Our 2010 strategy

Before we purchased our first property in 2010, we decided to come up with a strategy.  We re-evaluate our strategy every year.  Our strategy was to purchase 1 property in 2010.  We also determined that we would stay below $100,000 on our purchases for now.  This is not hard to do in MS, but can be in other areas.  We weren't exactly sure how to go about purchasing our first property.

So we decided to let some people know we were in the market for our first property.  It didn't take too long.  The father of one of my father's friends was looking to get rid of a house he owned.  I don't remember why he owned it, but he was retired an didn't want the "hassle" of a property anymore and since it was paid off would rather have the cash.  They were nice enough to give us 6 months interest free while we lined up appropriate financing.  They sold us the house (with a renter already in it) for $70k.  We paid 10% up front ($7,000).  We paid $450/month (all towards principal) for about 6 months.  When we went to finance we were given a loan for what we owed.  The house appraised for $77k, but banks don't care about appraisal value for purchases (if it's higher than the purchase price).  Let that be a lesson for you.  Appraisal value does NOT matter for a purchase if it's above the purchase price.  Banks lend money based on the purchase price.  They will however lean on the appraisal if it's lower than the purchase price.  The days of lending on appraisal value ended in 2007 (at least it's still that way in 2013).  Also, the days of 100% financing (especially for investment properties) is gone as well.

Once we had the property financed, it wound up being a 15% down payment and finance on 85%.  We received 6.5% on the interest rate.  After all expenses we cash flowed about $100/month.  It was a pretty good property.  It rented for $750 month.  In 2011, we raised the rent to $825 and are about to raise it again.  $75 was a big bump but it hadn't been raised in 6 years.  So now in May 2013, we're cash flowing around $200/month.  Pretty good for our first house.

So that's how our first real year wrapped up.  1 property purchased which used most of our cash.  Our contributions at this point were $600 month in 2010.  Please view our company overview for a quick status on where we stood at the end of each year.