My First Investment Property, Age 18

My First Investment Property…

I was 18 years old and barely out of high school when I bought my first investment property. Actually, I should really say “stumbled upon” my first investment property. It was a family deal, driven mostly by my parents.

Now before you go thinking that I was born with a silver spoon up my butt, I should let you know a few things about my upbringing:

First, my Mom and Dad are high school sweethearts. Met when they were 15, married at age 19, started having kids immediately. Totally broke, totally in love, supporting 4 kids when they were just 25 years old. No college education, my parents were barely scraping by financially. I grew up eating porridge for breakfast, wearing hand-me-down clothes, and sharing a small bedroom with all 3 siblings for most of our childhood.

BUT – My parents were always good at budgeting. Eventually, they ended up buying our family’s first home on my 10th birthday, borrowing some of the down payment from my grandparents. (Finally my sister got her own room – I still shared with my 2 brothers). Needless to say, my upbringing was modest at best. So when my parents sat me down to talk about this investment property idea, they were figuring it all out for the first time. It was their first investment also.

Jump to section:

Deal Overview and Structure

Ongoing Work and Learning

Financial Results and ROI

What if We Put Our Money Elsewhere?



“Your first deal should always be about experience. Not making money.” – Brandon Turner, BiggerPockets


Looking back, this statement is so true. I learned so much from this first deal, and the money made was icing on the cake.

About My First Deal:

It was 2003, and my Dad was working sales at a telecom company. One of his older coworkers announced that he was selling a rental property, and asked my Dad if he wanted to buy it. Here are the property details:

  • 2 Bed, 1.5 Bath Townhouse
  • Great suburb, 2 miles from the city
  • Good condition, no major renovations needed
  • $195,000 Purchase Price
  • Rents for $700 per month

I always knew that “real estate is a good investment” but had no idea how to analyze a deal or what “good” looked like. Knowing what I know today and with my current investment criteria, I would have never invested in a property with numbers like this. Not at all. (I’ll share some of today’s investment criteria towards the end)

The Ownership Structure:

Dad and Mom proposed that we partner together with a 50/25/25 ownership structure. This was to be strictly maintained for all ongoing expenses and eventually profit-sharing.

Here’s what it looked like:

Ownership Purchase Price Downpayment
Mom/Dad 50% 100k ~$15k
Joel 25% 50k ~$7k
Brother 25% 50k ~$7k
Totals 100% 200k ~$30k


Doubling Down:

After a few years, somewhere in 2005, my parents offered to let me purchase an additional 25% stake in the investment. I had a bit more money saved at that point and was ready to do something with it. Since the property had risen in value, we got an appraisal and worked out the new numbers.

Property Value Increased to: $240k
25% of the new value: $60k

I went ahead with it, and assumed the appropriate 25% portion of the existing mortgage. I paid my parents cash for the equity that I was acquiring.

But Then Came Additional Work:

Up until that point, I hadn’t really done any real ‘work’ on the investment. (TBH even though it was located in the same city/state, I hadn’t even visited the place or seen it with my own eyes!) But since I now owned the biggest stake, my Mom made me take over the accounting and bookkeeping.

Mom was a fantastic note taker and record keeper and had been teaching me to do the same from a young age. My Mom and I sat down at some point during each month to work out all the incoming rent, minus expenses, minus property management,  and monthly fees like insurance and taxes etc.. We had set up a partnership “float” account for all the incoming and outgoing money.

This is where the actual learning began.

I’m no mathematical genius, but it didn’t take me long to realize we were losing money each month on the property. We had a negative cashflow. It was a small, manageable amount. I had never really noticed because I was contributing more than I needed to each month with my high savings rate.

I figured out this system wasn’t scalable and sat down with my Dad to discuss the investment:

Joel: Hey Dad, looks like we’re actually LOSING money on this investment

Dad: No we’re not. You’re not looking at the whole pie.

Joel: What do you mean? Our rental income barely covers our monthly mortgage, and all the other monthly fees are paid by us each month.

Dad: In the long run, we’ll make all that money back, and more.

Dad then explained to me about the small rental increases, tax benefits and deductions, principal pay down, and continuing appreciation of the property. Although we were losing a small sum each year, we would eventually sell the place for a large profit.  (Funny, I think my Dad took a Rich Dad Poor Dad course – which teaches you the exact opposite strategy and to never acquire cashflow negative properties).

