Buying His First Rental at 19 by Doing What Most Newbies Are Afraid to Do

Ashley:
We have heard from our rookie audience that you would like to hear more from true rookies. And today we are bringing on a guest who has one property that he purchased within the last year. Of course, he hopes to eventually retire from real estate, but he is just getting started. He is definitely the inspiration we might all need right now that buying real estate after the low pandemic interest rate is still very possible. This is the Real Estate Rookie podcast. I’m Ashley Kehr, and I’m here with Tony J Robinson.

Tony:
And welcome to the show where every week, three times a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. Now Elijah, welcome to the podcast brother. Super excited to be chatting with you today, man.

Elijah:
Hi Tony. Thank you. It is more than a pleasure to be here with you guys

Tony:
At 19 years old. It’s an incredible accomplishment to already be investing in real estate.

Ashley:
Yeah. Elijah, to start the show off and you went into mention your 19 year, so what were you doing before you bought your first property?

Elijah:
A little background about me. I work at m and t Bank. I’m the vocal custodian there. I’m a boxer, registered boxer within raised gym. I do a lot of fishing, play video games sometimes, but not so much then. So that’s kind of why I came dressed like this and not my suit that I wear at the bank to show I’m not some guy with a top hat and a monocle and I’m just like a normal kid. Most people are calling me a kid still, but I’m kind of an adult now. So I learned fire, financially, independent, retire early after doing some digging.

Ashley:
So Elijah, just real quick, when you discovered fire, what made you decide that you were going to use real estate as your vehicle to reach that financial independence?

Elijah:
And I knew during when I was doing penny stocks and trading all that, I knew there’s no way all the big money getters, there’s no way all the big fish are sitting here doing this. There has to be something different and it’s real estate, which it is crazy enough to think that. And honestly, with it being real estate, I think you have to kind of find your own Why? Just because real estate was kind of the top end. Me starting off in residential, my end goal is to be commercial, eventually move to hotels and big syndications like that. So that’s the end goal. But starting small like this, you got to realize that you have to find love in this. I wouldn’t be doing, there’s the reason why I quit trading and investment and stuff like that. I didn’t love it. I had no control over that variable. In real estate, you have a lot of control. It’s a lot more forgiving and I actually love it. I love saying that I’m the landlord. I love going to my property, rehabbing it every day. It’s something that I love. I’m building quite literally an empire. This is an empire. This is why I love it.

Tony:
Now, Elijah, I’m super curious man, because we have a lot of folks who are, you said you’re 19, but we have a lot of folks who are in their twenties, thirties, forties, fifties, sixties, who haven’t yet figured out how to save the capital that’s required to actually go out and purchase real estate. And these are people who have maybe had two or three decades on you to actually save that money. So I think the biggest question for me right now is how did you as a teenager accumulate enough capital to actually go out there and buy something?

Elijah:
Yeah, that’s a really good question, Tony, which it’s kind of like a caveat, kind of like a trick question kind of because you got to think of it like me being so young, thankfully I took the path out to learn this and I never grew up on bad debt. I didn’t have the time to learn how to improperly use a credit card or how to take on bad debt. And then now I’m in some rabbit hole. I’m the most frugal person ever. When I go to the grocery store, I only go there to get what I need and then I’m out. I’m not getting bag of chips and all this because all that stuff, even though it’s small, it really does add up over time. Instead of driving to my fishing spot, I’ll go ride my bike to my fishing spot. That’s how frugal that I’ll really get.
So yeah, I was 14. Yeah, I would say I was 14 when I first started. I would say a job. I was mowing my neighbor’s lawn for money on the weekend, and then at 16 I actually got my working papers. I worked at Dunkin Donuts for a long time. Well, not a long time, only two years just to save up as much for my car. And then after I bought my car, I was like, wow, I just worked all that time just to buy this car and now my money’s gone. I have a car, but now I have no money.

Ashley:
You didn’t have that gratification of the kind of reward. Yeah.

Tony:
Elijah, I want to go back to your point though about the saving piece because again, the initial capital is where a lot of folks get stuck. So obviously you’re working full-time at 16 years old, which is amazing. But maybe what were some specific personal finance tips that you employed that you can maybe share with the Ricky audience to help them save for that first deal?

