Hello to All,
I have been a passive BiggerPockets user for the last several years. I read the blogs, I read the topics, and the Qs/As. Yet, I feel terrible because I am not great at actually posting things which is something I want to get better at. I figured what better place to begin than at the very beginning.
I actually just turned 29 last week and a few days later my wife and I celebrated the birth of our first child. As I held my son for the first time I thought a lot about the journey that brought me to that exact moment. First of all, I have never held a 9 to 5 job. That is not me, that will never be me, I am just not wired in that way. I have too much kinetic energy to be stuck in one place for too long and want to be out moving around. Above all else though I love people and real estate.
I feel in love with real estate in high school when my family moved to the Buckhead section of Atlanta and I looked at the world around me. It was as if my friends were all trying to play a game of one upmanship with each others' homes. I was stunned. I come from a middle class background- education and paralegal work are the world that parents knew not board rooms, mergers and acquisitions, and securing millions and millions of dollars for projects. That world was foreign to me, but I knew from there that it is what I wanted to do. So I setup shop at my local Barnes and Noble one day with a notebook and stacked up the first ten books they had on real estate investing. To this day, that first notebook is my bible and I am sometimes amazed it has held up over the course of the decade plus. I will touch on what I believe are the key takeaways from that in a second.
I did not actually begin my first project until I was in college. I wanted to make sure I had a plan. Let me stress that A PLAN! My plan centered around where I was. The city where my college is was at one point in time the furniture capital of the world, but sadly the year before my freshman year one of the worst economic downturns this country has seen since the Great Depression struck, and places where I was calling home were the hardest hit. People were legitimately leaving their homes in the middle of the night or just letting the homes fall into such disrepair. Sadly this twist of fate created an opportunity I saw. My school was planning rapid growth in the next six years so much so there was a question of where would the student body live in my mind. Here was my first eureka moment.
I want to pause here for a second for a deeper dive on everything I just touched on. I believe the best real estate projects are the ones where problems are solved for all involved. The problem here was a couple fold.
1) The city was looking a higher foreclosure rate on top of a higher rate of abandoned and dangerous properties.
2) My university was looking at a housing shortage starting in a few years.
Available housing for a problem on the horizon? That did not take long to see the answer.
So I set off to begin to research the laws regarding abandoned properties and foreclosed or pre foreclosure homes in the state. I wanted to become an expert in this field.
Here is my first piece of advice I want to offer, and it comes from notebook. Know what you do in fact, and do not act to know everything. I quickly learned the value of the answer "I do not know the answer to that, but I can get it to you shortly". I do however want to express the high level of importance of knowing the crux of the information behind a project which I will touch on shortly. Anyone who has done a high number of projects, deals, or transactions, will tell you that learn something from each an every deal they do and while that is true I learned more on the first deal and there are more annotations in my notebook from progress on my first deal than any other project I have ever done.
Part of my plan was knowing what my strengths and weaknesses are. I will humbly admit that I am awful at math. After simple addition, subtraction, long division, and multiplication I am no longer of any use. So I wanted to create a small team where specialization would become the secret to hopeful success of my first "project". This concept is now what I base the majority of an interview with a potential hire for my team- in the form of a simple question- What can you teach me about?
Example of a bad answer: I can teach you about project management.
Example of a good answer: I can show you how project management can decrease your costs in the long run by budgeting specific resources at the right time, and how long term planning can increase your productivity over the course of the long and short run.
Over ten years I still have the same numbers specialist and project management specialist in place. They are respecitvely my left and right hand. I understand and greatly appreciate the expertise that they bring to the table, and without question are the two most important members of my team.
I always tell first time developers that unless they have project in mind right away, look for a group, or team that they can join in there interim to learn something from. Pitch to that team exactly what it is you can bring to it and how you can help better than anyone else. Avoid using that language that is impossible to measure- such as you will hustle more anyone else, or that you will work harder than anyone else. Be creative. Think outside of the box. Yet, stay true to who you are as an individual. They might even help you when you find that first project you want to do.
