So I thought I would share some of the bad times I've had on my fiurst deal.  Don't get me wrong, I am still passionate about real estate.  But I need to vent about some of the problems I've encountered because of my own lack of knowledge.

Just under a year ago my wife and I bought our first investment property.  An old home converted into Tri-plex that appraised for $137,000.  It was in pretty sad shape.  At the time, none of the units we're ready for renters, however two of them really needed just a good cleaning, paint, a new furnace, and light fixtures (as the old ones had been ripped out). 

The third unit was a smaller cottage behind the larger duplex.  It was in much worse shape.  It needed a much more thorough cleaning, new light fixtures, paint, a new shower insert, new toilet, and more.  It needed some rewiring because the whole house was on a single fuse. But most importantly it needed some more insulation and heat tape on the pipes in the crawl space.  We knew about everything except for the pipes.  Knowing it needed this work and would probably appraise higher once the work was completed we still thought we were getting a great deal when we paid $120,000 for it.

We were desparate for renters when we first got the property.  We knew we needed at least $910 a month the make mortage payments so we rented out the main house to a group of our friends (who are all still in college) and one guy they knew but we didn't.  We were pretty stupid about it.  We set them up for rent at $1050 a month split fairly evenly among the three of them.  No background check, no employment verification.  They could pay their security deposit at their conveniecne. And all on a lease downloaded from the internet.  The only condition was that they knew we would be at the property in the early months still fixing things (like getting the furnace installed).  The only good thing about it was that they were paying utilities.

So the guy we didn't know pays his first month's rent.  2nd month he tells us he is waiting for money from his parents and pays the 2nd month about halfway through the month.  The third month he stops talking to us.  Finally one of the other renters pays that month's rent.  The next month we start posting notices of late rent and he pays a little over halfway through the month.  The following month we were pulling into the courthouse parking lot to file for an eviction when he called us and said he had the money.  We were pretty broke at this point because of another issue that I will mention later.  So we accepted his late payment and things slowly start to turn around.  He keeps paying late but now he has a job and he does pay some of the rent on time.  It isn't until right now that he has finally started paying on time and started paying down his part of the security deposit. (One final note here is that he wasn't paying for his part of the utilities either).

So now about the repairs to the property.  We finished most of the repairs to the big house before the renters moved in except for fixing one running toilet and the furnace.  Then we moved onto the small house out back.  It started getting colder so we were spending less time there.  Finally about four months into it (about the same time as we were getting ready to evict our tenant) we see the light at the end of the tunnel and know we are going to be done within a matter of days.

I go over one day with my daughter to do a few little things and open up the front door which immediatly puts you at a stairway leading into the basement or up to the main floor.  I look down and realize the roll of carpet I had bought and was planning on installing myself was floating in about 3 feet of water. (I didn't know carpet could float but it apparently had an airbubble in it). We were smart enough to know you had to leave the heat on to keep the pipes from freezing however, there was no heat tape on the pipes and the crawl space wasn't insulated well enough.

The long and the short of it is the whole pace is much nicer now than what we had originally planned to fix it up to (mostly because we did a lot of the work ourselves and the insurance company cut us a check).  But during the middle of it all we were pretty stressed out.

It took months more for us to get it all fixed back up and about three weeks ago we finally hired a property manager and the place is now paying for itself completely every month.  When it gets fully rented out (we had one tenant move out early on us) we're expecting between $400 and $500 per month net cash flow.

I don't think my story is particularly inspiring except to say that things couldn;t have gotten much worse but we still faired alright.  If you ever think your property deals are rough, just think back to mine and remember that I found a way to make it work.  With time and perserverance all things are possible.