Elijah:
Yeah, so going back to how I said because of my age, I really wanted to not start off on the wrong track, taking on huge student loan debt, taking on huge credit card debt and doing all this nonsense. I kind of took the time out to really study and how I can save as much as I possibly can from the initial starting point when I bought my car and went from zero in my head was because I’m so young, I don’t have any bills, I don’t have anything, bills my gas and food that I wanted to really get. So I said in my head, I’m saving everything I can to put this money in because in order to make money, you have to spend money. So I’m saving the most that I can in order to hopefully project me somewhere into wherever I want to be one day, which is here. And from that time, I had no clue it was going to be real estate. I had no clue I was going to buy my house, which is really crazy to think about how in that short amount of timeframe that I switched from saving as much as I can to hopefully use it one day to better myself to now investing in real estate.

Ashley:
After a quick break, we’re going to hear more about how Elijah sourced his first property with an investor friendly agent. Do you need a great agent too? Go to biggerpockets.com/agent. Welcome back to the show. Elijah, when you were saving, did you have a number in mind or did you do any kind of research, get a pre-approval to know how much capital you actually needed to buy your first property?

Elijah:
So I never actually had a budget starting. I invest in Liverpool, New York, which is right across from Syracuse, New York, not that far from Buffalo, which is again, it’s super crazy to be here, Ashley, and he is like, you’re not even that far away. It’s only a couple hours. But yeah, I knew I didn’t want to invest in a single family I knew wanted to go multifamily, literally only about a five or 10% difference between buying a fourplex and buying a single family unit and maintaining it and managing it apart from the cost and why not? So I was hoping to get a fourplex, but the market here in Liverpool was kind of hard for that. So I settled for the duplex, which going back to knowing your market kind of, that’s what I mean. You kind of have to know your market and where you’re buying because with my DTI knew that I needed to have the initial capital, which depending on what loan you’re using, that’s going to be however much you’re going to be putting down.
I needed to have my personal reserves, six months of personal reserves. I wanted to have 5% reserves for the property in case a heater goes out, whatever goes out, I still have that initial reserve set aside, not counting it within the cashflow reserve, CapEx, whatever. That’s kind of when I refine, I didn’t know, okay, what loan product do I really want to use in order to minimize my initial down payment, which is at the end all be all is going to keep more money in my pocket at the end of the day. So at that time, that’s right. When the new Fannie Mae, Freddie Mac, 5% down, that new loan came out.

Ashley:
The conventional one?

Elijah:
Yep. Yeah. Yep. Conventional 5% down Freddie Mae and Fannie Mac. So we used that. And at the time, which is no longer available right now, there was a DL grant for first time home buyers, which my loan officer very recommended me to use. Otherwise my DTI would be way too high for me to afford this. So with those two, that’s how we really initially afforded purchasing the property using that grant, which is no longer, I’m sure other banks have it. I mean T doesn’t right now. So it was only distributed per bank for first time home buyers. So I was really lucky to get a part of that.

Ashley:
Did your loan officer tell you about this grant?

Elijah:
Yes, yes, she did.

Ashley:
Oh, cool. Yeah. Awesome.

Elijah:
That’s the one thing I didn’t know about real estate is you could have an agent who’s not really an investor agent, they’re going to go to the house and they’re going to show you cabinets and stuff like that. They’re not going to really show you the divot in the ceiling. That’s going to be a big CapEx problem or how the area is that’s going to be in the market rent. So with my lender, I knew I wanted to have a real estate investor friendly landlord lender, which me working at the bank, I literally sat right across from her on Wednesdays. So it was a lot easier to communicate with her versus having to do it over email or everyone call it like that.

Ashley:
And for anyone who isn’t sitting right next to a lender, you can go to biggerpockets.com/lender. And I think when you are talking with lenders, that is a great question to add to that initial consultation is do you have any grants available? Great question to add.

Tony:
Just one follow up to that too. And Elijah, you make a great point, and Ashley and I have talked about this in the podcast before, but as you are shopping for especially your first real estate deal, when you go talk to lenders, don’t necessarily tell them, Hey, this is the loan product that I want. The goal and the better strategy is to say, Hey, here’s the goal of what I’m trying to accomplish. I want to buy a small multifamily, and when you say Liverpool in the Liverpool area, and hey, what do you think is the best loan product for me? And then let them assess your entire situation and say, well, hey, Elijah, you’re actually a first time home buyer, so we can use this and we can combine it with this, and now you’ve got a really low cost loan product to use. So important thing you walk into the bank and you say, here’s my goal. Don’t walk into the bank and say, here’s a loan product that I want to use.

Elijah:
Exactly. They’re going to stick you with that.

Tony:
Yeah, yeah. They’ll just give it to you. Right. So Elijah, we have a sense of the buy box. We have a sense of the kind of debt that you used, but I like to maybe get into some more specifics about the property itself. So we know it’s a duplex. How did you actually find this deal?

