How do you even get started in real estate rentals?

How do you even get started in real estate rentals? And does it even cash flow? I’m going to share with you how I got started.

My First Time-Buying a Rental Property
How do you even get started in real estate rentals? And does it even cash flow? I’m going to share with you how I got started. I will never forget my first rental almost 18 years ago. I thought it was time that I should buy my very first rental property. I had saved up 20% and had talked to a lender and gotten pre-qualified. I was so scared. It was $63,500 and had been recently repainted crazy colors after the neighboring townhouse caught on fire. Yeah, I know crazy, right? But I saw it as an opportunity. Turns out it was.

Hi. I’m Alisha Collins with RE/MAX The Group and the Alisha Collins Real Estate Team. Thank you for watching. Make sure to subscribe to our YouTube channel for all things real estate and all things Wyoming.

Back to my first rental. Since I had a 20% down and the townhouse was in great shape, I was able to get a conventional loan on the secondary market. My payment was a whopping $395. I know you’re all thinking no way that is happening nowadays. Here is the thing about that payment and how the whole thing came about. My mentor in real estate gave me some great advice right out of the gate, whatever your payment is, if you can get rent, that is double that payment, then it’s a great investment. Now, some people out there want to run a bunch of formulas and figure out the cash payout over 10 years, etc. And we probably have great reasons for this. What I can tell you is that the simple formula I mentioned above has worked out for me time and time again.

Here is the premise behind it. No matter what happens in the real estate market, if you can cut your rent in half and still make the mortgage payment, you will make it even in a horrible real estate market. Now, obviously none of us want to lower our rent to the mortgage payment, but if you have to, then at least you’re not forking out the money. Side note here. I’ve always used this formula regarding principal and interest only. The taxes and insurance are not worked into my formula. What made the above scenario work was that the townhouse I bought was in great shape. I did not have to do a thing before I could rent it to my first tenant, which I will get to in a moment.

That was the only property I’d ever purchased as a rental, and that was turnkey and ready to go. Every property I have purchased since, has not been in good enough condition to go the conventional lending route. So I financed using commercial lines of credit. These are loans that are available most often from local banks that lend you 75% of the purchase price. Sometimes they will even lend you fix up costs. Important to know you will have to pay cash or get commercial lines of credit if you have more than 10 conventional loans. And yes, this includes your personal residence.

Now, back to my first rental. The first rental taught me some of what I needed to know about how to deal with a tenant. I had the best first tenant that paid their rent on time every single month. I walked through the property every six months and fixed things immediately when needed.

Now, the second renter taught me even more about how to be a landlord. To be honest, I actually learned something new about this landlord role every single week, sometimes daily. The second tenant did not take care of the property. When I walked through the property, they had sprinkled the carpet powder on the carpet to make it smell better. They paid their rent one out of three months on time, which meant two out of three months, I was calling them to remind them to pay. They aggravated the neighbors with the noise, etc. This business has developed so many skills, mainly negotiation. When the second set of tenants moved out, we went in and let me tell you, there was at least a dump trailer full of leftover garbage the tenants left in there. I had to replace all the flooring, which was when I discovered the powder freshener that was repeatedly sprinkled on the carpet. I also repainted the entire townhouse and got rid of the crazy paint. Guess what? After all of this, I got almost $200 more per month from $750 and $940. We all have to start investing somewhere. And this was the perfect place for me to start.

Since that time, I have helped many people build their rental portfolio. We actually manage many of the properties we sell to investors. I would love to help you with all your investment goals. Please reach out to us. Let’s schedule an appointment to discuss this further. Remember we want you and your tenants to love where they live.
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