How prepared did you feel going into your first deal?
New to Real Estate · Nixa, MO · Member since 2019 · 64 posts · 50 votes
How prepared did you feel going into your first deal?
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Investor · Fort Collins, CO · Member since 2014 · 123 posts · 329 votes
4y@Blake Ramsey Think of it like being a student when you're researching for a paper. You look in the bibliography of an applicable book, and rent out all those books. After a while, you've found that the bibliographies you are referencing all reference books/articles that you've already examined. At that point you know you've pretty exhaustively covered the topic.
In a market, I talk to as many vendors as I can - property managers, contractors, appraisers, realtors, etc. After a while you start hearing the same names and promising neighborhoods over and over again. Same with deal analysis. If you conduct enough of them, after a while you'll KNOW when you see a good deal and be ready to pounce. Trust your numbers, trust your team, and have fun! If you either don't have the bandwidth or still feel like you're just not sure, consider a turnkey company as a way to tap into an existing, proven network while also having a mentor to provide some guardrails for your first deal. That's what I did with Rent to Retirement. Either way, the biggest thing is to pull the trigger! You'll get a great education along the way and be even better with each deal.
84 Replies
- 4ySebastian MarroquinPro MemberReal Estate Agent · Pasadena, CA · Member since 2015 · 477 posts · 263 votes
You will never be 100% ready even if you think you are. and at the same time... not that big of a deal. :)
Biggest suggestion if not already in the 74 comments:
Have a good cushion of cash and emergency funds. It's all about the money. Imagine buying a 300k property but you have $1 million cash reserves :) pretty easy right... even if the home burns downs in the middle of the process, chances are you will be upset of course but it will be ok.
Now imagine buying a $500k home and you only have money for a down payment and closing costs. A kid playing outside can break the window and you will collapse in tears.
So, do most people have $1 m reserves (NOOOO) i get it.
but if you care buying a mild or heavy fixer: you should have :
down payment
Closing costs
20% or more in reserves on top of your renovation budget. (and some people have 50% to 100% more than the budget for repairs). Things come up all the time. Make sure you buy home warranty when you buy.
Reserves, reserves, reserves.
Do a great inspection and don't get emotional about anything you are buying in the escrow process.
If you have to walk away - do so : better to lose $1k in inspections than buy a bad property.
- 4yJoe HammelBusiness MemberReal Estate Agent · Metro Detroit, MI · Member since 2018 · 614 posts · 666 votes
@Blake Ramsey
It’s a great discussion topic.
As I’m sure you’ve heard the advice “you need to jump in with that first deal and learn by doing”
Well, it’s super good advice.
My first was similar where you are. You read the books, listen to the podcasts, analyze a few hundred deals for practice, and it’s a great educational foundation.
Then, once you buy the first deal, you put your head down and work through the ups and downs and learn a lot. It’s a lot of work because everything is new and you’re trying to learn how to do the little things like picking a good tenant, or even “how should I communicate with my tenants?” And other less discussed topics
My biggest take aways from my first deal was:
1. Wow, real estate is freaking amazing. (Referring to the passive income and wealth built)
2. You learn so much from that first deal it doesn’t matter how good of a deal it was. The first deal you’re buying an education.
FIRE Realty Team - Keller Williams5379 Reviews @Blake Ramsey How did I feel? I felt awesome! Of course my cockiness and arrogance completely overshadowed my ignorance, and that's why I felt great. How did it turn out? I had to sell the prop after about 18 months since I had no money and no reserves specifically. Basically, I failed. This was before the internet and BP, and I was a young dude like you. I learned from it and moved forward.
How do I feel now when I do a deal?? When I put in an offer now, I feel like I'm doing drugs it's so cool! Such a rush, so exciting. The feeling of opportunity and risk and leaning forward! Progress pending!
So my recommendation for you: learn and lean on experienced-others for advice, but know you have to make the plunge at some point and that you will likely not hit a homerun but rather experience an intense learning opportunity. And not just with what transpires in the transaction, but how you emotionally and personally manage all the nuances & challenges that will occur.
