Just Went All-In On New Venture

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Just Went All-In On New Venture

Jeff Mays
Member since 2019 · 13 posts · 4 votes

Okay everyone, here we go...I'm sure that given my extensive business experience and background I'll have much more to contribute as we go along, but today is my first conversation with the Bigger Pockets community, so thank you in advance for your indulgence. 

I've had a successful career in automotive retail now for over 28 years, but it hasn't gotten me the freedom and independence, or the wealth (frankly) I should have at this point in life. I cringe as I write this next line, but I just left a position making over $300k/yr to venture into real estate investing (gulp.) After a year's worth of study, leaving is probably the only way to force myself to take this leap of faith seriously. My background provides an extensive head start in terms of business knowledge, so that's a positive. The challenge will be replacing as much of the income as I can as quickly as I can...hence, the reason for my post. I have some capital, and am more comfortable in the transactional space than collecting rent and looking only for a $200/mo or a $500/mo positive cash flow first step, and means I'm not necessarily starting from scratch.

That said, (or maybe not,) what does the community think about securing a first deal? Inside track on flips maybe? Partner up for the first couple deals to get going? Or point me in the right direction to look, at least? I have places in North Jersey and South Florida, which would be primary areas of interest, but I'm also familiar with Ohio where I grew up. 

Everyone's been here, I imagine, so thank you.

Jeff

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y

pretty rare that your going to take 200k and replace 300k a year in income.. are you sure you want to leave that well paying job.. why don't you keep it and start investing.. rentals is not a tough thing its the easiest thing to do in real estate it takes very little acumen to understand the principals  IE buy property rent property.. it does take skill to run them right though.

but to make money like your talking about U have to value add. or be in sales and coming from the car industry you understand that a great salesmen can make bank.  

Married to HML 200k should allow you between 500 and 700 k in borrowing power although when starting out keep in mind your rates are going to be much higher than say someone like me that gets the absolute best rates.. it makes profits a little smaller when U start..

but your looking at value add flipping ..  new construction..  buy land get it up zoned and approved for HBU and flip 

timber tracts that you can instantly log and resell we made millions doing this on OPM .. and it viable in the Carolinas etc.

since its a full time gig you need to look at more robust ways to create income than as you already understand drip income is not going to get your were you need to be in a short amount of time.. rentals is a very LONG game. 

so you need to be looking at crap properties that can be turned around and resold if you can do them in 13 months you get cap gains.. and or rent them for a year or two and you can roll up for a 1031 and keep velocity going that way.. 

but again I would not be so keen on just giving up 300k a year  many of the landlords on this site can get to that 5 to 10k a month and that's all they need to live on.. someone used to larger income that usually wont cut it.. so scale has to be huge to replace 25k a month..

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  • Kristel DaughertyBusiness Member
    Real Estate Broker · Bremerton, WA · Member since 2018 · 127 posts · 71 votes
    7y

    Since your main goal is cash flow, I would look at investing in things that will provide that.  You might want to contact the hard money lenders in your area to see if they would like additional partners.  Maybe research note-buying to build additional capital.  I'm personally a fan of multi-family properties, so maybe look at small apartments or quadplexes in your area.  Connect with wholesalers and GCs in your area to see if you can start a self-sustaining business model?  It all depends on how you'd like that cash flow to look and what level of involvement you'd like to have.

    Good luck!!

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  • Jeff Mays
    OP
    Member since 2019 · 13 posts · 4 votes
    7y

    Kristel, thank you for the useful information. Would you agree that both in NJ and South Florida where I have residences that those two areas are not necessarily prime locations to find bargains? I'm having difficulty making the cash flow numbers work on the available multi-family properties I've done analysis on so far. Also, I have access to about $200k to get going on some W/S deals or flips, but in your experience is that enough to get the attention of area hard money lenders already doing business in these areas?

    0Reply
  • Syed H.
    Developer · NY/NJ/PA · Member since 2018 · 758 posts · 935 votes
    7y

    NJ isn’t great for cash flow numbers except in some areas like Newark, Paterson, Camden; etc. 

    But it is an amazing market for flips. If you want to talk, shoot me a msg.

    I’m a flipper in north NJ and LI, NY.

