This Was My Very First Real Estate Deal
The Amplified Impact Podcast
December 12th, 2023
Ever thought you needed a fortune to start in real estate? I’m here to share my story and bust that myth.
I jumped into the game using an FHA loan with a modest $30,000 and a credit score of 600.
I bought a triplex for $246,500, lived in one unit, rented the rest…and I let the property pay for itself.
Within nine months, its value soared to $375,000.
Whether you’re diving into real estate actively or seeking passive investments, there’s a way in for everyone.
TWEETABLE QUOTE:
“Investing in real estate is not just about investing in a property, it’s about building a real estate investing company. Treat it like a business, and it can set you up for success.”
– Anthony Vicino
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Episode Transcript:
Anthony Vicino:
Alright, so one of the things that I get questioned on a lot in the comment sections on YouTube is always around the idea that when I got into real estate, I was in debt, I didn’t have a lot of money, I had terrible credit, and I didn’t have much to my name at that point. And one of the rebuttals that comes up time and time and time and time again from people who don’t understand real estate, don’t live in breathe into that world, don’t really have a deep understanding of it. Their opinions of real estate or opinion on these topics is stronger than their baseline understanding of it. And that’s a recipe for disaster, especially when you are just moving through the world, operating under the assumption that you are correct in your perspective. And I get that a lot. And people being like, this guy’s full of shit because there’s no way that anybody’s going to give you a mortgage on a building when you’re broke and blah, blah, blah, all this stuff, right? That’s without understanding the context, the picture, and more specifically the nuances of real estate. So I just wanted to share a little bit of my journey and how I did get started and how you could as well. Depending on where you are financially, you don’t need to be as far along on the journey as you might assume.
Anthony Vicino:
I didn’t know this at the time. I swear to God, it was like having the scales pulled off my eyes when I finally saw the truth of like, oh my God. People that are getting into real estate, they’re not necessarily already millionaires, they’re not already billionaires. Normal people can get into these investment vehicles in many, many different ways. And the way that I chose to do this was through something called an FHA loan. Now, the idea behind an FHA loan is it’s for first time home buyers. I think the FHA stands for first time Homebuyer association or something like that. I don’t know exactly, but it’s a program that’s government subsidized program that’s designed for first time homebuyers, young people who maybe don’t have great credit, they don’t have great credit history, they don’t have a ton of money, they don’t have all these things.
Anthony Vicino:
They don’t have enough money saved up to be able to put down the normal 20 or 25% required on a commercial mortgage. So the FHA is really designed for people who are already coming from a disadvantaged financial position. And when you understand that, there’s actually quite a lot of loan products designed like this. You can start to look for them to take advantage of the opportunity. Now, there are some nuances and some downsides to the FHA. I’ll talk about here in a second. But for context, at the time when I got my FHA loan, I had probably around a 600 credit score. And that’s not like a high six.
Anthony Vicino:
I’m talking like dead on around 600. It is not great. I had $7,500 saved up, or I had $7,500 for the down payment, and I had about $20,000 in reserves. They like to see reserves. So all told, I had about 27, $30,000 to my name. That was my starting nut. And so that’s a lot of money. But if you’re making 50, $60,000 a year, you could be putting away a sizable portion of that each month and have that saved up within just a few years.
Anthony Vicino:
And so going into this at the time, also, it’s also worth noting I was only pulling a salary of around $40,000 when I got into my very first building. And that was from a business that I owned. And that makes it even harder in a lot of cases to qualify for these loans. When you have a W two salary being paid by somebody else, not your business, then the banks actually look on you more favorably. But I went into this building, so it was a triplex that I negotiated it down to $246,500. And this was in a market that I knew that building probably should have been going for closer to 300, $310,000, and so picked it up for about 50 ish less than what they could have gotten for it. And the reason for that, I think, is largely luck. I think part of it is relationship building and just being somebody that the seller wanted to do business with.
Anthony Vicino:
The building was not in the greatest neighborhood. When you’Re starting off and you’re trying to find these deals that you can make your money go farther, sometimes you have to go into rougher neighborhoods. And this wasn’t a bad neighborhood, but it wasn’t a great neighborhood, and there really wasn’t any kind of future for this neighborhood. It wasn’t in the path of progress, meaning, like, other businesses and stuff are moving in and they’re going to make the neighborhood better. It wasn’t like that. So there wasn’t like a great long term outlook for this building, getting what we call organic appreciation. That’s the kind of appreciation that occurs when the market just generally improves. Looking back on it, the building was actually very good.
Anthony Vicino:
For me and where I was and having to learn the processes and getting my feet into the game. But I would not go back to that neighborhood. I wouldn’t take that investment again. But when you’re young, you can bear to take more risk, and you should, you have more time to recover from it. You have to go be willing to do things that other people aren’t willing to do. So picked up this building for $246,500. I got an FHA loan, which only required that I put down. I think it was like three, three and a half percent.
