First Deal: $600 into $32K in 6 months!!

Ok, full disclosure I probably spent closer to $3,000 when you count every receipt but that's still a good return and I got your attention.

That $600 represents the only real project I took on to improve the property before selling it 6mo later for $40K above my initial purchase price and the $32K is what I netted after commissions, etc.

This post will cover my experience in networking and leveraging relationships to identify undervalued properties and opportunities. Information and community involvement are my area of expertise and what I used to help start digging my way out of student debt. 

Starting Point:

I had just started a new job and moved back to an area I'd been around my whole life. One of the first things I wanted to do was get involved in the community and find a young professionals group where I could meet new people to expand my network and improve my community. I have always been project driven and enjoy the building process. I was fortunate enough to be in an are with an old historic downtown district that was attracting a lot of revitalization attention so upcoming projects were a given.

It all started with reading and research. Downtime was spent very intentionally on searching for the right young professional groups on facebook or linkedin and a surprisingly good resource was pinterest. A few different searches about entrepreneurs and leadership kept producing the same 4-5 book titles on various reading lists and I ultimately chose to read Rich Dad Poor Dad and Never Eat Alone. I burned through both in less than 2 months and narrowed my professional groups down to about 2. I then set my new principals and strategies into practice and went to work attending meetings and contributing to the conversations.

Early Stages:

Authenticity is key. You CANNOT enter into each new relationship expecting people to do something for you. Your mission should be to seek out and identify value adding individuals. People that are genuine in their character with their own established goals. Find out what those are and what is important to them and attempt to help them reach theirs. Your efforts do not have to be over the top, but at least noticeable. Over time these people will come to trust and collaborate with you and as you learn more about each other you will add team members that can help connect you to the right people or opportunities. 

Well, through my community involvement I learned of a $2M park renovation that had not been announced to the public yet, a $10M abandoned hotel renovation, a new grocery store, 2 new restaurants, a bike park, a new farmers market, etc. I knew all of this before the market had a chance to react. 

Finding a Team:

I began reading everything in site and emailed a couple of different realtors. I happened to find a real estate agent who seemed to "click" with me. We immediately hit it off and our styles and personalities gelled perfectly. In some respects I was lucky to have come across her but I had done my due diligence too. I was upfront with my finances and goals from the beginning and we set to work researching deals. I was upfront with her on my communication expectations too and luckily she was young and hungry and still burning the candle at both ends to build her reputation and client base that she was willing to take emails late and exhaust ourselves on the research end. I also found a few trusted opinions to bring in with different experiences that would shape their viewpoints I could run ideas by. One was a rich family member with experience in buy and hold strategies, another was a small business owner and contractor, another was a local who had been around for 20 years and new everything about everyone and anything in town. 

Finding the Deal:

No shocker here. The work had to be done on the front end. Every blog, podcast, book and video will tell  you that. We must have discussed at least 70 houses, narrowed it down to 20, visited 15, put offers in on 5. Ultimately I found a property that had not 1 but 3 unique value propositions. If you are new to business, marketing, or real estate, it quite simply is, "what is that one thing your product has that sets it apart from the competition." In a small 1/4 acre sectioned old neighborhood I had the equivalent of 3 lots compared to the other houses so there was potential to break them up and sell off the lots by a future investor as well as a HUGE yard compared to the neighbors. It was also a corner lot with a heavily wooded tree line on 3 sides which gave the owner privacy in the center of town. I also had the "oldest registered home" in the city." Yes it was in fact 10 years older than the town itself and close to 150 years old on what had originally been acres of fruit orchard with the original fruit orchard shed. Yes with the age maintenance and disrepair are a concern but we were exhaustive with our inspection and it was sturdy enough to take on the risk and the current owner had just upgraded plumbing, AC and electrical.

We then set to negotiating, argues its time on market, some repairs or upgrades we invented might be necessary and told the seller we wanted them to pay closing costs. Given that I was using a VA loan I didn't need a down payment. Now there were miscellaneous costs like inspection, etc but they were negligible in the scope and scale of home buying.

Timing:

Slowly but surely over the winter months these large community updates and projects hit the mainstream media and word got out. By spring I waited until the first few weeks of sales went through and called my same agent again and asked her on some feedback about selling. As predicted the market was responding to the news as we thought it would. By the time we listed it on a Friday we had 2 showing that Saturday, and 2 Sunday and 3 Monday. Within 8 weeks we had a bidding war and closed more than $40K above my original purchase price just months before. 

Maximize Your Return:

I was not a man of many resources so I took on every project I could reasonably manage myself. At first, I made a list of 20 things or so that should be done before I try to sell the house. I then invented my own cost/payout list to maximize where I would allocate what little funds I had. Easy ones, paint the front picket fence. Add a flower bed and some hanging baskets. Water the grass and keep it cut and trimmed. Trim/Clip overgrowth and shrubs back. Power wash the garage, install window locks myself and upgrade the locks and door handles across the property. All in all I think those projects cost less than $200. I borrowed the lawn mower from a relative and did all the labor myself instead of hiring it out. The only real project I took on was a tile floor in a room about 150 sq ft. Luckily I had helped out on a few flooring jobs in my teens and had an idea on how to do it. This is a very labor intensive process but it was sweat equity. I was smart about my tile choice when it came to cost and quality and watched a lot of youtube. In total this project cost about $400-$500 which included using extra grout on the upstairs bathroom to touch it up. 

My last big expense was a massive 200 year old oak tree that fell within feet of the house literally 2 days before a showing that ultimately turned out to be one of my bidding war couples. After calling a few people I trusted for a recommendation I used my last $250 to negotiate with a tree removal service who quoted me $700 on site and when I held up the cash and said, "this is literally the ONLY money I have left" and offered to help him we sawed the whole tree in a matter of hours. He hauled away most of it but left me with about 40x 80lb(+) logs/stumps that I had to move to the fence line on my own. Which I turned into a positive to potential buyers and said look, "free firewood for the fire pit for a year."

Ultimately it took hundreds of man hours in 90 degree high humidity weather to points where I literally collapsed from the heat and exhaustion and just laid on my back in the shade for 30 minutes at a time before continuing on. However, I am a young man, with few resources and no attachments so this model works for me and it led to me pocketing a little over $32,000 in 6 months with an out of pocket investment of less than $3,000 total on little projects and tools. 

I condensed a lot of this story for the sake of a quick read so if you have any specific questions leave them in the comment section below. It is my first post and I am new to BiggerPockets and am not sure which points other investors would like to know more about. 

Big Takeaway:

Leverage people and information to identify opportunities before others do. This is the model I am using and have used it on my first deal and to get into my current 2nd house which I am prepping to rent. If you want any tips on how to network and connect to those opportunities leave me a comment.