Elijah:
Yeah, so it was actually through my realtor who I found on BiggerPockets.

Ashley:
Awesome. We love that. In the forums or on the agent finder?

Elijah:
On the agent finder, what I did is I put in my, okay, I’m going to get into something that you shouldn’t do in a second, but Steven, thank you so much for everything. I wouldn’t be here without you, which I found him on the BiggerPockets. So again, what I did do, which I don’t think you should do, is I went on the agent finder and I messaged every single one of the agents to kind of just find who I really wanted to work with. Because before I got into finding an agent, one of my workers at the bank kind of recommended me to an agent, but he was one of those agents who aren’t really a real estate investor agent. So after messaging all of those agents on the BiggerPockets forum, I was kind of like, okay, I want to go view. How am I going to know?
How are you going to work for me? If we’re just sitting here talking, we’re not actually viewing their properties. And I’m actually glad I did this, which I’m not recommending again. So I visited a property with one of those agents, correct, and I told them from the very beginning that this is my first property I want to, and I’m talking to multiple other agents just so I can see how things go. So viewing the first property, the first agent, I’m not going to say any names or anything like that. He was kind of just the other agents kind of just let me walk through. He wasn’t really showing me, look at this dip in the ceiling, that’s going to be a huge CapEx problem. Look at the foundation. That’s going to be another huge CapEx problem. He was kind of just letting me walk out and feel it out the same.
So I was like, okay, maybe that’s just how it is, maybe it’s not. So I went to go review it with the other agent. This wasn’t Steven, and it was kind of pretty much the same thing. And I was like, okay. But the moment I talked to Steven, it was a game changer. Within my first couple sentences, I was like, I’m kind of trying to escape the rat race. I see my path through real estate. And he was like, oh my gosh. A lot of people talk to him and they want to go view properties and all this stuff, but they haven’t even read a book of Rich Dad Port Avenue or something like that. They haven’t begun to get their first step of self-education before trying to go out and do all this stuff. So the very moment that I even spoke to Steven and walked into the property, he was like, look at this, look at that.
Look at this, look at that. You don’t want this, you don’t want that. I wouldn’t buy this. I wouldn’t do that. And that’s the realtor who I wanted. I got a little bit backlash from that because working with Steven after that, the other two realtors who I kind of was like, okay, not to really say I don’t want to work with you anymore, but kind of just terminating the relationship, not like that I owe them anything. I was only viewing the property. You only get the money off of the sale, off of the property, and I kind of got a relationship backlash or that, why are you talking to this realtor when you’re talking? You know what I’m saying? Yeah.

Tony:
And Elijah, you said that you don’t recommend doing it that way, but honestly, I think there’s a lot of value in getting a good feel for an agent before you actually decide to work with them. Now, I’m not a real estate agent, so don’t quote me on this, but obviously with the legal changes, the NAR settlement that happened earlier this year, I’m almost certain now that before an agent can even show you a property, you have to sign a buyer’s representation agreement now. So that exact strategy might be a little bit more difficult, but there’s still other ways, I think, to suss out who the agents are and which ones you want to work with. So it sounds like Elijah, this investor-friendly agent that you met through bp, they were the ones that found that duplex for you. And was it just listed on the MLS?

Elijah:
Yep. We visited, it was every single weekend for that initial, it was January towards the beginning of January where I was like, okay, when am I? I’m done waiting in time to pull the trigger. Met Steven from then until April. We were visiting properties every single weekend, and so it was this one property, it just came on the market. He sent it to me and he was like, I think we should check this out. I was like, okay, let’s go check it out. And the moment we got there, it’s an A class, I would say it’s an A class neighborhood. It is definitely a class neighborhood. It was very good walkthrough and all that. And at the end of the walkthrough he was like, yeah, we’re not getting this. There’s no chance. It was just that good. And he was like, I myself would put an offer on this if you don’t. So that was kind, okay, I got to do this. But he was like, we’re not getting this. So he is like, do you still want to put an offer on this? I was like, yeah, well why not?

Ashley:
Yeah, you might as well try

Tony:
Elijah. One quick follow-up question. When did you actually close on this property?

Elijah:
It was July 31st

Tony:
Of this year?

Elijah:
Yes.

Tony:
Awesome. So the reason why I ask that is because there’s a lot of real estate investors who say that there are no good deals on the MLS, but I think you just proved that depending on your strategy, depending on your location, depending on your kind of business plan, there are very much still deals available directly on the MLS. And kudos to you for using that. It was an easy resource for you.