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y

    pretty rare that your going to take 200k and replace 300k a year in income.. are you sure you want to leave that well paying job.. why don't you keep it and start investing.. rentals is not a tough thing its the easiest thing to do in real estate it takes very little acumen to understand the principals  IE buy property rent property.. it does take skill to run them right though.

    but to make money like your talking about U have to value add. or be in sales and coming from the car industry you understand that a great salesmen can make bank.  

    Married to HML 200k should allow you between 500 and 700 k in borrowing power although when starting out keep in mind your rates are going to be much higher than say someone like me that gets the absolute best rates.. it makes profits a little smaller when U start..

    but your looking at value add flipping ..  new construction..  buy land get it up zoned and approved for HBU and flip 

    timber tracts that you can instantly log and resell we made millions doing this on OPM .. and it viable in the Carolinas etc.

    since its a full time gig you need to look at more robust ways to create income than as you already understand drip income is not going to get your were you need to be in a short amount of time.. rentals is a very LONG game. 

    so you need to be looking at crap properties that can be turned around and resold if you can do them in 13 months you get cap gains.. and or rent them for a year or two and you can roll up for a 1031 and keep velocity going that way.. 

    but again I would not be so keen on just giving up 300k a year  many of the landlords on this site can get to that 5 to 10k a month and that's all they need to live on.. someone used to larger income that usually wont cut it.. so scale has to be huge to replace 25k a month..

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    11Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y

    also others on here are no doubt going to chime in with BRRRR now that fine but it still just gets you to a place that is max leverage usually.. and drip income.. and takes a ton of time and risk..

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    JLH Capital Partners51 Review
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    2Reply
  • Jeff Mays
    OP
    Member since 2019 · 13 posts · 4 votes
    7y

    Married to HML 200k should allow you between 500 and 700 k in borrowing power although when starting out keep in mind your rates are going to be much higher than say someone like me that gets the absolute best rates.. it makes profits a little smaller when U start..

    but your looking at value add flipping .. new construction.. buy land get it up zoned and approved for HBU and flip

    timber tracts that you can instantly log and resell we made millions doing this on OPM .. and it viable in the Carolinas etc.

    Can you elaborate on above more please, if you have the time? (HML=Hard Money Lender, right?

    Thanks so much Jay, ...great input. Staying in that 60 hour/week, six day/wk grind for so long is what kept me from learning what to do in this space. I've learned more in the past 60 days than in the last year, being able to research and study all day. Background is in dealership management, nationally recognized, so I'm great at closing/negotiating, numbers, and navigating a deal, and I'm naturally more transactional inclined. Just need to know where to look for areas of opportunities, and then how to set up LLC's, holdings company, etc.

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y

    @Syed H.  and I share same thought process on many levels through our interaction on BP and I think he is local to you.

    now I don't know him personally and he does not know me personally.. so understand that.

    but I would offer to meet with him.. I believe he is flipping currently in NJ and that is a great way to start by being a capital partner.. ( which is what I  am in my day job.. )  

    when I say marry to a HML I mean you have 200k in cash equity you should be able to borrow 500 to 700k on deals.. so your purchasing power right now is 700 to 900k

    I what I like to always advise folks to do when shopping for short term money is to pop on Lendinghome.com's website and look at their pricing matrix its very transparent.. of who gets what rates.. and its fairly universal through out the industry.. very seasoned well funded folks get best rates..  beginners even well funded and good credit get the highest rates.. 

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    1Reply
  • Jeff Mays
    OP
    Member since 2019 · 13 posts · 4 votes
    7y

    And what about the land purchase/logging opportunities, and the zoning approval/ (HBU?) flip you mention? 

    but your looking at value add flipping .. new construction.. buy land get it up zoned and approved for HBU and flip

    timber tracts that you can instantly log and resell we made millions doing this on OPM .. and it viable in the Carolinas etc.

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Jeff Mays:

    And what about the land purchase/logging opportunities, and the zoning approval/ (HBU?) flip you mention? 

    but your looking at value add flipping .. new construction.. buy land get it up zoned and approved for HBU and flip

    timber tracts that you can instantly log and resell we made millions doing this on OPM .. and it viable in the Carolinas etc.

     you will need to listen to my pod cast or make a very nice donation to my charity for a personal consultation.. this is too detailed for the forums too much typing.  LOL 

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    3Reply
  • Albert Hasson
    Investor · Paradise Valley, AZ · Member since 2012 · 366 posts · 214 votes
    7y

    Jeff, don’t mean to discourage you or burst your bubble but giving up a $300k/yr job in order to go into “real estate” with only $200k is foolish unless there is more to the story.  

