My First Investment Property: What I Got Right and Wrong

My first investment property was a four bedroom house in Baltimore, Maryland. I bought it in 2018 and lived in it while I rented out the other rooms. Here is how I found it, what I got right, what I got wrong and what I would do differently. This is my experience, not advice for your situation.

I was saving for a different house

For some context, I had been saving up cash for closing costs and a down payment to purchase a home in Northern Virginia, which is a pretty expensive real estate market. I was 23 years old, and I told myself that in two years I should be able to save enough.

I worked full time in my nine to five role, and I worked two part-time jobs as well. I was able to save my first $25,000 in cash.

Then I found out I was accepted to graduate school and would be relocating from Northern Virginia to Baltimore, which is a cheaper real estate market. I was on a time crunch. This was May, and school started in August.

The first house on the tour

I got connected with a real estate agent up there, and I shared with her exactly what I was looking to do, which was house hack the home. That means live in it and rent out the other rooms. My plan was to rent to other students, because I knew I would make some friends within the program I was accepted into.

We went to five homes that day. The one I bought was the very first house I stopped at. I liked it, and it checked my buy box. A buy box is the short list of things a property has to have before you will make an offer on it.

I did not want to spend too much time traveling back and forth to keep viewing properties, knowing I had found one that accomplished at least 80% of my goals. I wrote more about buying in a new city in Buying in a City You've Never Lived In.

So I put an offer in. I believe it was a conventional loan with 3% down. A conventional loan is a mortgage that is not insured by a government agency. After the down payment and closing costs, it came to around $14,000, as best I remember.

What I got right

I lived in the house by myself for about four months, until the start of the winter semester, when I began to rent it out. While I lived there, I made sure to sleep in every room.

It was a four bedroom, so I spent time in each and every room, understanding the nooks and crannies. I wanted to know every inch of the home like the back of my hand before I moved people in, in case there was anything I might have missed.

I also got the rental rates right. I did good research on what students were paying, and on how much of that would offset my mortgage and utilities.

And in my first couple of years, I had a really solid group of roommates. It was an amazing experience.

What I got wrong

I should have had my lease reviewed a couple of times. Small things such as security deposits, the length of the lease and late fees were all new to me, and I had a hard time enforcing them.

Landlord and tenant rules differ by state, and sometimes by city. That is one more reason to have someone qualified, like a local real estate attorney, look at a lease before you use it.

The other thing was separating personal from business. House hacking is a little bit different because I lived there. Naturally you become more friendly with your tenants, and more understanding of them, and there were times I had to navigate that.

What I would do differently

Two things.

First, I would always try to fix problems myself before hiring a third party. Especially today, between YouTube, artificial intelligence and answers online, it is worth getting your hands a little bit dirty and trying to figure it out yourself first, before just throwing money at every problem. That does not mean every job. Some repairs call for a licensed professional, and local rules decide which ones.

Second, I would have tracked my profit and loss much closer. I just knew that I was doing okay, because I was essentially living mortgage free. But that did not excuse me from following some type of process: seeing how cash coming in, cash going out, repairs, maintenance and capital expenditures were affecting the overall investment. Capital expenditures are the big, occasional costs, like a roof or a heating and cooling system.

Looking back, it started with telling my agent exactly what I was trying to do. If you are thinking about a first property of your own, read Find an Investment Friendly Agent With FABA and Saving for a Down Payment. And if you want to be introduced to a Black real estate agent in your market, start at findablackagent.com.