Pulling The Trigger On Your First Real Estate Deal With Sean Pan
is a Real Estate Investor and the Host of the . In this episode, Sean joins Brett Swarts to share his story of becoming a real estate investor. After graduating from UCLA and then working full-time as an engineer, Sean knew that he didn’t want to be an engineer all his life and wanted to create his own legacy. Sean talks about pulling the trigger on his first property and why he decided that it was finally the right time to invest. Sean and Brett dive into getting into fix and flips, Sean’s first and best flip, and how the Deferred Sales Trust could have helped Sean with the deal.
I am excited to welcome our next guest, who is a real estate investor. He’s from the San Francisco Bay Area and lives in San Jose. He focuses on single-family renovations as well as out-of-state investments in the Jacksonville, Florida area. He’s the Host of the , where he interviews top investors in the area, many of whom are making over seven figures. He also brings on real estate professionals and those who help them such as architects, contractors and inspectors to try to shed some light on the best practices and what you want to look out for when buying a deal and having more success. He also hosts local real estate meetups in the South Bay, San Jose area as well and produces real estate educational videos to help more investors make more passive income. I want you to welcome, . Sean, how are you doing?
I’m great. Thanks, Brett, for having me on your show.
Sean, tell us a little bit about your story and what your focus is.
I grew up here in the Bay Area. I studied Engineering in college in UCLA. After working for a couple of years, I decided that I didn’t want to be an engineer full-time. I want to find a way to create my own legacy. From all the different businesses that I tried, real estate was the one that stuck with me, made the most sense and ultimately, I poured my heart soul into it and been going into it full-time.
You started out at UCLA, got your Engineering degree, and you started with a full-time job. Where were you working first when you first started?
I was working at Boeing and Northrop Grumman as a defense contractor building satellites for the government, so a lot of stuff is pretty hush-hush. While it is fun and unique, I didn’t see myself being there. As a twenty-year-old, you’re looking around at your older co-workers, they’re like my dad’s age and they’re doing the same job as me. I thought, “If I stay here and be complacent and 30 years go by, I’m going to be like them. That’s not the future I want. How can I get out of this situation?”
For some people, they’re 9:00 to 5:00 and being with the same company doing the same thing for 20, 30, 40 years is great. You had a vision and a dream for your future and you’re saying, “How do I take some action to make a difference to change that future?” You found real estate. Before we go into how you found real estate and why you chose that as your means for a living and for helping others, tell me a little bit about Sean before, the younger ages. Whatever you do now, back up to when you were a kid. What were the gifts that you were given or your personality or some of the traits that you had growing up that you found that, “It helps me now to help more people?” Have you ever connected those dots? Who was Sean as a kid growing up?
Growing up, I was pretty shy but I was always good numbers. That’s why real estate jived with me a lot because real estate is all about numbers. When I grew up a little bit, I got my first job working at Timberland, the shoes, over at the mall locally. That helped me build a lot of my social skills.
Not for the rapper, Timbaland. You were you weren’t doing concerts and side rap battles with rapper, Timbaland?
I don’t even know if he was that big back then. It was all for the shoes. Honestly, it was a retail job at the mall and I got paid relatively high, which was $9 an hour. It’s pretty good for a kid. It taught me a lot. It taught me how to be more social, how to look people in the eye when they’re coming towards you, even though you think, “I don’t want to bother this person.” Those skills translated into the real estate investing world where you have to talk with many different people on each project.
Be more assertive, working hard, working for somebody and getting the sense of the real world. When did you become fascinated and obsessed with investment real estate? Walk me through that journey of, “There’s something that’s different here that I didn’t know about before that maybe I wasn’t taught in school. I knew about numbers. I was good at math. I like finance but I never knew this world of investment, either passive or active in real estate.”
It all goes back to my first job. As an intern, in the first year, I was fascinated with the work. After a while, I started realizing the situation I was in, so I started poking around at different books. The big one is by Robert Kiyosaki. I read it when I was 22 years old and it opened my eyes to this whole world of real estate investing. I wanted to learn more, so I went on and started listening to their podcasts and reading their blog posts. I remember there’s one post from Brandon Turner and he said that you can make $1 million in about ten years if you do these steps: Buy low, rehab the units, rent them out, refinance, take the equity, do it again and again and over ten years, you’ll make $1 million. At 22, I thought I would never have $1 million. Now it’s a reality and a thing.
You’ve been doing this for years now. Is that in your journey over the last few years of slowly moving from the W-2 day-job to the full-time in real estate investment?
Definitely. I would say the first four years were more about learning but not taking action. I read Rich Dad Poor Dad at 22 and it wasn’t until I was 26 that I moved back from Los Angeles back to the Bay Area that I started attending these real estate meetups and started talking to actual investors. I took another year from there to purchase my first properties over in Florida. It took some time to get the courage to pull the trigger.
What gave you the courage there? I know that you’re talking and getting around people. It sounds like you’re changing your environment. You went from either learning by yourself, reading and either being hesitant or not sure if you should take action to getting in an environment where people are doing deals. You’re saying, “These people are like me. They’re either smarter or maybe I’m smarter than some of them. Why can’t I do this?” You took action and you bought your first deal. Is that a fair summary there?
