First Time Investor Tips

First Time Investor Tips On Buying Investment Properties

Gustan Cho Associates are mortgage brokers licensed in 48 states

This BLOG On First Time Investor Tips On Buying Investment Properties Was UPDATED On June 20th, 2019

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 that 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

My First Multi-Unit Building As A First Time Investor
Gustan Cho Associates

I purchased my first multi-unit building as a first-time investor back in 1998.

  • It was an 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

Learning Curves As First Time Investor
Gustan Cho Associates

The first thing I did was contact Section 8 and see what market rents were going for.

  • I was surprisingly amazed at how Section 8 paid per bedroom
  • For example, Section 8 paid landlords $700 for one bedroom, $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 average 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

Commercial Loans
Gustan Cho Associates

The first most important step in First Time Investor Tips is hiring the right commercial loan officer. 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 cash-out 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 apartments building the same way
  • Get it via seller financing, use my capital I got from my 8 unit cash-out 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 Tips

Building Wealth As First Time Investor Tips
Gustan Cho Associates

Being a first-time investor can be both frightening and exciting.

Here are some First Time Investor Tips:

  • 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 the invested money back
  • And have an apartment building that which have gotten all the 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 residential rental units on future blogs

Stay tuned!

Gustan Cho NMLS ID # 873293

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