My First Real Estate Deal

So, I wanted to talk about my first real estate deal which was finally closed early January in 2015. It was a wholesale deal a couple blocks down the road from my college. At the time, I was in the middle of my junior year and skipping some classes to learn about real estate investing. My roommates looked at me like I was crazy, but I was committed to getting started in real estate as soon as I could. I read everything I could get my hands on and listened to tons of podcasts. I was sure I wanted to start a business to take advantage of the opportunities in my market, and that business was real estate wholesaling.

Getting Started

I knew after gaining all this new knowledge that I could succeed in real estate investing, so I jumped right in. I was willing to fail because I knew the faster I fail, the faster I learn and I could build momentum from there. I started contacting investors in my market and started going to a couple REIA meetings every month. I made these contacts to learn from their experience so I wouldn’t have to make the same mistakes they did when starting out (although I made my fair share and still do). From there, I started my marketing campaigns and started talking with sellers.

I was using direct mail to reach sellers from a targeted list I bought from ListSource. Things were going well. I remember I sent out a marketing campaign mid week and it hit the sellers on a Saturday. I was playing in a college football game in Wisconsin and checked my phone after the game to find tons of voicemails from motivated sellers. So on the bus ride home, although I wasn’t nearly as prepared as I should have been, I made all the calls back and set up a few appointments for the next week to walk through a few properties. The point is: take lots of action. It’s the key to building a real estate business and really, success in general. I explain the most important things I’ve learned my first year to be successful in my last post here.

The Hot Lead

So I was spending hundreds of dollars on direct mail marketing and decided one afternoon to do a $10 Facebook pay per click ad. I had my website listed on the ad and a webform set up so all my web leads would go straight into my CRM. (There are plenty of YouTube videos to learn how to set this up.) One day, I got a notification on my phone that I had received a lead. I pulled up the property on Google Maps, Zillow, and the county assessor's website to do some research. I looked at the numbers and they already wanted about 65% of the retail value of the home. I quickly jumped on a call with this seller and set up an appointment. Ironically enough, I got this leads from the $10 Facebook ad instead of the massive direct mail campaigns I was doing.

The Numbers

So the next day, I ran over to the property about 2 blocks from my college. It was a duplex with 3 beds and 1 bath on each side. The seller was asking 70K for a property that was valued just over 110K after repairs. I can’t remember the exact figure but I know it was cashflowing nicely. I knew if I could negotiate the price down I would be able to wholesale this property very quickly and with a ton of built in equity. After walking the property with an inspector I met through a REIA meeting, it needed only about 5-10K in work, conservatively. This could potentially be a sweet deal.

Negotiating Price

So when I met with the seller, she was a very nice lady who wanted to get rid of the property because she didn’t want to take care of it anymore. It was my first experience negotiating with a seller and I know I made many mistakes. After walking the property and pointing out the negatives, I was able to bump her down to 61K while paying closing costs (which the end buyer will have to pay). I didn’t use any ninja salesmen tactics, I just was honest and clear with what I could offer while justifying my price. We ended up signing a purchase agreement that night for $61,000 and I had my very first property under contract set to close in 20 days.

Finding a Buyer

After locking up the deal, I was now looking for a buyer. I knew this deal would sell because I got it for a great price. I could make a nice spread on this deal if I found the right buyer. Since I was pretty new to the game, I didn’t already have a buyers list set up to notify them of the great deal they needed to have. I was building a relationship with one of the biggest investors in my market, and I knew he had some serious buyers if he didn’t want the deal for himself.

So I negotiated a deal with this investor for 40% of the profits if he can find a buyer and finish up the deal. He has a buyer walk through the property the next day, the buyer looks over the numbers, and accepts our price at $68,000. Together, we made a profit of $7,000. I took away $4,200 after giving 40% profit to the investor who helped me out. It was a very nice deal for my market, especially being my first.

Conclusion

Wholesaling real estate is a great way to enter to real estate game. Although it is not truly investing, you will be able to learn a ton about your market and how to analyze a deal. Although it is not as easy as it sounds, if you can put in the time and consistently take action, you will have success. My first deal was very inspiring and helped to propel me forward to complete more deals and continue improving my skills. Next week, I’ll go more in depth on why I believe wholesaling is the best way to enter into real estate.