Young investor fresh from Californian seminar purchases first rental property

Posted Thursday, March 9th, 2023 by Enterprise Property Management

Received an email from brand new, young out of town investor fresh out of a seminar in California wanting to purchase his first rental property. He was convinced he could purchase a home for 30K, put 10K into it, refinance and pull out 10-20K equity to buy more all while creating a 15% R.O.I. He wasn’t accounting for all the cost and unforeseen issues that come with a property like that. I went to work viewing all the properties he sent me, drove neighborhoods, took pictures, prepared CMA’s and gave him my honest opinion. I was brutally honest with him about the properties he was pursuing, after 3 months I expected him to move on and find another agent that would sell him a card board box just to make a buck. However; After several months I was able to move him towards a minimum value of 50K, in better neighborhoods with better tenants. The R.O.I wasn’t 15% but the R.O.I was solid and long term, We just closed our first 2 properties and now working on the next 2. Eventually he told me my honesty gave him confidence in his purchase.

I’d rather lose an investor then facilitate a bad investment just to make a commission.

2 house package- both 3/1 average of 1300Sq. Feet.

Market value $110K
Listed $110K
Purchase $95K
Re-hab $6K
Total Investment $101K
Equity $9K
Monthly rental income $1250
Expected ROI 10.5%
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