That’s it. I started reading posts on . It’s Yahoo! Answers but a lot better. They said that the best way to become a real estate investor is to find your local REIAs. We don’t have an official REIA here but we have a ton of real estate meetups you can find on . I started showing up and every time you go and you’re a young kid, they say, “Great for you. What do you do?” I say, “I’m an aspiring investor.” After a while, they look at you and they’ll walk away because they want to talk to someone who is “worth more their time.” After a year of this, I got sick of it so I said, “Let’s do something. Let’s stop analyzing everything and take action. Let’s try it on a small property and see where it goes.”
Tell me about your first property. Walk us through finding, funding and closing on it.
The United States is a large place. There are 10,000 cities here. How do you choose the one location that will give you the money you want? By going to all these different real estate meetup groups, I saw a lot of these Top 10 Lists to Invest and consistently on those top 10 lists was Jacksonville, Florida. There are other cities as well, but I didn’t like their climate. They had tornadoes or snow. I’m from California, I don’t know how to deal with snow. I figured that Florida has a similar climate to California and hurricanes aren’t a big deal. This was before those giant hurricanes happen.
Eventually I said, “I decided on these target markets. Let me figure out who I can work with over there.” I started thinking about creating a team out of the state. I went on and I started asking people on the forums, “What are some of the best zip codes to invest in at Jacksonville, Florida?” I got a lot of responses and I called all the different agents that respond to forum posts. One agent, in particular, I felt that we had a good connection. He spoke the same language that I did and he was responsive. I decided that I’m going to work with him and help him find my property. He helped me find a whole list of properties. After a couple of months, we found one that was good in my opinion. He connected me with a property manager that he works with. By referring different people, I suddenly had a team in Jacksonville, Florida even though I’ve never been there before.
Did you already have a down payment saved up? Did you use other people’s money? Walk us through how you fund a deal?
I was fortunate to have started my career in a W-2 job at a good time. I know people who have started back in 2009, they couldn’t get a job. I started an internship in 2011 so the economy was already coming up and that’s when I was reading all these books. I learned about investing in stocks and in bonds. All the money I invested appreciated quite a bit. By the time 2016 and 2017 rolled around, I had a good amount saved up. A down payment for a house in Jacksonville isn’t that much. You only need 20% down on $100,000 property. That’s $20,000. If you’re making a six-figure salary in the Bay Area, you can save it up in a relatively quick time.
You put $20,000 down on $100,000 deal, maybe sold some stocks that had appreciated, paid the tax on those and that $100,000 deal turned into what? Do you still have that property? What’s the story there now?
I got that property lower than that. It is a long story, but I got it for about $80,000. We did some small renovations to the property, maybe $2,000 or $3,000. It wasn’t too much. It rented out for about $900. I was doing the whole 1% rule which is where you want to buy a property where the rents are about 1% of the purchase price of the home. For a property that rents out for $900 a month, I could afford something up to $90,000. Here it was $80,000 to $100,000. It’s a pretty good deal.
It sounds like a great deal. Do you still own that and cashflowing? Where are you at with that one?
I’m pretty lazy with my Florida properties. A lot of my friends say, “You have too much equities and properties. You should refinance that out and sell them.” I like them and they give me cashflow. I have no reason to sell them. I don’t need the money now anyway so they’re there.
I worked with Marcus & Millichap for a lot of the clients that I have helped buying and selling apartment complexes. If they own it long enough and don’t take on too much debt, don’t over-leverage or refinance too much out of there and pay down the debt and live off the cashflow, I don’t want to say can’t lose, but you lower the probability of losing a lot. People need a place to live. As long as you have some good property managers that you can trust, good team locally there and you bought it at the price, which you did, I don’t blame you. That’s a wise approach. Shifting to some other deals, that was your first deal. You started doing maybe some other fix and flips and maybe bring it back to California. Have you done anything here? Walk me through some of the ones where you bought, sold and flipped the deal.
I’ve been attending all of these meetup groups here. When I first started getting into real estate investing, the only concept in mind was buy and hold. It’s like you said, you can’t lose if you hold on to it and it cashflows. I started going to meetups where you hear flippers talk about how they made $1 million a year flipping homes in the Bay Area. I was thinking, “You can make $1 million a year?” I can’t make $1 million a year at my W-2 job, unless I’m a CEO or something. By hanging around with all these flippers, I became one of myself. Honestly, it was showing up. I talked about my first deal. My first deal was my best deal and that was given to me on a silver platter.
The story is, I wanted to be involved in the real estate world you but in the beginning, when you have no experience, nobody wants to talk to you. I volunteered to be the checking boy. I said, “I’ll take your $10. Here’s your name tag. Welcome.” I had a friend next to me and she was also a big hustler. She broke seven figures, so she is a top dog now. At the time, we were both newbies and she had a project where she had an opportunity, no one else wanted it and she didn’t have the funds to do herself because she was already over-leveraged in other projects. She was like, “Sean, I know you need a deal. Do you want this one?” I looked at it. It was maybe a couple of blocks from my work. I knew exactly where it was and I said, “This looks like a pretty good deal.” It was $865,000, which is a good deal for us in the Bay Area. I thought it could probably hit $1.25 million. We put about $75,000 into it. We thought we’d get a good profit out of it, maybe $100,000 or $150,000. We got super lucky that the market appreciated it and we end up selling for $1.4 million.
How long was the timeframe?
It was about three months. We closed in the middle of August.
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