    I would venture the vast vast majority of BP’ers use RE to supplement their income, not replace it.  My business partner and I have worked over the past 20 years to build a single family home portfolio with $4M in equity that generates about $300k/yr gross income.  Then subtract property tax, maintenance, etc. and it’s way less than that.  All the while we have both worked full time in our W2 jobs. 

    Absolutely no way in the world can you turn $200k into $300k/year in any reasonable time frame.  

    Please think twice about giving up that high paying job

    2Reply
  • Jeff Mays
    OP
    Member since 2019 · 13 posts · 4 votes
    7y

    Not trying to replace all the income at the same time...or in a short time, for that matter. Can get by on less, but I imagine your W2 job has you at 40 or so hours/week and weekends off, so you have time to research, learn, study, practice, etc. Mine didn't and hasn't for like-ever...Six to seven days/week, 70 hours/week for years. No time to undertake anything else literally, and believe me, I tried. I've learned so much more just recently; in fact, those efforts are what led me to this community, and comments like the one you so encouragingly just left. So, do you think my family will be better off in 15 years by staying in that environment, or by taking a calculated risk and using my abilities to gain real wealth? 

    2Reply
  • Albert Hasson
    Investor · Paradise Valley, AZ · Member since 2012 · 366 posts · 214 votes
    7y

    Actually Jeff I’m an anesthesiologist.  60 hours would be a light week for me!!

    1Reply
  • Albert Hasson
    Investor · Paradise Valley, AZ · Member since 2012 · 366 posts · 214 votes
    7y

    I think your family will be best served by financial stability.  It will take time to deploy that capital and see a return.  What are you going to do for living expenses in the first 6-12 months while your real estate investments are in their infancy?  Hopefully not use the $200k you have set aside for RE investments 

    0Reply
  • Jeff Mays
    OP
    Member since 2019 · 13 posts · 4 votes
    7y

    May be, if I planned on pursuing it passively. Guess we'll see...but I really wasn't asking for validation though.

    2Reply
  • Kiley N.
    Honolulu, HI · Member since 2017 · 231 posts · 191 votes
    7y

    @Jeff Mays

    One of the key points you made in your original post was the hard-earned business acumen and experience that you have. In my experience (admittedly much less than many other on these forums), that experience will be an asset to you in the RE world.

    You have game experience but now you're running a new offense and learning a new playbook.

    As you continue to research and learn more about this world you'll find parallels that will enable your fundamentals to kick in and it'll be off to the races.

    Just a matter of finding a strategy that resonates with you.

    2Reply
  • Jeff Mays
    OP
    Member since 2019 · 13 posts · 4 votes
    7y

    My thoughts exactly...thank you. You read it well. Good at marketing, developing leads, negotiating and closing. Is it unreasonable in the fertile markets to W/S and/or flip and actively bring in $15k to $20k/mo after 90 says or so of ramp up?

    0Reply
  • Dempsey Lulley
    New to Real Estate · Queens Village, NY · Member since 2017 · 1 post · 1 vote
    7y

    @Syed H. I am looking to do flips and BRRRR in Paterson within the upcoming months. Just getting everything in order to dedicate a lot of time to this. Gonna shoot you a dm with some questions if you don't mind.

    1Reply
  • Eric Mielke
    Realtor · Dayton, OH · Member since 2017 · 49 posts · 55 votes
    7y

    @Jeff Mays

    It sounds like you are on the right avenue with flipping and then putting a portion of that profit into long term passive income. I'm not interested in flipping but am going to start buy and hold in Southwest, Ohio. Not entirely certain about the flipping market there but what part are you from?

