3 Mistakes That Almost Blew Up a 3-Family Investment Purchase in Rhode Island (Julio's Real Story)

Alex: Hi everyone, happy day. Thank you for watching this video. We're here today with Julio Palacios, and we just closed. Congratulations, Julio. But rather than talk about the closing, I'd like us to talk, as we say in Colombia, with nothing held back. What motivated you to buy? This is your second home, an investment. What was the motivation?

Julio: The peace of mind that comes with owning an investment property. You're investing in something not just for now, but for the future. You're securing your money, the value of the house will go up, and you're collecting rent: someone is paying you rent, paying your mortgage, and the house is yours. You get all of that through the investment.

Alex: So what I'm hearing is that the benefit was, above all, a return on investment. There are different investment vehicles, but you decided to go into a multifamily to keep the rental income and grow your net worth step by step.

Julio: Exactly.

Alex: Why Rhode Island? Why did you buy here and not in Massachusetts or Connecticut?

Julio: Because I need to have control of the property. It needs maintenance; it has three apartments, and I'm going to be the one in charge. Maybe I'll look for some help from someone else, but I need to be in control.

Alex: Close to where you live, so if there's an emergency you can get there right away instead of traveling thousands of miles. Very good observation: close to the circle where you live. Now, how long had you been thinking about buying your second home?

Julio: I finished paying off the house I live in, and then I started thinking about investing my money in another house. Once it was paid off, I knew I was free of that mortgage and could focus. Since the house I live in is a two-family, I have the rental income, which pays the property taxes and still leaves me something extra. On top of the job I have, I'm comfortable paying the mortgage I took on now.

Alex: Because in the end it all has to be numbers. It's a business decision more than an emotional one. One plus one is two, not twenty-five. Know your budget.

Julio: Exactly. You have to have funds to make sure that if someone moves out, there's no problem: you can cover it without difficulty, so your investment stays healthy.

Alex: Rhode Island, proximity, numbers, investment. Whether you're a first-time buyer or an investor, it's very important to know the numbers and how far you can go. That all sounds nice; now let's talk about the other side of the coin. What were the hard moments of this transaction, the challenges you ran into, so people know how to prepare?

Julio: More than anything, what I had was frustration: from seeing so many houses, from going to so many places.

Alex: Let's expand on that. What was it about those houses that didn't work for you?

Julio: Sometimes everything looked perfect, and then, when I started running the numbers properly, they didn't add up. The price could be fine, everything could look fine, but once you start doing the math you say: no. Or the time it would take to get it ready to rent. All of that has to be taken into account. And I especially had to consider it because this is the second house I'm buying: I need a house that produces income immediately. I could have bought another house at a lower price, but I would have had to put money into it and wait at least six months before starting to collect rent. For me that was very important. The other thing was that sometimes I'd put in an offer and someone else would come and take it.

Alex: And that was part of the exercise. As they say: you did the homework, but you didn't pass, so you have to do it again.

Julio: But in the end I know it was a good investment, a good purchase, that is going to start producing immediately from now on.

Alex: That resonates with me. When we were looking at houses it was like baseball: you swing, you miss, but you keep swinging until the home run comes. It's a numbers game: the more you go out, the more you look at the numbers, if you hit it, you did it; if not, keep going.

Julio: It's persisting and persisting until the opportunity comes. It's worth waiting and being persistent, and when it comes, you know it's going to be something like how I feel now: at peace. I know I made every effort to buy a property that will give me the numbers I expect and will work perfectly for me.

Alex: One of the frustrations was touring houses. But once you were under contract, what was the frustration? What was the fight?

Julio: I only had one budget, but I also only had one lender, one bank that was going to lend to me. I was confident that person would give me a good rate based on my credit, but that's not how it went. It was a surprise to me; in a way I think what they did wasn't right, because they were offering me a very high interest rate.

Alex: "That's what there is."

Julio: That's what there is. So I said: I have other options, and I asked for your help. That's when Patricia came in.

