How I Bought My First Rental Property in Northern Virginia

Mathew Kuhn Making Money 20 Comments

My Backstory

I’ve dreamt of becoming a real estate investor for several years now. During my senior year of college I got bit by the financial freedom bug and started a finance blog (“Profitable Matters”) where I studied the basics of finance, added my own thoughts and ideas, and then shared what I thought were smart things to do with money. One of the topics that kept coming up in my studies was real estate. 

Ironically, at the time my wife and I had very little money. I considered trying to pursue real estate anyways, but every time I thought about getting into real estate with little or no money, I’d get scared off by the risks and my own lack of experience. So I kept it in the back of my mind, passively dreaming about one day becoming a real estate investor. 

After I graduated from college, we ended up moving to Northern Virginia. I had a pretty good entry-level job offer, and at the time it was close to family. Little did I realize how significant a “cost of living” was. For those who don’t know, Northern Virginia is expensive. Probably not Seattle or San Francisco expensive, but some areas can get pretty dang close! 

That said, we moved into a “cheaper” apartment while we saved for our first downpayment. In my youthful mind, I felt like I was “wasting” money renting. I wanted to feel like a part of my payments each month were going toward something. On top of that, we had a mouse problem and just wanted to get out of the place. So about a year later, we put 15% down on a nice townhouse-style condo (end-unit) and still live in it today.

Unfortunately for us, we had no idea what we were doing and put a little too much trust in our realtor. She told us to offer the asking price (which was already pretty high for the area and at the top of our budget) and not too surprisingly, we got the house. That left us pretty much broke again. Throughout this whole endeavor, I envisioned myself owning rental properties and retiring early, but it was more of a “wish” than something I really thought about pursuing.

Getting Our First Rental

After living in the house for about a year, my wife and I had our first child. She quit her job and we were now living off my income. At this point I wasn’t sure if I’d ever be able to own rental properties. We were a single income family, living in Northern Virginia, with a baby. Even if I did buy a rental, I didn’t think cash flowing would even be possible. I even started looking into long-distance investing with the hopes of finding something cheaper.

Side note – a couple months later, I actually ended up switching jobs. And the great thing about job switching in the tech world is the signing bonus. It wasn’t huge, but it was definitely better than nothing. 

As fate would have it, several months after the job change I received a message from someone on BiggerPockets (an amazing place to learn about real estate). The message was from a Real Estate Agent saying that he worked in the Northern VA area, was also a real estate investor, and he’d be willing to help me reach my real estate goals if I wanted to chat.

We met up the next weekend and drove around to several houses. At each house, he told me why he thought it would be a good deal or a bad one. He answered all of my hundreds of questions and ran through the cash flow analysis of each house at the end. He was basically the complete opposite of the Agent we had worked with to buy our own house.

The cash flows weren’t nearly as high as I had dreamt of, but I knew that the money came from other means as well – forced appreciation, tax write-offs, debt pay-down, rent increases, etc. It also provided some diversification and options down the road (like a HELOC). Above all, I’m the kind of person who needs to be in the game to learn, so I knew this was a stepping stone to my future in real estate. So I reviewed the properties, talked it over with my wife, and started the process of buying our first rental property.

The Purchase

I’m not going to go into specific numbers here. I’ll consider writing a future post with the property breakdown, but I’m a little more guarded with the details since it’s our first rental. I will say that the property was a townhouse, less than 15 years old, priced between $200k and 300k (we got it at a discount because it had been on the market for a couple months), and cash-flows in the hundreds. 

We ended up putting 20% down on the property (through a mortgage broker) and paid for it using the signing bonus I had received, some stocks I had from my previous company, some savings we had, some money from my personal IRA, and a little bit from our emergency fund. On the flip side, we still had my 401k’s, my wife’s IRA, and I knew I’d be getting a bonus from work to help pay back the emergency fund quickly.

The house was pretty turnkey, but we did end up getting a few of the rooms repainted, replacing the countertops in the kitchen with granite, and replacing the water heater. We weren’t really expecting to replace the water heater, but it started leaking and had probably reached the end of its life anyway. Lesson learned for the future.

We decided to do the property management ourselves (thanks to Cozy!) since the cash flow wasn’t huge, it was our first property, and we live relatively close by. We got contractor contacts from our real estate agent, so if any work needs to be done, we’ll hire it out. Luckily, we received plenty of applications (we posted the home on lots of sites, but Zillow especially brought in a good number of candidates) and we approved some great tenants before the first mortgage payment was due.

It was a ton of work, especially since we learned everything (or at least as much as we could) along the way, but all the lessons learned made it worth every minute (not to mention the cash flow we’re now making :)).

