash, with perhaps extra 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 suppose, what would you say to these of us you assume that perhaps proper now is just not the most effective time,

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

Tony:Not the most effective time to spend money on actual property?

Elijah:Actually, you simply query actually why? As a result of in my eyes, 2024 is type of the golden age to be investing in actual property. So there’s individuals who assume that not investing proper now could be going to get you wherever as a result of the rates of interest and all these items. Investing in actual property is just not about timing the market, it’s about time available in the market. So it doesn’t actually make sense to be sitting on the sidelines. And I type of thought that that was my ideology too, is that if I simply wait it out and await the curiosity to go decrease and stuff like that, issues’ are going to get rather a lot 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 type of getting over that worry 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, easy methods 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 type of like, why? What are you ready for?And the tip all be all, it was simply worry. And to him he was like, what are you afraid of? And it’s simply all the opposite variables that everybody like, what if the home burns down? Or what if this goes on and I don’t find the money for saved up? However on the finish of the day, that’s simply worry. So long as you’ve saved, so long as you’ve executed what you wanted to do in your phrases of due diligence, then that ought to all be taken care of. On the finish of the day, if that ever does come up,

Tony:Elijah, you convey up worry, which I believe is a vital factor for us to most likely shut out with. However worry is usually an excellent factor, proper? As a result of if you’re working inside your consolation zone, you’re usually not fearful. However in the event 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 approach you can develop as an individual, as an actual property investor, as an entrepreneur is to step exterior of your consolation zone, which at all times induces slightly little bit of worry. And I believe the query for the Ricks which are listening is what sort of particular person do you really 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 targets 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 worry, however guys, worry is an efficient 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 nicely for you.

Elijah:Sure. So as to add on to that actually fast, Tony, me being a boxer, there’s probably not something scarier than getting up into that ring and understanding the man throughout from you is attempting to knock your head off. So how Mike Tyson’s coach Cusato mentioned, everyone has worry, and in the event you don’t have worry, 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 worry retains him alive. Similar to the way it retains us people alive. It’s a pure intuition like what you ought to be utilizing. And that’s how Mike Tyson actually grew to become who Mike Tyson was. He used that worry like a hearth and fireplace can both burn your own home down or you’ll be able to cook dinner your meals. In order that’s type of how I exploit my worry.

Ashley:Elijah, thanks a lot for becoming a member of us right now. We’re going to hyperlink your info into the present notes. For those who’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 now.

Elijah:Sure, I’m actually glad that you simply guys had been capable of hearken to me right now. Hopefully I may be that beacon of sunshine to individuals round my age or individuals of all ages who’re type of simply misplaced at midnight and actually need that push of motivation. On the finish of the day, I’m not that lion who’s up prime. I’m nonetheless that lion. I nonetheless have that starvation. I’m nonetheless climbing the hill. When you’re up prime, you’re up prime. So I’m nonetheless climbing that hill. You at all times bought to be hungry. You at all times must attempt. You at all times bought to raised your self.

Ashley:I believe anybody who’s over the age of 19 might be considering proper now. I want I’d’ve began after I was 19,

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

Ashley:There. Could be 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.