Now, lets step back into the plan part. I get frustrated when I hear real estate agents, developers, or even lenders say they want to make X amount of dollars. That can only be part of the plan, in fact that is simply the by product of the plan. The amount of money one wants to make is a goal, but a plan is the roadmap for how to achieve the goal.
In my office there is a whiteboard, and on that whiteboard split into four columns. Each of those columns is a goal for 2019 and in each row of the column is another goal that is a checkmark to get to the bigger goal. These should be recited by heart, and affirmed every single day.
Make 100,000$ Project Growth
- 1 Project with Own Profit of 45,000 - 1 self funded flip
- 2 Projects with own combined profit of 30,000. - 2 projects with purchase price of over 250k
- 3 Projects with own combined profit of 15,000. - 3 projects with potential add on potential
Naturally every single one of those goals could be tweaked to reflect whatever area a person is in or whatever their own personal goals. I do however recommend that the goals start small and build upwards. It is exceedingly rare, aka next to never for someone to get right into real estate and do multi million dollar projects from the get go. There is no shame in starting small. I laugh when I look back and realize what my first goals were:
1) Buy a new car with cash- 15,000 value
2) Pay for a semester of college tuition- 24,000 value
3) World Class European Graduation Vacation- 18,000 value.
4) Save 15,000.
Those four things when I first wrote them down seemed almost comical and I thought even if I achieved one of them I would be a happy person. One year late I had achieved all four.
Now, the plan to put all those goals into action was a little harder to define, but again I wanted to start small. One house as a fix and hold. The hard part to explain is the amount of work that goes into one project. One project means x amount of potential homes, means y amount of appointments with various people, means z amount of conversations. I spoke with more asset managers at banks regarding foreclosures, and sent more letters to peoples homes offering to buy them than I can ever remember. Understand that there will be a lot of No's, hell no's, and not even interested in talking to which to say great thank you for you time. I spend no time on the people who say no. The ones I spend time on are the unsure and maybes. 100 conversations might lead to five meetings with people of which might lead to one yes, which at its face value is a 1% chance but that one is all that is needed. Here is why is it is so important to know exactly the type of project you are looking for and drill down from there. If you are looking for 1500 sq ft home with at least three beds and two baths- do not bother targeting 1200 sq ft homes with two beds and one baths. Why bother targeting it? Each home is an opportunity to be targeted just stay true to your board.
In my first project that I purchased it took me a little over two months to find it, and actually buy it. This took a lot of going to different homes and evaluating them. Lots of discussions with different bank holding companies about different assets, and trips to city hall for rules on foreclosure. Finally I was able to convince a bank to sell me a property. To secure it I used both a semi-conventional loan and hard money lenders. I secured the hard money loan first, which I speak to at a later point in time, and then the semi conventional loan. It is important to know the numbers of each project, in the regard that each project might require a different structure for securing the loan, but never expect a perfect box to fit loans into. Simply put, the hard money loan secured the acquisition of the property with monthly payments each month with a balloon payment due when the property resold. The semi conventional loan was used to help make the monthly payments on the hard money loan and also the rehab portion. The purchase price was 110,000 and the rehab cost was additional 42,000 mostly for a new kitchen and bathroom fixtures. All told the total expense was for 152,000. I sold the property to a teacher at the school for 187,000. After all closing cost, repayment of the loans, and payments to my team owed were made I was left with a little less than 10,000 in profit for myself. I thought I had made it big time.
From there it is a rinse and repeat formula, the same bank that I bought the first property from then sold me two more and from there I was off. I spoke with a lot of real estate agents in the area and put the word out I was looking to buy, and once word got out I was in the market and was legitmate doors were flying open. Here lies the last part I want to make. Real estate is a show me industry sadly. Nobody cares about what you say you have done, people care about what you have done when you can show it. Banks in the area who were not returning my call suddenly were when I sent them my portfolio of what I was doing and had done. Do not be afraid to speak to your success. Let it snowball. After completion of your first deal more people should know about what you have recently done vs what you will be doing.
Most people never give real estate a chance because they are too afraid for any different reason. Do not be afraid. Chase away the fear with a plan, goals, and knowledge. Arm yourself with those tools and there is zero limit to what you can achieve and what you can accomplish.
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