This is Real Estate Rookie, show number 50. I am Ashley Kehr, and I am here with Tony Robinson. Today we have a special Saturday episode just for you guys, and we’re going to be answering a question from the Facebook group. Are you excited Tony?
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I’m super excited to give the listeners a second dose of us during the week, and really spend some time diving into some of those questions that we know that they want to hear answers to.
So what we’re going to be doing going forward is we’ll be having the Saturday episode. We’ll be pulling questions from Facebook, from Instagram, from the BiggerPockets forums and coming up with some of our own questions. So if you guys want to get involved, join the Real Estate Rookie Facebook group. Just search Real Estate Rookie and ask to join. Make sure that you answer all of the questions and agree to the terms so that you can be submitted into the group.
Beautiful. So the first question, excited to dive into it. It comes from Trevor who's in our Real Estate Rookie group on Facebook. And Trevor's question is, "Hey everyone, I found BP a few months ago and have loved the content so far. Very interested in getting out of the analysis paralysis phase and was curious if anyone is around the Northern Kentucky, Cincinnati area. Would love to touch base and hopefully pick up a few pointers on how you got started in that area. My girlfriend and I are determined to take the leap." So the big question is, what was the hardest part for everyone else in getting started, and then what helped you overcome that obstacle? So that's a big question, right Ash? And I feel like so many people think and have that same question. I know from my perspective, what held me back the most is trying to find that perfect deal.
You hear about all the different rules, this rule, that rule, then you’re trying to make all these different numbers work. But when I finally realized that the purpose of the first deal wasn’t to be perfect or hit a home run, but just to get that base hit and just get over the hump of getting the first deal done and learning and educating myself, it took away a lot of the stress because it’s like, “Okay, I don’t have to make a killing on this first deal. I just need to learn. I just need to educate myself. I just need to know the ins and outs of getting that first deal done.” And once I made that mindset shift, it became a lot easier to actually move forward.
And I think the mindset is a huge part of just taking action and getting that first deal done. Because if you can change your mindset and not be afraid, and you can overcome that fear of getting started, overcome that obstacle, I don’t think you will find any successful real estate investor who has regretted their first deal, even if they lost a ton of money on it. A while back, we had Jay Scott on, from the BiggerPockets Business Podcast, and I love hearing about his first deal. It was not a home run. It sat on the market. They ended up having to rent it out and finally sold it for basically what they had put into it years ago before they actually sold it. But he has done an amazing job and he has grown and he does not regret that deal at all because they learned so many lessons from that.
And I think that’s the same thing too, is just taking that action and getting into the groove, but really find out what are you afraid of? What is that actual obstacle? So is it that the numbers aren’t going to work? Well, bulletproof those numbers. Actually pull the proof and figure out, okay, my insurance is going to be this, prove it to me. My property taxes are going to be this, prove it to me. My rents are going to be this, prove it to me. How you can do that is you can get so much information online. Go online to any insurance website, ask for a free quote for that exact property. Plug in the information, a lot of times you can get quotes back within 24 hours on a property, and it will be a good estimate of what that insurance cost will be for you. And then next, you can pull the county taxes online, school taxes online, verify all that data and get your really tight numbers.
BiggerPockets has the BP Insights where you can pull the rents for that area from there and underestimate it. If you're not very confident, go below what it says the market rents are. And then if worse comes to worse, have another exit strategy. You are buying this property for a buy and hold, what's going to happen if you can't rent it out? Do you have the reserves in place to hold it for six months? Or would you be able to sell this property and then move on to another property? So these are all ways to put plans and ideas and strategies in place so that when you think about that worst fear, you say, "Oh, well actually I have a plan for that." Or "I looked at the data and the data does not lie that these are the actual property taxes and my numbers are accurate," if you can prove them to someone else.
So if you guys need an accountability partner, send us your deals and prove to us how you got those numbers. I think that’s a big part of it is really honing down where you’re getting your information from. What do you think, Tony?
That’s such a good point, Ashley. As new investors, we can make investing be an emotional experience when really it should be based in the data. And it should be based on the numbers that, like you said, that you’ve proven to yourself. So when you can remove that emotional factor and really focus on the numbers, it makes a huge difference. I love that point. I guess one other thing I would add, and it came to my mind as you were speaking, is can you live with the worst case scenario? So if you buy this property and say that, I don’t know, you’re halfway through the rehab and you’ve realized that you hate rehabbing and you hate real estate investing, and you need to offload it mid rehab, can you live with that worst case scenario? Or say that you’re buying this property and it needs to sit vacant for a year, do you have the reserves to cover that property sitting vacant?
Whatever you feel the worst case scenario might be, think if you can live with that worst case scenario, and if you can, then what are you waiting for? If you know you can live with what the worst case scenario is, there’s nothing stopping you from moving forward. It just came to my mind, but I love what you said, Ash. It’s all good stuff.
A lot of times any problem or issue can be fixed with money. So that can seem so easy to say, but that’s why it’s important to have those reserves but also, maybe you have someone that would lend you money in emergency or maybe that’s why you’re taking on a partner. So for me, my first partner, he came to the table with all of the cash. I put in a little of my own for the rehab, but he used his cash to purchase the whole property, but he also had money and resources beyond that. He had his stock investments, other ways to access capital if we really needed it, if all of a sudden we needed to replace the whole foundation or fix the sewer, all of these things that you think of as a new investor, I knew that we could tap into his other resources, and to me, that was my safety net and that made me feel comfortable. And yes, it can seem unfair.
"Well, you're using him." Well, structure that partnership so that it benefits him and he wants to do it. And he did. He was more than happy. So what we did was, it was 50/50 equity and he also got a mortgage payment for any money he put into the deal. So every month he was paid principal and interest and five and a half percent. And he did nothing. I did the property management. I found the deals, everything like that. So if you really want to get started, give up something too and make it an opportunity for someone else. And that can really help you if you were like me and you were scared, you were nervous about getting started and that something horrific would happen and you wouldn't have the money to take care of it.
So that’s a lot for you there, Trevor. I hope you got some value out of that, brother. But yeah, I think we hit it on the head. You follow that advice and you should be able to get that first deal done.
So make sure you guys tune in next Saturday. We will have another Facebook question that we will be answering and make sure you join us on Wednesday for episode number 51. Thank you guys for listening. I’m Ashley Kehr, @wealthfromrentals and he’s Tony Robinson, @tonyjrobinson.
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