How Much Pressure Should I Put on Myself for Deal #1?

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How Much Pressure Should I Put on Myself for Deal #1?

Daniel Whitmore
Rental Property Investor · Los Angeles, CA · Member since 2019 · 78 posts · 40 votes

How important is it for my first deal to be a good deal?

I’m new to real estate. My network is small. I don’t have muscles to flex, I don’t have past experience to guide me. I’ve read books, listened to podcasts and webinars but that can only help me so much, right? I have a lender and an agent but I don’t have a contractor, attorney, CPA, or inspector I trust.

To make matters even more difficult, the markets I’m looking to invest in are hot. Good deals go fast. Starter homes are more expensive than I anticipated. Everyone is paying asking price or higher. Most deals are gone before I ever hear about them. I’m competing with investors who have been doing this for 20 years. They know the market far better than me. They have teams in place. They have systems I don’t have.

I have little hope that my first deal is going to be a home run. I’ll be lucky if I break even in terms of cash flow. In reality, it seems a lot harder than all the books make it out to be.

Here is my question: how important is it that my first deal is a good deal? How much pressure should I be putting on myself? This stuff is stressful and it sometimes consumes me. Should I spend the next 2 years reading every real estate book, vetting/ interviewing every potential team member, studying the market daily, finding a mentor I trust and can learn from, BEFORE I do my first deal??

Or... Should I work with my investor friendly agent and just buy an OK deal found on the MLS just to get it out of the way?

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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
7y

Two comments:

1 - What?!?!?
2 - Why in the world would you think it's OK to have your first Property be a bad deal...just so you can make one?  NEVER, EVER, focus on the goal being the property.  All properties, especially your first property, should ALWAYS be focused on the "deal".

3 - (OK, three comments).  I have found in life in general, that the solution to every problem, can be found in the problem itself...hidden, in plain sight.  Read your first two paragraphs, and find your answers.

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  • Cherie Orellana
    Salt Lake City, UT · Member since 2018 · 219 posts · 182 votes
    7y

    You will find the right deal.  If you are house hacking and plan to later turn it into a long term investment I would still look at each property focusing on cashflow and not as a home shopper looking for your ideal personal residence. Utah is a great market and great deals are out there.  I wouldn’t expect a home run necessarily, however I wouldn’t settle for a mediocre deal.  Also ARIA meetings are over rated around here:)

    0Reply
  • Patrick Menefee
    Real Estate Coach · Charlotte, NC · Member since 2016 · 399 posts · 341 votes
    7y

    @Daniel Whitmore I would take the value of what @Joe Villeneuve says and combine it with what some others are saying. Don’t buy a property for the sake of buying a property, and don’t take a loss for the sake of “momentum”.

    That said, there’s a middle ground. Do all the analysis and find a property that meets your criteria...if from a buy and hold strategy, get something that cash flows. It doesn’t need to be a home run, just get a base hit and build from there.

    Take action...right now that may seem like the only action step is the purchase. How many deals have you analyzed? How many houses have you looked at? How many neighborhoods have you driven through? What steps have you taken?

    If you analyze dozens of deals a week or month, you’ll eventually figure out what’s a base hit and what isn’t. Action doesn’t need to be a purchase

    3Reply
  • Daniel Whitmore
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2019 · 78 posts · 40 votes
    7y

    @Jonathan Bombaci You have a beautiful system in place that seems to be working well for you. I envy you and hope to someday follow in your footsteps with the large multi family focus. But I realize it will take a lot of work, practice and persistence as well as overcoming mental blocks.

    Thanks for your insights. Luckily I’m working with a great agent (also small broker) right now who is an investor herself locally. Just make my very first offer with her today! She will be key in helping me find deals!

    1Reply
  • Daniel Whitmore
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2019 · 78 posts · 40 votes
    7y

    @Joe Facenda you bring up a good point. I need to get more clarity from my lender. I’m in a bit of a unique situation because I don’t have a consistent W2 job and will need a co-signer. I’m also not totally sure I will live in one of the units. I’m not exactly clear on how these two points will affect my interest rate. However as I understand it a better W2 income would lower my rate.

