I didn’t have a specific goal in mind when I started my real estate journey. At the beginning, I wanted to create another source of income that would help me be less dependent on my daily work in the banking sector. I was in my early twenties and had friends who had been laid off unexpectedly for industrial reasons well beyond their control. I didn’t want it to be me.
I purchased my first property, a single family home in Georgia that I still own today, in the summer of 2007, and then a second property, a two-unit multifamily home in New York City in the spring of 2008.
At the time I purchased this second property, even in the midst of the recession and a temporary drop in value, I was convinced that real estate was the right path for me, as it was something I could carry on while keeping my day job.
It was a wise choice: My real estate scramble allowed me to pay off my $26,000 student loan debt and match my 9 to 5 income.
My last real estate purchase in 2020 brought the number of properties I own to five. My investment portfolio generates six figures, which brings me one step closer to my ultimate goal of financial freedom.
Although I’m not on a FIRE track, my main goals are to work because I want to, not because I have to – and to build generational wealth. Through my online business, OneSavvyDollarthat I started in 2015, I was able to use what I learned from my experience to help others achieve their financial goals.
Here’s how I got started, and my top tips for anyone wanting to get into real estate.
I found the investment strategy that worked for me
There are several types of approaches to property investment. Some of these strategies include:
- House hack, when you buy a multi-unit apartment and live in one unit while renting the other unit
- Partnerships, either with friends or through a syndication deal, which is when someone finds the property and seeks out investors who finance the purchase in exchange for a return
- Invest in out-of-state property
- Repair and flip houses
- Simply buy and hold property
After doing some research, I felt that the best strategy for me, with the lowest barrier to entry, would be to buy and own real estate.
I chose not to go the fix and turn route because I wanted to learn as much about the industry as possible without the added stress of dealing with contractors and construction loans, which can get messy quickly. .
Video by Helen Zhao
Another part of choosing a strategy is determining whether you want to be an in-state or out-of-state investor and determining the pros and cons of each route.
I first decided to invest out of state in Georgia because my local market in New York was, and still is, very expensive. But there are more affordable markets, depending on what you’re looking for.
I established good credit early on
In real estate, having good credit often means access to funds and at favorable rates. From a lender’s perspective, credit gives you the ability to buy something today with the promise of paying it back later.
As a borrower, credit shows how well you can keep that promise and repay loans in a timely manner.
I got my first credit card by accident when I was 19. I went to the bank across the street from where I worked to open a checking account to save $100 I had on me and left with a checking account, a savings account and a credit card.
Video by Mariam Abdallah
I didn’t know anything about how credit cards work. The only clarification I got from the personal banker who opened the accounts was, “It’s just a card you use and pay off every month.” It was the first and only lesson I learned about credit.
I was concerned about getting into debt, so I only used this card for small daily purchases, and made sure to pay it off every month.
In a way, my extreme caution paid off. This first credit card allowed me to buy my first property at 21, because within two years I had a credit score of 721.
I made sure not to incur any additional debt
Your debt to income ratio plays a major role in the loan process, as it determines your ability to repay a loan. Lenders may view large debt as a red flag. I learned that your The debt-to-income ratio can be the difference between achieving your real estate goals and having your mortgage application rejected.
I was still in college when I bought my first two properties. But when I bought them, I knew that the debt might prevent me from acquiring more real estate in the future.
In my experience, before the recession, with money in the bank, good credit and a job with a steady salary, I was able to get 100% mortgage financing. And at that time, for some properties, a 20% deposit was not required as often as it is today. This is one thing that has changed in the industry since I started.
Video by Mariam Abdallah
I ended up taking out a student loan of $26,000 to cover some undergraduate courses and my graduate program where I earned a master’s degree in accounting. I was able to pay it back quickly, in part thanks to the income from my properties.
Once I was debt free, I started looking for properties again.
My best advice is, rather than buying liabilities that can increase your debt, buy assets that appreciate and help you build wealth. For example, I’ve driven four cars since I started my real estate business and I’ve paid cash for all of them. My current car is the one I bought at an auction in 2017 and it still drives great.
It was important to me that with my biggest purchases, I didn’t get into more debt.
I have built strong relationships
I learned that real estate is a group effort, and you need to build a team around you and have strong relationships with financial institutions, lenders, real estate agents and lawyers to help you get the leverage you have need to achieve your goals.
I wanted to buy my first property in Georgia, because of the affordability, the weather, and the thriving cultural scene. Although at the time I lived three hours away, so it was important to work with a realtor I felt I could trust.
This particular agent owned several properties in the area and knew what to look for. So we calculated that he would visit a number of properties and then we would scale it down from there.
Video of Richard Washington
My best advice is to research agents based on the area you want to buy from, get referrals, pay attention to online reviews, and follow them on social media if they’re there. The more information you have, the better.
I have long standing relationships with several banks where I have personal checking and savings accounts, and credit cards, so when it came time to borrow for real estate I was a known quantity and a strong candidate.
I made sure I understood the numbers correctly.
If you are thinking of buying your first property, familiarize yourself with all the expenses incurred after the acquisition, such as mortgage, insurance and taxes, because all of this will determine whether you run with a profit or a loss.
Acquiring a property means you will have to pay initial costs such as appraisal, inspection and application fees, a deposit and closing costs. Depending on which one you work with, some banks expect you to have three to six months of cash mortgage payment.
A carpenter’s biggest rule is to measure twice and cut once, and this rule applies to real estate as well. If you only remember one thing as a new real estate investor, my best advice is to measure twice by performing this type of analysis on every transaction you come across.
Ogechi Igbokwe is a financial educator, real estate investor, coach and the founder of OneSavvyDollar. Real estate has helped her pay off $26,000 in student debt, match her 9-to-5 income, and build a six-figure portfolio. She is the author of the eBook “Don’t Buy Real Estate Until You Read This: 7 Steps to Buying a Profitable Rental Property”.
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