Good luck to you Sir,
Dave
- Real Estate Agent · Winter Garden, FL · Member since 2017 · 57 posts · 28 votes4yRaising the capital was easier than it probably should have been. I was already in talks with the person who ultimately lent me the money. I have previously bought my primary residence from his son on owner financing after leasing it for 2 years so they knew my track record making payments on time. They had told me they were up to finance a deal up to $200k. A little time had passed and I brought this deal to them and they said yes to lending $350k. I would say they are small time investors and had lended money to friends and family in the past.
Quote from @Blake Ramsey:
Because I am licensed and I knew what the seller was looking for as far as net, I was able to work a commission into the deal. I ask for a commission in my initial offer and the offer got them to the net number they were looking for so they agreed. - Rental Property Investor · Springfield, IL · Member since 2020 · 36 posts · 35 votes4y
@Blake Ramsey
I wouldn’t say we had much in the way of parameters when we first started. A small 2/1 house that smelled like cats was for sale for a couple months. We liked the small town and thought it’d be cool to fix it up and have a rental. We made it a little nicer than it needed to be (I did almost all the work) and got our first tenant. Honestly, we didn’t really know what we were doing. That was 5 years ago. We’re eight doors in now and we still learn a little more on every deal.
- Property Manager · Raleigh, NC · Member since 2014 · 729 posts · 596 votes4y
@Blake Ramsey
I felt ok when I bought my first sfh many years ago. I bought a nice property in good condition so my backup plan was "I can always sell in the retail market if it goes sideways."
This works if you set requirements for potential tenants and screen every tenant. This means calling previous housing and jobs. Verify all the data on the app as best you can. I also verify all numbers on the app before calling (internet is a godsend for this).
- New to Real Estate · Nixa, MO · Member since 2019 · 64 posts · 50 votes4yDid you have any reno experience before doing this? My friend and I were thinking of flipping a small house just to get our feet wet and we both have experience with that kind of thing.
Quote from @Dave Carter:
@Blake Ramsey
I wouldn’t say we had much in the way of parameters when we first started. A small 2/1 house that smelled like cats was for sale for a couple months. We liked the small town and thought it’d be cool to fix it up and have a rental. We made it a little nicer than it needed to be (I did almost all the work) and got our first tenant. Honestly, we didn’t really know what we were doing. That was 5 years ago. We’re eight doors in now and we still learn a little more on every deal.
- Lender · Kansas City, MO · Member since 2016 · 142 posts · 71 votes4y
Quote from @Juan Campos:
@Jacob Trogan
I'm in tx looking at my first single family home for my first investment
Trying to stay under 250k preferably around 200 but even then I've been looking and searching on MLS, zillow, realtor, running the numbers and hardly anything cashflows, I'm taking cap-Ex,vacancies,maintenance,management,taxes mortgage insurance since I'll be using fha, and I surely endup with either 100 in cashflow or negative cashflow 1 out of 100 properties brings me at most 100 in cashflow, bit there's hardly any homes!
I have 10 months to get into my first property that's when I'll have enough saved up for my down payment.. but I see the market and how it is and I think I rather wait not really sure what's going to happen in the next 10 months though, any advice ?
Sorry did not see this, shoot me over a message - all I can say is if it cash flows very conservatively now it will do better in the future and help you learn, if you want to talk numbers which is what I do I need more details
- Member since 2016 · 12 posts · 5 votes4y
Hey Blake! I'm from Springfield, Mo as well. House hacking a duplex is where I started out and I highly recommend starting that way! It takes the pressure off a little and allows you to get use to owning rental property, land lording, and get a feel for how your numbers are working out. You'll be able to obtain a better rate (most of the time) and a lower down payment as a primary residence. I typically use an app called deal check to run some numbers quickly but, the calculators on bigger pockets are awesome! The hardest thing to get over is the analysis paralysis. It's way too easy to pass up 20 good deals because you're set in trying to find that perfect deal - I've done it more times than I can count. I've just went under contract to acquire my 4th door, it needs rehabbed and I'll be using the BRRRR method.
Feel free to reach out if you want to connect.
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