    0Reply
  • Daniel Whitmore
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2019 · 78 posts · 40 votes
    7y

    @John Barrows thank you for the great advice. I think it’s wise to find other investors (through networking events/meetings), learn from them but not necessarily follow them. I have to forge my own path based on my goals and experiences. To your other point, I need to have more courage to look at smaller markets further out where other investors are few. I’m currently focused on a few markets that are very hot. When everyone goes right, I would be wise to go left.

    0Reply
  • Daniel Whitmore
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2019 · 78 posts · 40 votes
    7y

    @Amy Kendall thank you for your support! As a UT agent, you’re very familiar with all the challenges I face. The market is a lot more competitive than I thought it would be. I appreciate you assuring me that my strategy is sound. Fingers crossed I can find a small duplex or mother in law soon (my goal is to do my first deal by end of Dec). As you mentioned, if I live in one unit and don’t see positive cash flow (after considering all expenses), it’s not necessarily a bad deal. I’m still getting help with paying my mortgage which will allow me to save additional income to put forwards future RE Investments!

    1Reply
  • Daniel Whitmore
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2019 · 78 posts · 40 votes
    7y

    @Heather Schmidtknecht thank you very much! This is great advice! I do need to start small and consider the worst possible outcomes so that there aren’t any surprises that I’m not prepared for financially. I think your strategy is fantastic and I hope to achieve the same results you have someday. Having your rental income “pay the bills” and cover all expenses is a beautiful thing. I may not get so lucky on my first deal but it’s something I will strive for. Lastly I just wanted to say I’m jealous you have a W2 job you love! That’s a wonderful thing I’ve never quite been able to achieve. Which I why I’m so eager to get started with real estate!

    0Reply
  • Daniel Whitmore
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2019 · 78 posts · 40 votes
    7y

    @Tylor Williamson I appreciate your advice! Wise words! I definitely want to ensure my first deal is good experience so it doesn’t leave a bad taste in my mouth and potentially I give up. Knowing myself, there is a high likelihood I would in fact give up if my first deal was a bad experience. I would love to connect with you and talk about the UT market and your experiences.

    0Reply
  • Daniel Whitmore
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2019 · 78 posts · 40 votes
    7y

    @Jeffrey Vazquez thank you!! I appreciate your support! I think you have a great strategy and mindset. I’m always impressed by the posts on BP where people focus on the learnings and takeaways from past mistakes. I have to be OK with the fact that I will make some mistakes but I can learn from them and grow. However, the more I prepare and educate myself, the more I mitigate risk and roadblocks. Good luck with that first notch and keep in touch!

    0Reply
  • Daniel Whitmore
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2019 · 78 posts · 40 votes
    7y

    @Mike Dymski wise words! Thank you for the advice. I think concrete weekly goals is definitely key and something I can work on. Today I made my very first offer! I spent a big chunk of the day analyzing the deal. If I’m able to achieve my goal of analyzing 10 deals per week, I will get faster and more confident which will lead to more offers and hopefully a sweet deal. Thanks again for sharing your wisdom.

    1Reply
  • Daniel Whitmore
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2019 · 78 posts · 40 votes
    7y

    @Ian Walsh thanks for the feedback. The brand new guys in your market have found a formula that works! I will not settle. Hopefully thru hard work, analyzing deals, learning the market and being persistent I will achieve similar results and find a lender willing to finance my deals.

    0Reply
  • Daniel Whitmore
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2019 · 78 posts · 40 votes
    7y

    @Karen Lee thank you! I love your advice to “have fun”. No one ever emphasizes that. I can’t put too much pressure on myself as a beginner. Thanks for your advice! I hope to implement a similar strategy and put down as little as possible so I can sooner find my next property.

    0Reply
  • Daniel Whitmore
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2019 · 78 posts · 40 votes
    7y

    @Brock Mogensen 89 units for deal #2???? That is crazy!! Buying that duplex must have given you a huge boost of confidence! Which deal was more stressful - duplex or 89 unit? Which required more work upfront?