Elijah:
Yes, definitely. I do think it’s a little bit of luck because there was 10 investors who looked at the property before me, and I’m technically not the first place winner, the first place buyer. His lender couldn’t, or his lender decided, you can’t afford this. So they backed down to the second place buyer who was me. So in some way I think it was kind of luck, but not really, because I’m the one who put in this time, dedication, education and determination, blood, sweat, and tears to actually be here. So in some way I think it’s a little bit of a mix.

Tony:
Alright guys, we have to take our final break, but more from Elijah on how to break into today’s market as a rookie right after this. Alright, let’s jump back in with Elijah.

Ashley:
So what was the actual asking price of this property?

Elijah:
So it was 165,000 and I put in an offer 180, which was my highest that I was going to go.

Ashley:
And did they accepted it right away or did you have to counter with them at all?

Elijah:
Yep. So because the first place winner, I’m not sure how much he offered, it was probably way above 180, but his lender said, Nope, you can’t afford this. So they kind of just went down to the second solution.

Ashley:
So then they came back to you. And that is why it is always so important to put an offer in because you never know what could happen if there is an offer higher than you, because I’ve had that happen before too, where something happens and they come back to me and say, you know what? We’d actually like to take your offer. So such a great idea. Patience put in that offer no matter what, and thank goodness you did. Yeah. Okay. So now you’ve got this property. What were you looking at as far as the rehab? How much did you estimate for the rehab and how much did it actually cost to do the rehab on the property?

Elijah:
So that’s kind of something that I’m still in the middle. I’m myself am doing the rehab. I inherited one side of the unit, so I don’t plan on rehabbing that until the tenants move out. The other unit, the first time I walked into there, I was like, oh my gosh, I’m going to have to rip down this wall. There’s a lot of cracks in the wall and stuff. I’m going to have to rip up this floor. The floors were completely shot when I said, oh my gosh, I’m going to have to rip down all these walls to all the cracks and stuff like that. I didn’t realize that the walls were plaster and not drywall. So all I had to do was scrape and joint and whatever. It’s not drywall or it’s water. Damn drafted tape, take it all out. And the floors were just extremely well worn.
I didn’t have to take ’em up. All I have to do is take a drum stander to it. So it’s simple stuff like that, which kind of saved me from the moment that I purchased this property. And I’ve been doing rehab on this every day. I’ve spent probably $10 on just stuff, even only $10 because most of the stuff I’ve already had, or I’m just getting from my mentor, working under his wing for a long time. I’m kind of just using his tools. I thought I was going to have buy all these sheets of sheet rock, go in there, take all it. But in reality, it’s just a lot. Nothing’s hard. It’s just a lot of tedious work, like scraping the walls and then taping and then jointing, and then painting over that and then drum sanding, applying the polyurethane, stuff like that. It’s really just tedious work. Nothing’s hard or really that expensive.

Tony:
Should learn a lot Elijah is what it sounds like, man.

Elijah:
Yeah, it’s a lot of YouTube university,

Tony:
A lot of YouTube university, which is good. I guess one last follow up question. You said the purchase price was 180, and I know you had the grant that assisted with the down payment. So Elijah, what was your actual out of pocket expense to purchase the property?

Elijah:
Like my cash to close or what my loan value is right now?

Tony:
Your actual cash to close, how much did you have to bring to the table?

Elijah:
So my cash to close was around, it was 19, around 19,000.

Ashley:
And that was with closing costs? Everything.

Elijah:
Yep. Everything,

Ashley:
Yeah. Very nice. For a conventional loan. And what was your interest rate on this loan?

Elijah:
It was, so I was supposed to have a lower interest rate because I’m an employee of the bank, but because I was able to get that loan, they’re like, nah, you can’t. That’s the funny thing about underwriters

Ashley:
Can’t double dip.

Elijah:
Yeah. So it was 6.5.

Tony:
That’s actually pretty good.

Elijah:
Historically, this is what a lot of people don’t see is historically interest rates were a lot higher than some six, seven, even 8%. And even worrying about that small interest rate, the appreciation of your house appreciates by 5% every year. So while you’re worrying about some 6% interest rate there, property of your house of the value is going up by 5% each year. So it doesn’t really, a lot of people don’t really get that part.

