What’s up, BiggerPockets? Alex Felice here with another episode of Meet the Investors.
In this edition, I’m in humid Baltimore, Maryland, to meet Jon Kessler, a BRRRR investor like no other.
Meet the Investor: Jon Kessler
Hey, everybody! I’m Jon Kessler. I’ve been investing seriously for about three years now. I have a wife, three young children (all under the age of 10), and still have a full-time job. So, I’m living proof that you can do this with limited free time.
I invest in real estate because I want to achieve financial freedom. That is important to me because I want to be able to spend time with my family while my children are still young enough to actually want me around.
I picked real estate over other investments like the stock market because I really don’t understand what truly makes those numbers move. I feel like you have to be on the inside or be some kind of billionaire to make that work for you.
I got into real estate by accident—as an investor, that is. In 2006, I bought a house for myself, which as many of you remember, was a really bad time to pay retail for a property.
Fast forward five years. I’m now married, my wife is expecting our second child, and we want to upgrade. We could not afford to sell that first house and still buy the type of house we wanted. So, I decided to give being a landlord a try.
It truly went terribly—I had no idea what I was doing. I lost a lot of money, but I could still tell that there was something there. I knew enough that when I ran the numbers, if I had bought that same property at that time instead of five years earlier, I actually would have been making some money, so I knew there was something there.
So, I decided to continue in that vein. I found BiggerPockets one night as I was randomly swiping through podcasts on my phone, looking for a business podcast to listen to. The BiggerPockets Podcast was on the list, so I gave it a try. That is when I truly, finally received the education that allowed me to turn it around.
I still own that first house today. And it is cash flowing—not a lot, but it is cash flowing today. And it is all because of management. Now I have the knowledge that I needed to make it work.
I participate in the BiggerPockets Forums. Even with three years of experience and seven properties, they are still my go-to source of information. When I have a question, I look there first. And it’s not just a matter of asking a question and getting the answer—the same questions have been asked over and over. That’s not the point. The point is who you’re getting the answers from.
It gives you an opportunity to network. And that is huge. “Your network is your net worth” is an adage that I truly believe. In addition to engaging on the forums, I’ve also read the books in the library. And I have gotten a tremendous amount of value out of those, as well.
My Latest Property
My latest acquisition, which I just closed on three days ago, is a three-bedroom, two-bath BRRRR deal here in Baltimore County. Check it out in the video above.
The house is very similar to my other BRRRR deals. I have five others in this exact neighborhood, and they’ve all been really similar in that there was nothing major wrong with them. They’ve mostly just been in sore need of some updating.
These houses were built in the ‘50s. There were a lot of original owners still left in this neighborhood. So you’re just updating kitchens, bathrooms, and flooring and painting. And other than that, it’s just cosmetic, handyman stuff.
Upstairs, the house has some nice hardwood floors. They don’t need much work. We definitely need new windows in this place. There’s also a bathroom that definitely needs to be updated. It’s probably original tile from the ‘50s, original tub, original everything in this house.
We’re going to completely gut this place and rebuild it with nice, new stuff. That’s where you get your money in these BRRRR deals: in the bathrooms and the kitchen. So, we want to make sure we spend money there.
The basement is not finished. We are going to completely finish the space. There’s a little quarter-bath that we’re going to completely tear down and rebuild into a full bathroom. When we’re done, it’s going to be a nice, clean living space.
I found this deal through a local Facebook investor group. I put a message out there saying what I was looking for, and a local wholesaler contacted me. He said he had this deal and showed me videos. I signed a contract based on the videos alone, but I had an opportunity to walk through it before I closed.
The Numbers Behind the Deal
All-in with closing costs was $110,000. I’ve got roughly $30,000 for my rehab budget. I believe the ARV is going to be around $175,000 to $180,000, and I paid for the acquisition with a private loan from a family member. I’m going to pay for the rehab out of my own pocket.
I told you I found this deal through a local Facebook investors group. But I want to emphasize how important it is to have a network and to expand your network in any way possible.
Look at local meetups. Whatever market you’re in, there are bound to be several Facebook investor groups that you should be participating in. The more people you know in this business, the better, because it only took one message for me on Facebook to get my last two properties. (They came from the same wholesaler.)
If I wasn’t putting myself out there, I wouldn’t have gotten these last two deals. Because I can tell you, the previous six months I spent grinding and chasing deals. But I was not getting anywhere.
You just have to find that one right person who can make it happen for you, so definitely put yourself out there. Keep networking any way you can think of because it is super important.
I paid for this deal with private money, and I realize that not everybody has someone in their life who can give them that money. But the person I got the money from for this property would not have given it to me if I didn’t already demonstrate that I knew what I was doing.
He was an investor himself. Yes, he is family, but he’s also not a fool. So, he would not have given me the money if I had not put in the work first and proven that I can make this a profitable business.
My Advice for Other Investors
I’ve told you a little bit about myself, told you about the house, now I want to tell you a little bit about what I think is important to keep in mind in order to get where I’m at.
Blaze Your Own Trail
I’m really still a beginner in many ways. I still have a lot to learn. I just started taking this seriously about three years ago. And over the past three years, I’ve added five units.
But at the beginning of 2019, I hit a roadblock. I was really struggling. I was chasing a deal that I was not capable of getting. And that was the perfect BRRRR, a BRRRR where I got every penny back out. And it took me a while to realize that I was borrowing goals from other investors—goals and plans that weren’t my own.
What I’ve realized since then is that you can’t do that. You have to figure out your own goals and then you have to figure out a strategy that makes sense for you based on your lifestyle, your resources, your knowledge, your network, your comfort level, and your tolerance for risk. And once you have that figured out, don’t let anyone else tell you that strategy is wrong.
If someone’s willing to give you advice and teach you things, by all means, take it in. Absorb it, apply it if it makes sense. But you have to figure out what works for you in your life based on your responsibilities.
Expand Your Network
The second thing I would advocate is to network like crazy. I know that’s said a lot, but it’s very important.
Look for local Facebook groups, look for local meetups. You can look through BiggerPockets for local investors—anything you can think of to get out there and meet other investors. Because I am telling you, you never know when you’re going to meet that person who’s going to be able to get you to that next level, who’s going to start providing deals that actually work for your lifestyle.
I’m Jon Kessler, and I’m using real estate to spend more time with my family. If you want to be able to spend more time with your family, then you need to buy real estate.
Do you find your deals through networking?
Tell us your deal-finding tricks in the comments.