My Experience As A First Time Investor

Investing In Real Estate

First Time Investor Tip

I started my full time career as a stockbroker and investment banker fresh out of college.  I really enjoyed my work and was good at what I did and got promoted within three months of working to become an Assistant Manager and eventually regional manager.  I ultimately opened my own company and eventually went into investment banking.  I always made a lot of money in the securities business, however, the reason why my ten year career in the investment banking and securities business came to an end was because whether my clients made money or not, I always made money and I had no control over the investments and securities markets.  I decided to get into conservative investments and decided that becoming a real estate investor was my calling.

My First Multi Unit Building As A First Time Investor

I purchased my first multi unit building as a first time investor back in 1998.  It was a 8 unit apartment building in the ghetto of Chicago’s West Side.  It was located in the highest crime district and the sellers were asking $160,000 .  Rents were at $250.00- per unit but I saw major potential in buying this property and doing well with it.  I spoke with the seller and asked if he can give me owner financing.  I asked the seller if he can give me 100% seller financing, I will invest whatever it took to get the 8 unit apartment building rehabbed and get Section 8 tenants.  The seller agreed and decided to give me a shot.  The 8 unit apartment building was now mine and it was my job to renovate it with the limited budget I had and get it refinanced so I can pay off the seller financing.

Learning Curves As First Time Investor

The first thing I did was contact Section 8 and see what market rents were going for.  I was surprisingly amazed how Section 8 paid per bedroom.  For example, Section 8 paid landlords $700 for one bedrooms, $1,000 for two bedrooms,  $1,300 for three bedrooms, $1,500 for four bedrooms.  The 8 unit apartment building I purchased were all one bedrooms but they all had dining rooms.  The first thing I did was convert the dining room to a bedroom so my 8 one bedroom apartment building was now all two bedroom units.  My rents went from an average of $225 per unit to an avery of $950.00.  I invested a total of $25,000 to refresh the 8 unit building.  I replaced every private tenant with tenants who had a Section 8 Voucher.  I was now ready to refinance.

Commercial Loans

I hired a mortgage broker and got the refinance process started.  I was amazingly surprised that my 8 unit building appraised at $400,000.  The mortgage lender was willing to give me an 80% loan to value mortgage loan.  I accepted the $320,000 cashout refinance.  I paid the $160,000 first note the seller was holding and had just over $160,000 in cash to use it towards a purchase of another apartment building.  I had enough capital to get two more apartment building the same way.  Get it via seller financing, use my capital I got from my 8 unit cashout refinance to improve and stabilize the property and add Section 8 tenants.  Then get the building refinanced and pay off the seller financing and you get additional capital to go and repeat the process.

Building Wealth As First Time Investor

Being a first time investor can be both frightening and exciting.  If you play the cards right and think things through, you can own an apartment building with very little money or no money, rehab it for very little cost, rent it to paying tenants or Section 8 tenants, get it refinanced, get all of your money back, and have an apartment building that you have gotten all your cash out and then some but yet the building is generating positive cash flow every month.  I used my system for many years where I had just under 3,000 residential apartment units in three states and accumulated millions of dollars in equity.  I will cover more on how to go about being a first time investor as well as how I accumulated just under 3,000 residental rental units on future blogs.  Stay tuned!

Gustan Cho NMLS ID # 873293

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The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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