Ashley:
Tony, I think one takeaway for you here is that Sean needs to get his next job at the bank while he’s in high school so that he gets a discount on interest rate to buy houses for you. There you

Tony:
Go. So Elijah, I guess what would you say, because you’ve taken this deal down in a time when a lot of people with maybe more life experience, with maybe more cash, with maybe more resources have been sitting on the sidelines because they feel that 2024 isn’t the time to invest in real estate. I guess, what would you say to those folks you think that maybe right now is not the best time,

Elijah:
Not the best time to be sitting on the sidelines,

Tony:
Not the best time to invest in real estate?

Elijah:
Honestly, you just question really why? Because in my eyes, 2024 is kind of the golden age to be investing in real estate. So there’s people who think that not investing right now is going to get you anywhere because the interest rates and all this stuff. Investing in real estate is not about timing the market, it’s about time in the market. So it doesn’t really make sense to be sitting on the sidelines. And I kind of thought that that was my ideology too, is if I just wait it out and wait for the interest to go lower and stuff like that, things’ are going to get a lot better. But how I just saying it’s about time in the market, that’s how you make the most money is through cashflow and appreciation and outweighing all those other stuff that of course is going to affect the market that you don’t really have a controllable variable over kind of getting over that fear is what is really going to determine to turn the tables. The discussion I had with my mentor LaShaun is it was like I took a year of just going through financial education, how to actually manage the property, accounting, insurance, stuff like that. A whole year of just educating myself before and obviously saving the capital to actually pull the trigger to LaShawn. It was kind of like, why? What are you waiting for?
And the end all be all, it was just fear. And to him he was like, what are you afraid of? And it’s just all the other variables that everyone like, what if the house burns down? Or what if this goes on and I don’t have enough money saved up? But at the end of the day, that’s just fear. As long as you’ve saved, as long as you’ve done what you needed to do on your terms of due diligence, then that should all be taken care of. At the end of the day, if that ever does come up,

Tony:
Elijah, you bring up fear, which I think is an important thing for us to probably close out with. But fear is sometimes a good thing, right? Because if you are operating inside of your comfort zone, you’re typically not fearful. But if you’re operating inside of your comfort zone, you’re also not growing, you’re also not getting better. So if both of those statements are true, then the only way that you can grow as a person, as a real estate investor, as an entrepreneur is to step outside of your comfort zone, which always induces a little bit of fear. And I think the question for the Ricks that are listening is what kind of person do you actually want to be? Do you want to be the person who continues to let their fears counsel the action, the actions that they do or that they don’t take? Or do you want to let your goals and your visions be the thing that drives your next step? So I know a lot of folks are sitting on the sideline, they have that fear, but guys, fear is a good thing because it means you’re stepping into something new. And for you, Elijah, again, super impressive. You’re able to break past that and do that scary thing, and obviously it’s worked out pretty well for you.

Elijah:
Yes. To add on to that really quick, Tony, me being a boxer, there’s not really anything scarier than getting up into that ring and knowing the guy across from you is trying to knock your head off. So how Mike Tyson’s trainer Cusato said, everybody has fear, and if you don’t have fear, then either you’re lying or something’s wrong and you should go to the hospital like a deer. Yeah, like a deer in the middle of the woods. Once he hears that twig of a snap, he’s gone. That fear keeps him alive. Just like how it keeps us humans alive. It’s a natural instinct like what you should be using. And that’s how Mike Tyson really became who Mike Tyson was. He used that fear like a fire and fire can either burn your house down or you can cook your food. So that’s kind of how I use my fear.

Ashley:
Elijah, thank you so much for joining us today. We’re going to link your information into the show notes. If you’re watching on YouTube, it’ll be in the description. Thank you so much for taking the time, giving back, and sharing your journey and providing so much information to the rookies that are listening today.

Elijah:
Yes, I’m really glad that you guys were able to listen to me today. Hopefully I can be that beacon of light to people around my age or people of all ages who are kind of just lost in the dark and really need that push of motivation. At the end of the day, I’m not that lion who’s up top. I’m still that lion. I still have that hunger. I’m still climbing the hill. Once you’re up top, you’re up top. So I’m still climbing that hill. You always got to be hungry. You always have to strive. You always got to better yourself.

Ashley:
I think anyone who’s over the age of 19 is probably thinking right now. I wish I would’ve started when I was 19,

Elijah:
And that’s what everyone is saying to me, which is why I am

Ashley:
There. Might be a little remorse and regret listening to this episode too. But Elijah, congratulations on making such smart decisions at such a young age. Thank you again for coming onto the episode. I’m Ashley, and he’s Tony. Thank you so much for listening to this episode of Real Estate Ricky.