Obsessed, Committed, Excited
I'm about to buy a property and I'm really excited but F$#@, it's taken grit for me to get here.
Is it normal for new real estate investors to become completely obsessed and work a gazillion hours per day to analyze deals and get through to the finish line? Two years ago I committed myself to learn real estate investing and the first big hurdle I had to cross was figuring out how to analyze deals. I had just left my cushy job as Chief Operating Officer of a small company I'd helped start alongside the owner, but I'd arranged to have 2 months of pay after I stopped working so that I could qualify for a loan during that time. (Story spoiler: I failed to buy a place then.)
For a month I lived, breathed, and dreamed real estate analysis. I read through countless articles online, learning about all of the different expense factors, from mortgage to taxes, insurance, vacancy, repairs, capital expenditures, water & sewer, snow removal, yard care, HOA/Coop dues, and property management. After taking notes on all of the factors, I put it all into a spreadsheet and started analyzing deals. I lived in New York City then and I looked at every single property for sale within my loan pre-qualification amount of $615k and some beyond. I first checked to see whether they might come anywhere close to the 1% rule. Then for properties that seemed like they could be anywhere close to a good deal, I dropped them into my spreadsheet for deeper analysis. I've got a record of all of those deals still so I can see that I did a deeper dive analysis on 98 properties in that month.
When I discovered BiggerPockets and how insanely helpful it is, I was so happy. I dropped my most promising deals into the Rental Property Analyser and got gorgeous PDFs showing the income, expenses, cash flow, and projected equity-over-time on prospective deals. That really helped convince my friends and family to support my endeavors in real estate because they could see that I was doing my due diligence and I didn't have to show them my scary spreadsheet.
I found an awesome real estate agent that specialized in representing buyers and we visited a lot of properties in New York City. I was going to the fringes, mostly Staten Island, in order to find properties that fit my criteria and she went there with me. A lot of the places scared the **** out of me. The issue is that they needed a lot of work. And my problem is that I had no idea how I would ever get the money to do that work. Would I ask to borrow it from people as a loan? Could I get a personal loan? Could I get a repair loan on top of my mortgage loan? These questions seem dumb to me now because I know more but at the time I could not figure out how to get around that problem.
And then a few properties seemed to pass my tests and seemed like they were in decent rentable shape already, but the listing real estate agents just never got back to my agent. I remember feeling really pissed off about that—here I thought I'd finally found a deal and no response.
After pursing this for a couple of weeks, I tripped over my own bright line. I had drawn a line in the sand for myself at the start of my quest, saying I needed to initiate a purchase before the end of the month. I believed I would not qualify for a loan after that. And when the end of the month came, I considered my quest a failure and decided to move on to other things in my life. It was a rough transition. I had wanted it so bad. But I believed I was doing the prudent thing by moving on.
Looking back, I now see all kinds of issues with that decision but at the time I didn't know how to proceed. I actually would have probably gotten a loan and buying in a place back then probably would have been a great investment for me. But the key thing I didn't know back then was how to fund repairs.
What's changed everything for me now is that I've learned about the FHA 203k loan. BiggerPockets' own Brandon Turner talks about these loans in his book Real Estate Investing with No (and Low) Money Down and they're incredible because it lets residential homebuyers put down just 3.5% and get a 30-year loan covering the cost of both the property purchase and repairs. And the program, I've learned, is allowed for up to 4 unit properties AND it allows a "non-occupant co-buyer" on the loan. That means that even if you wouldn't qualify for the loan with your own income, a generous friend or family member who believes in your analysis can help you get qualified. With such a low down payment, you're talking about $3,500 per $100,000 worth of property. That's a great deal if I've ever seen one. And the ability to include repair costs in the loan is, to me, an incredible opportunity.
That leads me to now. In the last two years, I've launched a business doing Business Growth Consulting and founded a nonprofit that helps businesses understand and improve their level of social responsibility and environmental sustainability. Those endeavors are incredibly fulfilling and they're making money, but something I've learned is that I'm still hungry for real estate investing. When you own a cash flow property that's being handled by a property management company, you can leave it alone and build wealth while tenants pay off the mortgage over 30 years. That's an incredible wealth-building tool and I just can't ignore it. If I invest in even 1 rental property per year, I will reach financial independence sooner and build wealth much faster.
I've experienced crazy inner turbulence about when and whether to invest in real estate but now I'm done with hemming and hawing and I'm simply committed to investing in my first property and then moving on to my next deal. I'm going to do it with tenacity. I don't care what it takes, I'm committed to getting my first deal done ASAP, and I'm working towards my goal every day.
You'll now find me investing in multi-family properties in the beautiful state of Vermont. It's been awesome to meet local investors and real estate professionals in my area and I look forward to working with a lot of people in this field.