First Investment Property Results:

First Investment Property Results

In the end, Dad was right. We did end up making back all of our invested money, and more. Due mainly to these contributing factors:

  • Rents were consistently raised as tenants turned over or renewed. My estimate is this averaged to 5% raise in rents per year.
  • Improvements and preventative maintenance allowed us to increase rents, but more importantly save on large costs when things came up. We never really had large capital expenses.
  • Living close to the property, we had relatives who were able to do small repairs for free to save maintenance costs.
  • Appreciation more than doubled the house value at an average rate of 6% growth per year.

*These figures are a best estimate of what our returns are. Over the years we have refinanced, paid down additional principal, changed ownership %s again, had various tax brackets each year, etc. etc. So It’s very difficult to calculate the precise ROI.

Here’s what our annual breakdown looked like:

Internal Rate of Return Breakdown

Yay! We Made a 9.95% IRR. Wait…, Is That Even Good?

Looking at the overview and breakdown, you might be wondering…

  1. Is a 9.95% IRR (Internal Rate of Return) even “good”? (Difference between IRR and ROI here)
  2. In the yearly breakdown, why does the IRR start going DOWN after year 5? It peaks at 11.30% and starts falling from there… Shouldn’t the investment get better over time? Here’s why it doesn’t!
  3. Looks like a negative $500 PER MONTH for the first few years. Ouch, did that hurt? How many of these properties can you even afford to buy and hold?  Eg. 4 x Investment Properties like this would put you at -$2000 per month!
  4. What other investment options were available back in 2003? Could we have made more money in another investment vehicle like index funds?

*I’ll do my best to answer questions #1 – #3 over time and link to the posts*

But for now, let’s jump right to question #4.

What If We Put Our Money Elsewhere?

Let’s look at a few different basic scenarios and play them out:

  • Scenario #1:  What if we put our money into an index fund like the S&P500?
  • Scenario #2:  What if we bought real estate using Joel’s TODAY Investment Criteria?

Fake Scenario #1: Index Fund


  • Initial Capital Investment: $34,250  (same as our downpayment and closing costs)
  • Period of Interest: March 2003 through March 2018
  • Additional Contributions: $325/month***
  • Fund invested in: SP500, dividends re-invested
  • Calculator Used: S&P500 Div Reinvested and Periodic Investment Calc

*** I came to this number by adding up all the negative cashflow over the past 15 years and dividing by 180 months. I realize it’s not completely accurate because we had higher negative cashflow in earlier years and lower as time went on. So our return would be very slightly higher.

Results for scenario #1:

First Real Estate Investment Results Comparison #1


Fake Scenario #2: A Different Real Estate Investment(s)

Assumptions:  (Based on Joel’s investment criteria TODAY)

  • Purchase Price of House: $120k (lower more affordable area)
  • Downpayment + Closing Costs: $34,250 (happens to be 25% down)
  • Rent Incoming = $1000 per month (1% of Purchase Price, minimum)
  • Vacancy Factor 5%, Management Fee 8% of rent, Cost to sell = 8%
  • Annual Appreciation of 2%
  • Period of Interest: 15 Years
  • NO Additional Contributions**
  • Calculator Used: This Rental Property Calculator

Results for Scenario #2:

Real estate investment results

Better real estate investment


Due to this scenario being cashflow POSITIVE, there are no additional contributions made annually.  Therefor, a more fair comparison to Scenario #1 would mean that I’d have an additional $325 per month to invest, along with all the accumulated cashflow. This works out to an additional $58,500 + $38,231!

Here are several options that would increase my overall ROI:

  • The uninvested $58,500 could be eventually used to purchase a second investment property.
  • The additional $325/m could be re-invested annually into additional mortgage payments, saving interest.
  • Refinance options around Year 7 or 8 could give me additional money to buy another investment property.
  • Using any other snowball momentum techniques

OK… Enough with the MATH!

First Investment property shoulda woulda coulda

Looking back, it comes to a point when all these other hypothetical scenarios are complete crap. Shoulda – woulda – coulda! I wouldn’t have my awesome investment criteria today if I didn’t buy this first investment property 15 years ago. And chances are, my investment criteria in another 15 years will be completely different (hopefully better).


In Conclusion:

I’ve learned so many immeasurable lessons from this first investment property. In the end, all that matters is my continual education.

“Any investment in education pays the highest return” – Ben Franklin

Questions, comments, concerns? Did I screw up? Is my math wrong? Have you screwed up in the past?

More to come!

Cheers, Joel

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