It has been a long long year for everybody, and I could not even remember how I came to know biggerpockets, the best forum for REI in the world, and exactly which day I made my decision to take REI as a serious thing besides my full time job. There are many great posts in this forum sharing their great achievements. I am far away from being successful yet. However i think it might be also useful to share my journey so far as a new investor too :).
To summarize what I have done this year:
- Read 5 real estate books. Rental property investing; Tax free money; Commercial real estate investing for dummies; ABCs of real estate investing; Crushing it in Apartments and Commercial real estate.
- Read numerous biggerpockets posts, podcasts, youtube channels etc.
- Made 4 posts on biggerpockets. Could not say thanks enough for everyone who replied to my posts, it helped me so much
- Bought first investment SFH with 5b/2b at $550k in north of greater Seattle area. Replaced the roof and fixed leaking pipes, rented at $3000/month, it is estimated $700+k on redfin now (though a bit hype I believe :)).
- Sold my first primary house, which was a rental after I bought another primary house, to harvest the tax free appreciation. Again, made the decision after asking in biggerpockets.
- Put a commercial apartment building under contract and killed the deal because of inspection surprise, illegal unit. Later I realized it was actually a bad deal even without the illegal unit.
Timeline
- March: bought the first REI book Rental property investing from Brandon. Didn't read it until a 2 months later I think :)
- May: registered on biggerpockets
- June: made my first post on biggerpockets
- July: opened redfin and started to looking for deals :)
- Sep: bought my first investment property and sold my first primary house
- Oct: made my decision to start buying multi-family
- Nov: put first apartment under contract and rescinded after due diligence
Pitfalls I fell or almost fell
- Do not skip inspection: I scheduled the inspection for my first deal, but ended up skipped it and went fishing in the lake :(((. Luckily, my agent reported me the major issues inspectors founded, and budget $30k maximum for repairs. Later on i found there are so many issues that need fix, though no big surprise, and have already spent $18k to make it rent ready.
- Be PATIENT and do not buy bad deal just because you want to jump into the game: For the first the apartment offer, I bought it mainly because I think I could not wait to jump into the commercial real estate game. I reflected it later on, I fell lucky it didn't work out. If it went through, the only exit strategy for me would be buy and hold. I cannot sell because the price is market price. I cannot raise rent since the rents are almost maximized. not much value-add opportunities for enforced appreciation, since pretty much all of them are rented at close to market even for the units in bad condition. If things go south next year, I am pretty much stuck with a large chunk of my hard earned money in the property.
Things I learned and area I grew
- An investor mindset. Over the time of this year, I have grown a lot to be a savvy investor. I got a deeper understanding what it means to be an investor, and what a good deal means, like 'Do not buy at market price, do not work for free!' Though I think I am still a bad investor without a mature and solid mindset for investment yet.
- Commercial real estate. After two months of exploring commercial deals, I started to learn how the game is played differently in the other side of the world, and what potential and benefits it provides and what risks it might have. How important to build connect and rapport, and how hard it is. I am still working on the steep learning curve, and look forward to my first multi-family deal, but this time, I will be more patient. Will definitely share here if I make it :)
- Started narrow down the criteria and areas looking for deals. I started with looking into Seattle cities, and now more hesitant than ever to enter this submarket due to its landlord laws, and properties being super expensive. There is no easy way to achieve 5+CAP, 8-10% CoC return, or cashflow $100-200/door/month without a large amount of downpayment. Now I am looking further north like Everett, and south like Tacoma, Puyallup, and Auburn etc.
- Started to know successful people in the area, and build connections with people sharing the same interest and goals. I got to know great people on biggerpocket, and other channels and also offline by looking through all major commercial broker websites. Way to go to build personal and professional relationships.
My 2021 goal
- Buy 20+ units by 2021, and 100+ units by 2022. I have a five-year goal of buy 500+ units. I failed this year's goal of buying one 5-9 units apartments, but i don't think it matters to achieve my next milestone of 20+ units, exactly because why I decided to do multi-family, it scales fast.
- Build a team that can supports my five year goal. A great team is where everyone contributes their value and work towards the same goal and share the rewards, happiness, pains and the journey together. Nothing can be achieved without having a good team. And nothing cannot be achieved with one. Looking for great business partners, realtors, and general contractors etc.
Why I decided to go with multi-family so quickly ?
My goal is to build passive income of $500k - $1million/year. I need around $500 units based on $100-$200/unit/month. Multi-family is something I cannot avoid. So why not just do it now? I am not afraid of how hard it might be (let's face it, making money is HARD), I am afraid of not achieving my goal.
Thank you biggerpockets. Being successful or being a loser that gives up, I will share my journey, as a lesson people can learn from or avoid :)