Alex: Yes, Patricia Vargas.

Julio: We started negotiating and it was done the way I wanted. Yes, it had to be negotiated, but thanks to them I got what I wanted. The other thing was the home insurance. The insurance I pay now doesn't exceed $2,000, and my surprise was finding out that for an investment it was almost double. That's when I really shopped around and asked for quotes, and the number didn't sound right: it was too high. Once again I got Alex's help, which has been invaluable in making this happen, and thanks to that we got very favorable insurance that is now completely fine.

Alex: Perfect. So the insurance is within the numbers, and with the fight alongside Patricia, the loan is too. Those were the two challenges on your side. Any other challenge you can share with the people watching, regarding the house?

Julio: My expectation has always been that I can improve a house. If I focus on what's wrong with it, I don't buy it. But the potential the house has is big; I focus on the potential. I'm aware that I have to invest in each apartment so it's the way I want it and up to the standard to rent it.

Alex: Exactly. You invest because you can't charge market rent for an apartment that isn't at market level. You have to provide a service people are willing to pay for, because, like any human being, nobody wants to feel taken advantage of. And there's another situation, especially for the people watching this video: the tenants. The previous owner had collected a deposit, but there was a language barrier, and when we went to take possession of the house, the tenants had a dispute about the deposit. It's very important that, when you're selling a house with tenants, that deposit is transferable and the amount is clear, so there are no surprises later. A small mistake slipped through: the previous owner keeps the deposit, the new owner has no idea, and they start shooting the messenger.

Julio: Unfortunately, the expectations weren't clear for them. But I know I have the receipt to show them what I received. If the previous owner didn't do their due diligence, that's part of buying a house: you have to receive the deposit.

Alex: This is advice for anyone who wants to buy a house, so you're not caught off guard. That's what we lived today, and it was good to have the conversation with the tenant. Obviously the frustration showed, but it was something that had to be discussed with the previous owner.

Julio: Exactly. That's something very important that had to be cleared up, because the closing is the moment where everything has to be put in place and fully clarified, so there are no surprises.

Alex: That's why it's called a closing: let's close the chapter and have everything clear. Now, throughout this whole process, how would you recommend this service to people? We met at a three-family house in Woonsocket.

Julio: Exactly, a massively large house. I was looking at properties in Woonsocket, and then I said: no, I'm not going to move completely away from my area.

Alex: We come back to what we talked about at the beginning: something close, manageable. Because it's not the same to go buy because I want to buy and make money, as it is to look at what's out there in a structured way. That's what we did: can we here? can we there? It has to be done that way, because otherwise you buy on impulse, and you may buy something that won't be good as an investment. So what did you think of this buying service?

Julio: Honestly, without your help I couldn't have done it. Many of the things I needed help with, you made easier, and that has been very important to me. I thank you. I bought my other house a long time ago, and you forget so many things you have to do. I'm really pleased. We're already talking about other deals in the future, and that tells you everything.

Alex: For me the most important thing is transparency. Within that transparency you become like friends, because you tell it like it is. It's not a transaction and done; it's: what's the real situation? Because the idea is to grow. Everything is based on a transparent conversation, because in the end nobody wants to feel taken advantage of.

Julio: Your business is real. I've always said you have to do your job as well as possible, because that's your present and your future. If I do excellent work, I'll have an excellent future, because people will come, they'll refer: "oh, there's Alex, here's his card, work with him."

Alex: That's how the business grows, and that's how more families get the chance to buy consciously, without rushing, without feeling pressured. Everything has to flow.

Julio: Exactly. You want something where you made the decision, because the one carrying that commitment for 30 years, the one who signs, is you. But Alex's help was excellent. I really appreciate it. I can't say anything but thank you, and thank God this is done, that it's a reality. There will be more deals in the future. This is only the beginning.

Alex: Well, everyone, I hope this video was educational. Learn from Julio: first of all, look at the numbers, because in the end that's what matters. Thanks for watching. See you next time. Julio, thank you.

Julio: Thank you, Alex.