Selling our first rental property is a little more emotional than I thought it would be. I think it’s mainly because this house taught us so much and was our “confidence springboard” to getting momentum started to build our business and this business has allowed us to have the life we wanted for our family. I don’t write this to tout what we’ve done – there are so many who have done so much more than us – I write this to nudge those who are on the fence and need some encouragement. The first rental is the toughest by far. Remember that time makes mediocre deals better.
These are a few of the lessons this house taught us. If we hadn’t made a dime, it would have been worth the work for the lessons. We’ve never paid a guru but this house taught us so much and it paid us along the way. This was before we knew about the BRRRR process but we essentially did a “delayed BRRRR” on it. After renting it a few years it had appreciated due to the improvements we had made as well as the market cycle we were in. We did a cash-out refinance and put the funds towards a couple of other projects that we took on and used the BRRRR strategy on.
As things began going well with our tenants, it was this house we were talking about when our first private lenders expressed their interest in what we were doing. They are still doing deals with us to this day.
This is the same house that the felon applicant tried to pay a year’s rent in cash to get us to allow him to be approved. We stuck to our criteria and will never know what the outcome would have been but the outcome we ended up with was several great families who made this house a home and we gained the confidence that property management could be enjoyable and that renters were like us – People. If we’d had a terrible first tenant by taking the cash, which was so tempting, we might have given up on rentals as it would have supported those horror stories some people had told us about landlording.
We paid 20 percent down and bought it for 110K. We put about 5K into repairs and were pretty darn broke at the end of the re-model. We felt we’d tackled a huge project despite it primarily being a cosmetic renovation. We worried that it wasn’t a “homerun” deal like the ones we’d heard about on podcasts. The lesson was that base hits can win games too. This base hit ended up helping us buy two more rentals with the equity we accumulated and refinanced out. It also is under contract to sell and should net us enough to buy a small multi-unit or a few single family houses while deferring the taxes using a 1031 exchange. I hope you see how these little seeds grow into wealth over time. If you’re like me, time moves faster the older I get. I intend to plant as many “seeds” as I can and watch them grow like this one did.
We learned that we prefer smaller houses with lower taxes and that as appreciation happens and taxes go up, the rent doesn’t always increase as quickly. This urges us to reposition into smaller houses with lower taxes. We also prefer single-story houses – especially after a tenant slipped on the stairs and we were sure The Angry Texas Hammer was going to sue us for all the money we didn’t have.
If you are on the sidelines, I urge you to go find a deal and take it down. I know that sounds too simple but it really isn’t. If you find a great deal you can do it. Partner if you need to. Get moving forward. If you think you don’t know enough, don’t worry, you never will know it all. Just start. If we can help, reach out. We want to see all of those who want to do this stuff be successful. It changes lives! It changed ours.
Stay safe and healthy and, as always, keep the main thing the main thing!