Lessons Learned

This post wouldn’t be complete without some crucial lessons learned! I’ll steer away from the nitty-gritty of buying real estate (maybe in future posts) – there’s just so much I learned and I truly believe the only way to fully learn is to do the thing yourself. But I think there are some less black and white lessons that are helpful in real estate and for any other dream you’re thinking about pursuing.

Do The Thing First, Then Figure Out The Details

If you’re like me, you don’t really learn something until you do it. I spent years casually reading about real estate and feeling like I just didn’t understand it enough to jump in. What if I made a mistake? That’s a lot of money we’re talking about! 

Now I approach goals like this differently. Instead of trying to understand everything up front, I now find it more effective to find someone who’s done what I want to do and get to know them on a personal level. Whether it’s email or texting or physical meetups – some sort of live communication. 

Blog posts are great, but you’ll have questions specific to your situation that are tough for a beginner to parse out of generic blog posts. So first, find someone who’s done the thing and know that they’re available if you have questions. You may need to give them a cut of the deal, buy their course, take them out to lunch, or in my case, buy the house through them – but it’s totally worth it for your first purchase.

Next, jump in. This is the fastest way to learn and get over your fears. I know it’s counterintuitive, but it’s effective. You’re never going to fully understand something until you do it. And with real estate, once you’re in, you’re in. Once you submit an offer and it’s accepted, you’re really on a time clock and you have legalities and contracts pushing you to learn and figure things out on the fly. Then you have the pressure of finding tenants before your first mortgage payment. It was one of the craziest couple of months, but also some of my proudest and most productive months.

Make Sure Your Spouse Is Onboard

If you’re not married, make sure the people you date are onboard with your investing dreams. It’ll make things much easier in the future. If you are married, you really need your spouse to be onboard. 

This was a tough hurdle for my wife and I. I wasn’t really into finances when we first got married. So when I started getting more and more interested in investing, my wife was understandably concerned. She had grown up in a very traditional household – work at a company for about 40 years, clock in your 9-5 each day, and then retire. Why complicate things with risk

It took a lot of number crunching and reviewing backup plans and begging before my wife came around. And honestly, I don’t think I would’ve succeeded without her help. With my own 9-5, I wasn’t able to drive down to the house on all the days that applicants could see the house. Having worked at a granite company before, she was also able to manage the contractors while I managed the financing and signing contracts.

Communicate, be understanding, and show your commitment. You may need to give something back in return. But once you’re on the same page, things move much more smoothly. 

Find An Investor-Agent

Maybe I got lucky, but I definitely recommend going to biggerpockets.com and posting on the forum or reaching out to local agents directly to see if they also invest. It was like having my own personal mentor. I was motivated by all the things I was learning, and he was motivated because he wanted me to buy through him. It was the ideal win-win.

Also, you don’t just want someone who knows a lot about real estate, you want someone who is passionate about it. I asked my Agent a ridiculous number of questions and didn’t feel annoying because I could tell he genuinely liked talking about all things real estate. Obviously, they’re not there to just answer your questions. At one point, I actually bought him lunch while I grilled him with questions so we both got something out of it. Always ask lots of questions when you don’t understand something. If you don’t, it’ll cost you later on.

Your First Real Estate Investment Might Be Different Than The Others

For one thing, I now recommend that any beginner invests locally first (within a reasonable driving distance), even if you are planning on investing out of state in the future. This was especially needed in my case as I don’t think my wife would’ve been able to handle anything out of state for our first property. But more than that, being hands-on with a local property teaches you things that you can’t learn with long-distance investing.

You may be thinking, “That’s great, but I don’t want to be hands-on – that’s what a property manager is for”. However, I would argue that you won’t know what to look for in a good property manager if you don’t do it yourself first. Plus, there may always come a time when you need to manage your own property for whatever reason. COVID-19 is a great example of a time when some investors are starting to lose money and may need to step in and manage the properties themselves for a little while. Would you rather learn the skills when you’re 10 properties deep, or at the beginning when you only have one property?

Your first property may also not be as profitable as future properties. Obviously, you want it to cash flow and provide a reasonable return. But don’t let a return that’s “not high enough” keep you from ever investing. Although I got a pretty good property, I knew if I waited I could potentially get a better deal. But all my fears and mental barriers would’ve still been in place and who knows if I would’ve ever pulled the trigger. 

The biggest benefit of your first property is learning and having a baseline for all future properties. I now know what a decent deal is and can make sure that all future deals are better than this one. I now have clout as “an investor” when talking to banks and brokers. And I now have a system for all my future properties (see below). Don’t let high expectations keep you from jumping into something that could change your life for the better.

Create a System For Your Properties

I was listening to an audiobook a little while ago and the host mentioned creating “systems” for your businesses. The way he described it made it seem like something that could make or break a business. Basically, you write down every step involved in a given task so you can later figure out how to automate it or delegate it to someone else. For example, for writing blog posts, I would write down every single step I take – from brainstorming ideas to publishing and marketing the post.

