Real estate investing is all about following a few straightforward steps, closing the deal, watching your bank accounts rise — and then buying a Lamborghini and retiring at age 24 on the island of Capri, right?
Seasoned investors know that this business isn’t for the faint of heart, the risk-averse — or the lazy. Investing can be stressful, discouraging, and just plain hard work.
Today, we sit down with Greg Martin, an investor who understands the highs and lows of real estate, but who jumped in and purchased his first investment properties (yes, plural) just recently despite setbacks and circumstances under which many may have thrown in the towel. Today, he’s the proud owner of a SFH and a duplex — and he’s on the hunt for his next deal.
Newbies, if you’re discouraged by your local market and wondering whether you’ll ever be able to take action and start your passive income stream, we hope this story inspires you to keep pushing. You never know which (hard earned) lessons from a tough beginning might be invaluable to your career as an investor.
Have any questions for Greg not covered in this interview? Jump in on the comments section and start a conversation! Interested in being featured in an interview? Hit me up at [email protected]!
How to Purchase Real Estate With No (or Low) Money!
One of the biggest struggles that many new investors have is in coming up with the money to purchase their first real estate properties. Well, BiggerPockets can help with that too. The Book on Investing in Real Estate with No (and Low) Money Down can give you the tools you need to get started in real estate, even if you don’t have tons of cash lying around.
A Conversation With Greg Martin, First-Time Buy & Holder
Greg got into the real estate game recently, but he’d known for a while that he wanted to start building wealth through property. Searching for about a year and a half for the ideal unit, he battled with a hot market in the Tampa Bay, FL area and a multitude of offers on any property that was worth purchasing. He stuck to his standards, however, and didn’t bite the bullet until he found an investment that fit with his criteria.
“We were just a few days late on a number of properties, and we were outbid on about 5 others,” he says. “Overall it was discouraging at times, but we just pushed forward and finally found a property that worked for us.”
In the meantime, he focused on his real estate education, in the form of listening to the BiggerPockets Podcast, reading any book he could get his hands on, and going to local real estate meetings. Still, all the education in the world can’t replace action — and in fact, even those who aren’t actively closing deals should be taking SOME sort of action so as not to get lulled into the dreaded “analysis paralysis,” he says.
“Look at a lot of properties, run your numbers, and make offers. The more practice you can get, the better. It also helps, because you will be way more confident when you do find a deal.”
In the end, he found and closed on not one, but two properties: a 2/1 single family home and a duplex with a 2/1 unit and a 2/2 unit, which are two structures on separate parcels situated next to one another.
“It was listed for $95.5k, and after multiple offers and inspection, we ended up purchasing the properties for $98,600 with a $3,000 credit towards closing,” he explains. “We financed through a local bank under an LLC. Overall, we should have cash flow of about $400/month when vacancy, repairs, and property management are accounted for.”
I asked him what kind of financing he obtained through the local bank, and he explained that he was using a commercial loan with 20% down and 20 year amortization with repricing every 5 years. He says it wasn’t his ideal loan at the time, and the process was a little more complicated because of taking title in an LLC — but the bank, being small, was easy to work with and helpful in the process.
“Once we get the 3rd unit rented and the property seasons a bit, we will be looking to refi into a fixed rate loan,” he added.
Finding & Vetting Deals
Greg found the deal through his real estate agent, who set up notifications on the MLS that alerted them to deals within certain parameters. Upon finding the deal he ultimately purchased, he ran the numbers carefully (“I used a spreadsheet that I downloaded off BiggerPockets plus another spreadsheet to make sure that I’ve accounted for all expenses”), and to make sure it would cash flow correctly, he took a look at comps in his area using Rentometer.com and Craigslist.
While he hopes to scale his business from here, at the moment Greg is happy to take on the role of self-management; however, he still plans for the eventuality of hiring a manager at some point.
“We plan to manage these ourselves for a while, but we ran all the numbers with property management fees taken out, so that if we decide to use a management company down the road, we can afford to,” he says.
5 Lessons For Newbie Investors
So, what has he learned from his journey thus far? I asked Greg what advice he would give to a newbie who’d like to be in his position of owning their first investment property, but who doesn’t know how to get over the hump of inaction.
That’s tough, he admitted, since everyone’s situation is different, but he advised:
1. Educate yourself. Read books, listen to podcasts, etc. There are so many resources out there to help you get a good foundation for your investing, and a lot of them, like BP, are free.
2. Decide on your strategy. Buy & hold, rehab, wholesale, etc. There are so many ways to make money in real estate, and it is easy to get distracted with the latest niche that you hear about. Decide on your strategy, take action, and learn more about other strategies as you go.
3. Look at a lot of properties. When you first start, it’s hard to know for sure what is going to be a good deal. As you look at more properties, it is easier to know when you find a good deal, and this allows you to move fast to make an offer.
4. Get involved with your local market. REIAs, real estate agents, etc. By surrounding yourself with people that work in your local market, and many of which have similar goals, you will have a great network to encourage you and answer any questions that you may have along the way.
5. Take action, be decisive, but remain patient. It is easy to try to learn everything and get stuck in the learning mode. It is also easy to get impatient and just try to make a deal work where the numbers don’t meet your criteria or are just a marginal deal. If you can remain patient, without getting discouraged, you will find the right property for you and your investing goals.
With these lessons learned, Greg now plans on working to get the third unit in his duplex rented out, then learning some of the “finer details” of landlording and refinancing the property to get the initial investment funds back. Then he’ll be on to his next deal.
What do his future plans for real estate look like? Greg says he hopes to reach his goals for monthly passive income, which will allow him to work on his business rather than in it.
Ultimately, his end goal in real estate is similar to many investors’: “My ‘why’ is to build passive income that allows me the flexibility in my schedule to volunteer in my community and travel.”
And if he weren’t investing in real estate?
“I was always interested in civil engineering so maybe something in that field.”
It’s a shame he has no motivation, huh? 😉
We wish Greg the best of luck on his investing endeavors!
- Have you run into the same roadblocks Greg did?
- How do you keep yourself in the game, taking action?
- Have any questions for someone who’s closed on their first property?
Be sure to leave all your comments below, and let’s talk!