My first property (2001)

I bought my very first property in November of 2001. Even though I had owned a home for several years, I had always been afraid to step into real estate investments. This was odd, since I knew I wanted to be involved in real estate since I was a kid. Monopoly was always my favorite game, and it was my dream to play a real life game when I grew up and had the money.

But I was still scared of the commitment. However, with a lot of encouragement from my new girlfriend (now my wife!), I went to look at a 1 bedroom, 550 sqft condo that was for sale in a decent but not great complex. OK, really the complex was probably pretty much lower class, but I thought it had potential. They were asking $25,000 for the unit and it had been on the market for several months. I met the listing agent after work and he showed me the inside. It was horrible. It appeared that nothing had been updated since the 60's when it was built...not even the carpet. The unit was rented for $350 per month to an older lady who had been there for a while. I offered $18,000 Cash to the agent, unsure if this was an insulting offer or not, but it seemed to be a safe low-ball. The seller of course rejected this offer, but I held to it, claiming that the condition of the unit did not warrant more. After a couple of days, to my surprise they decided to accept my offer. I closed a month later and bought the property using money from an equity line on my house. The seller actually had a note on it and was forced to come out of pocket for a few thousand at the closing table.

Five years later now and I still own this first property and it is still my favorite. The same old lady rents it, although I have bumped it up to $375 per month now, which is well below the market of $500+. But she pays every month on time, so why rock the boat. I did put a regular note on it a few months later, actually getting US Bank to finance it as a second home and took a little out to cover the closing costs I had paid. It became my first of several "nothing down" purchases. The unit is now worth probably $25,000 which is less than others in the complex, but is due to the condition. But still not a bad return and really good considering I have nothing in it and someone else is essentially paying my note. At the same time, I feel good about this one because I know someone who can't afford much is getting to live in a safe complex that is convenient to work. It is not always totally about the money.

And I learned my most important lesson in real estate investing from this very first purchase. I have quoted it to many people, many times since then and will do it again now.

"If you are not embarrassed by your first offer, then it's too high."