    0Reply
  • Daniel Whitmore
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2019 · 78 posts · 40 votes
    7y

    @Sean Nava thanks for the support. Glad to hear you approve of this strategy. Crawl, walk, run. Great advice. My goal is to find a mother in law or small duplex by Dec somewhere between SLC and Orem. Hopefully I can make it happen. Just gotta be persistant, follow thru with my goals, and analyze deals everyday.

    0Reply
  • Daniel Whitmore
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2019 · 78 posts · 40 votes
    7y

    @Patrick Menefee Thank you so much for the advice. One of my favorite posts in this thread as I feel like you have articulated it perfectly. I gotta just focus on a base hit. But in order to do that I need to be taking action. Last week I drove 10 hours from LA to UT, spent a week meeting with an agent and driving around the different neighborhoods trying to get a better sense of where I wanted to invest. Today I spent a big chunk of my day analyzing a deal and making my very first offer. I have to continue to move forward everyday. Action is key and I appreciate you emphasizing that.

    1Reply
  • Daniel Whitmore
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2019 · 78 posts · 40 votes
    7y

    @Cherie Orellana thank you for chiming in!! I appreciate all your help and support! With your help, I’m confident I’ll find a good deal even if it isn’t a home run!

    0Reply
  • Daniel Whitmore
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2019 · 78 posts · 40 votes
    7y

    @Caleb Heimsoth thank you. This definitely isn’t a get rich quick scheme. Just gotta continue to move forward and take action. It’s gonna pay off eventually.

    0Reply
  • Daniel Whitmore
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2019 · 78 posts · 40 votes
    7y

    @Ali Boone thanks for your advice! I appreciate your perspective. I gotta try to hit that home run just to get that base hit for my first deal. And being able to explain why it’s a great deal is great advice I’ve never heard expressed before.

    I’m actually focusing on the UT market now as it’s cheaper than CA and I have friends and family there.

    0Reply
  • Patrick Menefee
    Real Estate Coach · Charlotte, NC · Member since 2016 · 399 posts · 341 votes
    7y
    Originally posted by @Daniel Whitmore:

    @Patrick Menefee Thank you so much for the advice. One of my favorite posts in this thread as I feel like you have articulated it perfectly. I gotta just focus on a base hit. But in order to do that I need to be taking action. Last week I drove 10 hours from LA to UT, spent a week meeting with an agent and driving around the different neighborhoods trying to get a better sense of where I wanted to invest. Today I spent a big chunk of my day analyzing a deal and making my very first offer. I have to continue to move forward everyday. Action is key and I appreciate you emphasizing that.

    Congrats on the offer! Great to see the work paying off in some way...I put in an offer today as well. Now just keep analyzing more deals and don't get hung up on this one...see what else is out there and start working your funnel to produce leads. Hopefully your offer works out, but if not no big deal! Keep your pipeline full and move on to the next. 

    Have you met with anyone else besides an agent? Connected with any wholesalers, reached out to any sellers, etc.? I've only begun building my network in the last few months and have already found that between MLS alerts, saved search notifications on Zillow/Trulia/Realtor, and wholesalers I connected with I have plenty of leads to start with for now. How great of a problem would it be to have more deals falling in your lap than you can handle??

    Best of luck, keep me posted!

    0Reply
  • Ali Boone
    Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
    7y
    Originally posted by @Daniel Whitmore:

    @Ali Boone thanks for your advice! I appreciate your perspective. I gotta try to hit that home run just to get that base hit for my first deal. And being able to explain why it’s a great deal is great advice I’ve never heard expressed before.

    I’m actually focusing on the UT market now as it’s cheaper than CA and I have friends and family there.

    Cool! Not sure there's a lot of cash flow there, but have to start looking somewhere! You'll definitely learn as you go. Don't hesitate to reach out to any of us as you go along your journey and ask for help!

    0Reply
  • Daniel Whitmore
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2019 · 78 posts · 40 votes
    7y

    @Patrick Menefee aside from an agent and lender, I have not met with anyone else I can add to my team. I take that back, I also met with a couple friends who may want to partner down the road once I have a proven track record.

    In regards to wholesalers, I’ve heard mixed reviews in working with them. I’ve heard many wholesalers are looking for all cash offers so I haven’t pursued any for leads or deals. Any tips for finding and working with them (in my Market)?