With this in mind, I wrote out steps for each process in my real estate adventure as I did them – finding a good deal, financing the deal, getting the house ready for tenants, finding a good tenant, etc. 

This is great for several reasons. One, I have a terrible memory, so I can refer to my steps for my next property and seem way more competent than with my first. Two, I’ve already been able to use tools like Calendly and Cozy to automate out parts of my system. And three, I now have a baseline I can continue to improve upon as I buy more houses and start bringing other people in to help with each aspect of the business. 

All around, great decision, and I highly recommend keeping track of your systems with real estate and any other businesses you may have.

Do NOT Settle With Tenants

This one is HUGE. I literally bought this property right before all this COVID-19 stuff started. We would probably be in some serious trouble right now (and this post would look very different) if we had made exceptions for applicants because they would’ve been able to move in earlier, but weren’t as well qualified, . Looking back, this was probably the smartest decision we made.

It feels good to get tenants into a property. Especially if you manage it yourself. You don’t need to worry about showings anymore or driving around to meet people’s schedules, etc. But it’s not worth higher risk over the next year or more. The tenants we ended up accepting met all of our criteria, but we only found them after receiving applications from several other people who could’ve moved in sooner (which would’ve meant a free month of rent before our first mortgage payment kicked in), but weren’t as qualified. 

Which leads me to my next point. Be patient when it comes to long-term decisions. Whether it’s a job offer or finding tenants or anything else, don’t just accept the first thing that comes your way. Stop, breathe, wait until you really need to make a decision, and then make the best one with all the information at hand. 

Next Steps

Since my property-buying funds are depleted at the moment, I’m currently content building up some of my other businesses while I save money. It’s also a good time to automate out even more of my systems in preparation for the next property. 

I recently bought a book from BiggerPockets (https://www.biggerpockets.com/brrrr-book) and from what I’ve read so far, there’s some talk around raising money from private investors. This sounds like it could be an interesting option and a good next step in my real estate career. This would also help with future properties as eventually I’ll hit a point where it doesn’t make sense to save 20%-25% for all of my properties. 

With my full time job, an infant and wife, this blog, and my real estate portfolio, I’m really gonna have to systematize things even more if I want to keep moving forward. But I’m sure I’ll make it happen and I’ll be sure to keep y’all up to date with all the juicy updates!

Interested in getting into real estate? Already in real estate? Anything in particular that’s holding you back? Comment below!

Comments 20

  1. These are all great tips! Might have to consider doing something like this in the future – my husband will have some time on his hands after early retirement. Hmmmm.

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      Haha if anything, it gave my wife and I something fun to work on together. Definitely not easy for the first month or two, but now it’s pretty passive.

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      Thanks! And definitely worth looking into at least. I mentioned some benefits in another comment, but the cash flow is one of the major draws for me. Unless you’re investing in dividend stocks, you don’t get the same “current” income from stocks as you do from real estate.

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      Thanks! Yeah there are definitely pros and cons. Stocks have a lower barrier to entry and are more liquid. I like the real estate for the tax and longer term benefits (and cash flow, although I’m still working on that part).

  2. Nice blog! It’s great that you are starting early. We have wanted to do this for years. We have been too conservative and 28 years later still do not have our real estate investments. Now we are getting serious and not letting it pass us by. Great job!

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      Thanks! And that’s awesome that you’re looking into it more now. Honestly I got a little lucky having a push from a real estate agent/investor to get started. If it weren’t for that, I’d probably be starting a few years further down the road. It’s a very big investment and not an easy mental barrier to get over. They say the hardest one is the first! Reach out if you run into any questions.

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      Thanks! There may come a time very soon when it’ll be very good to have some extra cash and be ready to jump in. Definitely let me know if you decide to take the leap!

  3. Great info! I have found with my blog that it made more sense just to jump in and figure it out along the way rather than just gathering info forever and ever and waiting for the “right time” to jump in.

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      100% – this is the one major thing I’ve picked up trying a bunch of different business ventures. I’ve spent so much time just thinking about different possibilities, when jumping in and pivoting as you go is so much faster. Thanks for sharing and congrats on getting the blog going!

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  4. This is a great post with many good points to think about! My husband and I recently sold all of our rental properties (it was a good time to sell and also for us to be done with it), but all of the things you mentioned are very worthwhile if you’re looking into getting into real estate!

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      Hi Tara – that’s awesome, yep now is a very good time to sell if you’ve been looking to get out. With the pandemic, the risk level is definitely higher than before. I’m in it for at least a few more decades though. Congrats and selling and thanks for posting!

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