Anthony Vicino:
So I put down a down payment of $7500. I had 20,000 in reserve. And so I bought this building, this triplex with three separate living domiciles inside of it for $7,500 out of pocket. I moved into one of the units, which was a two bedroom, and I lived in one of the bedrooms, and I rented out the other bedroom to a guy that I found on Craigslist. He paid $600 a month for the one bedroom. I lived in the other one other bedroom and then the other two units in the building. I think it was a one unit and it was a single bedroom and a two bedroom. The single bedroom I think we rented out for like, 850 or 900 by the time we sold it.
Anthony Vicino:
And then the two bedroom, I think we were getting right around 1000 to 1100. And so you do the math on all this. 600 plus around 800, plus another thousand or so, it was pulling in like $2,300 per month in income, whereas my mortgage on this thing, a mortgage on $240,000, was far, far less. And so all this is to say, I was cash flowing a couple of $100 every single month and getting to live for free. And I think that’s the real beauty of this situation. It’s called house hacking. I was living in the bedroom. I already need to pay housing.
Anthony Vicino:
And if I was going to rent out that one bedroom somewhere else, it’d probably cost me $600 to $800 a month. But now I’m not paying that. Now I’m actually getting about 200, $300 of pure cash flow per month on this asset, and I’m also not having to pay rent. So all told, I’m saving around $1,000 a month just by doing this deal. Right? And so after twelve months, that’s $12,000. That’s pretty damn good. Well, what ended up happening with this asset was nine months later, I knew I had bought it at a really good deal. But what I didn’t realize is that I actually bought it at a fantastic deal.
Anthony Vicino:
I went back nine months later to refinance the asset after I had done some improvements to the property, went back to the bank and they reevaluated it for $375,000. So that’s one hundred and twenty five K more than what I paid for it. So what I did then was I refinanced that asset and the new loan that they gave me was for like 70% of the new valuation of the 375 or whatever. And so really what that means is the bank is coming in, we’re getting a new mortgage, we’re paying off the old mortgage. The new mortgage is more because it’s now 70% of the 375. And I can’t do that math off the top of my head, but it’s more than my initial mortgage, which was 240 or so. Right. But what it did was with the FHA loan, you have something called your.
Anthony Vicino:
What is it? I can’t even remember your PMI. So it’s a certain type of insurance that is on these assets which because you put such little money down, they want to make sure that you’re covering that. So that’s like a couple of month for me. I think it was like $160 per month. But by refinancing it, going into the higher loan to value, so I had more equity in the building. I was able to get rid of that cash flow even more. But the beauty of this system was that the bank, after they pay off the original loan and they have this higher amount, let’s say it was for 310. So 240 of that goes to pay off the old loan.
Anthony Vicino:
And then that means 60K is given back to me in the form of a check. It’s non taxable. It’s just money in the bank immediately that I can go and redeploy. And that’s what I did. I took that money that I got from the refinance and I went and bought another asset and I ended up moving out of that triplex and moving another tenant into there. So now instead of having me living in one of the bedrooms, not paying anything, I had put somebody else in there. They paid 600. So now it’s cash flowing even better than it was before.
Anthony Vicino:
So all this is to say I was able to get into this asset with very, very little money out of pocket, with very low income, with not great credit. And granted, I got really lucky with the timing of everything I caught the organic market appreciation. I couldn’t have seen that coming. I shouldn’t have gotten that lucky. But all told it was a way for me to get into the business, learn the ins and outs of it, and it set me up very, very well for everything that I’ve done subsequently. Because really, just over the years, I’ve just done a variation of that same play over and over and over, just with bigger and bigger buildings. Instead of buying a building now for 246,000, now I’m buying buildings for 10 million at a time. And then we’re doing the same thing.
Anthony Vicino:
So we’re making the building go from being 10 million when we buy it to being worth 12 million, and then we’re taking that $2 million difference and we’re pocketing that. Right? So that is in a high level, my first real estate deal. And I don’t know if where you’re at in your journey, if that’s going to be the plan that works for you, but just realize that there are a lot of ways to get involved in real estate and to benefit from it. But the key I think you need to be aware of is to answer the question, do you want to invest in real estate, or do you want to build a real estate investing company? What I did was I built a real estate investing company. I went into it, treated it like a business, and I treated it like my full time job. If you just want to passively invest in real estate, and you don’t necessarily want to be a landlord and do all the work that goes with building a business, aka, you don’t want to have a side job, then there are other ways to invest in the real estate, specifically get the benefits of it without having to do the work, which is one of the things that we do now in one of my businesses is that we bring investors into our deals. We buy the buildings together, and then we own and operate them on behalf of the group. So that’s just an example, but that’s neither here nor there.
Anthony Vicino:
Okay, so that’s going to do it for me, guys, I appreciate everybody for being here. Thank you. I hope this brings a little bit of value, a little bit of a perspective maybe on real estate in a way that you didn’t know before. Maybe it gives you some insight into how you can get involved, and I hope you do, because it’s an awesome vehicle. So that’s going to do it for me. Guys, catch you guys back around these parts tomorrow until fill, then stay hyperphilled.
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