    Also wanted to say congrats on your offer today! Hope it works out for you! If mine doesn't work out, no big deal, like you said. It's no home run. There will be others, just gotta find them! Back to searching the MLS and analyzing deals tomorrow!

    0Reply
  • Aladdin M.
    San Mateo, CA · Member since 2015 · 55 posts · 19 votes
    7y

    @Daniel Whitmore

    What Joe V states is true.

    Build your infrastructure before you walk across the bridge.

    Also, if you are more risk averse, try your first deal in a smaller out of state market.

    BUT BUILD THE BRIDGE FIRST no matter where you invest.

    0Reply
  • Account Closed
    Financial Advisor · CA · Member since 2012 · 128 posts · 76 votes
    7y

    Daniel-

    Understand some of these 80+ "doors" are not bought by one investor.  They are bought through syndications or partnerships.

    People sometimes want to act like they own the whole thing.

    0Reply
  • Aaron Hunt
    All Over, USA · Member since 2017 · 689 posts · 756 votes
    7y
    Originally posted by @Daniel Whitmore:

    How important is it for my first deal to be a good deal?

    I’m new to real estate. My network is small. I don’t have muscles to flex, I don’t have past experience to guide me. I’ve read books, listened to podcasts and webinars but that can only help me so much, right? I have a lender and an agent but I don’t have a contractor, attorney, CPA, or inspector I trust.

    To make matters even more difficult, the markets I’m looking to invest in are hot. Good deals go fast. Starter homes are more expensive than I anticipated. Everyone is paying asking price or higher. Most deals are gone before I ever hear about them. I’m competing with investors who have been doing this for 20 years. They know the market far better than me. They have teams in place. They have systems I don’t have.

    I have little hope that my first deal is going to be a home run. I’ll be lucky if I break even in terms of cash flow. In reality, it seems a lot harder than all the books make it out to be.

    Here is my question: how important is it that my first deal is a good deal? How much pressure should I be putting on myself? This stuff is stressful and it sometimes consumes me. Should I spend the next 2 years reading every real estate book, vetting/ interviewing every potential team member, studying the market daily, finding a mentor I trust and can learn from, BEFORE I do my first deal??

    Or... Should I work with my investor friendly agent and just buy an OK deal found on the MLS just to get it out of the way?

    Most important question of all which is relevant to pretty much every legitimate BP post:

    How old are you? Do you have time on your side or is it in fact a barrier?

    Is one’s goal is investing for retirement (protecting from ones own self) or investing for financial freedom (early retirement of sorts)?

    I’d much rather own property when I’m younger (with interest rates like these) in my 20s-30s, which is at the least break-even, then I’d wish to be 40-50 and finally hitting a home run by BP standards that’s $300-500/door.

    0Reply
  • Robert Plumpe
    Wholesaler · Eastpointe, MI · Member since 2017 · 39 posts · 13 votes
    7y

    Daniel:

    Let me suggest a few things...

    A). If you are looking at a deal with a $300k+ property in a "C" class neighborhood that is likely to cash flow $100 to $200 a month, I would really reconsider the deal.  The problem is the return on the asset.  If you are borrowing $240k+ to make a couple of hundred in monthly free cash flow, I would probably pass on the deal.  The only way I would do it is if there is some other "hook" where you can increase cash flow OR reduce the amount of debt, or some other type of thing.  The risk ($240k loan) is out of proportion to the reward (cash flow).

    B). If you are looking at dozens of deals, and can't get one done, perhaps now is the time to either save & build up capital OR move/look in different markets or assets.  

    C). If at first glance, a project is only marginally profitable, I would be EXTREMELY cautious.  So many things crop up that you don't/can't foresee.  The cost of renovating may be a bit more than thought.  A contractor may take a few weeks longer.  It may take a month longer to rent the property...and on and on.   I try to be extremely conservative in my estimates, and even then I'm still frequently too low/slow.  The odds are probably greater that you will have small problems, than you will pleasant surprises.  So a marginally profitable deal at first glance will likely prove to be breakeven?

    Finally, it is certainly important to get started and make your first deal, but you can't do a deal simply to get it done.  Maintain discipline and you will be off to a good start.

    Good luck!

    1Reply
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