    0Reply
  • Jeff Mays
    OP
    Member since 2019 · 13 posts · 4 votes
    7y

    I'm from southern Ohio. By southwest Ohio, you mean Cincinnati or maybe Dayton, directly west of Columbus, which is in the middle of the state. Dayton is fertile, and Cincy, Columbus, or Cleveland as well up north. Where I'm from has never really recovered. If that helps. Lots of lower price options of $75k or less, which I can handle with cash for flips. But buy and hold is good there too, in those same price ranges...mitigates risk.

    0Reply
  • Bill F.
    Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes
    7y

    @Jeff Mays Michal Jordon was arguable the best basketball player to step on a court and a world class athlete. When he went to play baseball he never made it out of AA. Food for thought...

    I think @Jay Hinrichs gave you some great advice about HML since it is the closest to the skill sets you have honed over 28yrs. The only issues I see is that you don't know what you don't know about the projects you'll be loaning on, so you'd have to find an experienced partner to show you the ropes and keep you from funding a bad deal.

    Best of luck

    3Reply
  • Kiley N.
    Honolulu, HI · Member since 2017 · 231 posts · 191 votes
    7y

    @Jeff Mays

    One thing you might consider is taking up @Jay Hinrichs on his offer for a consultation in return for a donation to his non profit. (I get no compensation from him or his company) I haven't taken him up on it yet myself but I like the idea behind it. He is well respected on these forums and has a large network of connections. He might have the right SME/mentor for you after you've had a chance to dive deeper into strategies with him after scratching the surface above.

    I think your next step is that SME/mentor.

    2Reply
  • Shaun Stephens
    Investor · Chillicothe, OH · Member since 2014 · 39 posts · 5 votes
    7y
    Originally posted by @Jeff Mays:

    I'm from southern Ohio. By southwest Ohio, you mean Cincinnati or maybe Dayton, directly west of Columbus, which is in the middle of the state. Dayton is fertile, and Cincy, Columbus, or Cleveland as well up north. Where I'm from has never really recovered. If that helps. Lots of lower price options of $75k or less, which I can handle with cash for flips. But buy and hold is good there too, in those same price ranges...mitigates risk.

     Hey, i'm from Chillicothe and doing a pretty good amount of business every month between flipping, rentals, mobile home park, and business. Would be happy to get together for lunch or something and discuss.  I've built a 3m business with $0 cash. I'm sure I can give you some direction to get a fairly quick start if you're interested. 

    0Reply
  • Ozzy SmithPro Member
    Specialist · Dayton, OH · Member since 2014 · 352 posts · 265 votes
    7y

    @Jeff Mays I'm going to take the other approach than the majority of the group (that's pretty much what I do all the time actually), and say good for you on taking a chance.  Like the others have said, it is a big risk walking away from the security of a high paying job, but is it any more risky for you with multiple 6 figures or the guy that only makes $10/hr to quit his job?  Either way, in both scenarios, the person is giving up 100% of their income to bet on themselves.... I'm guessing you at least have some savings (unlike the minimum wage guy) and some good business sense if your earning that kind of $ in the first place.  

    That being said you do have a tough road ahead of you to replace that much $ with passive income but it is totally doable and not in as long as many of these comments make it seem.  You are definitely on the right track and I'd highly recommend partnering with someone who has the experience to show you the ropes (that's how I got started and have done the same for others starting out) because you don't know what you don't know.

    I think you're spot on with looking to the Dayton area to start investing (your $ will go much further) as I believe it is the best place in the world to invest.  If there's anything I can help you with reach out to me anytime.

    Finally trust your gut (but be realistic).  No matter what you choose there will always be someone telling you you're wrong, but only you know what's inside and have to live with the choices you make.  This real estate thing is not rocket science and can be learned pretty quickly if you have common sense and a good understanding of business (again you know what's inside you).

    So happy investing, look me up if you feel the need, and btw... you can always take a part time job or I know there are lots of real estate investing companies looking to hire if you ever need to make some part time income while you figure it out! #GOFORIT!!

    3Reply
  • Jeff Mays
    OP
    Member since 2019 · 13 posts · 4 votes
    7y

    Wow...thank you. That's exactly the environment I'm used to...Always positive. I would definitely like to partner up. I'm from Chillicothe originally, even though I live in NJ now. Go Bucks!

    0Reply
  • Kiley N.
    Honolulu, HI · Member since 2017 · 231 posts · 191 votes
    7y

    Boom.

    0Reply
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