Not many people can say that within two years of starting their real estate investing careers that they built a portfolio of property worth over 8 figures, but Justin Schnettler can. This one time engineer has become an incredibly successful investor and his story is one that we will share with you in this interview. His success story is especially interesting to me because, according to Justin, BiggerPockets has played an instrumental rule in helping him make his growing fortune.
Take us back to when you got started in real estate. What were you doing for a living and what inspired you to start investing?
For the last ten years I worked in the defense industry as an engineer and program manager. I worked in the propulsion engineering department as a ordnance, propulsion, and pneumatics engineer. I went the management route vs. the technical route and ended up as a program/project manager. I’ve always been interested in real estate but I decided two years ago to make a move to full time, and last August I quit my job and have been doing RE full time.
Why real estate?
It was what I was most comfortable doing. My father is a carpenter and I worked for him ever since I could hold a hammer. I can’t build my own house, but I know enough to know quality work when I see it. So, RE was just a natural fit for me.
Once you made that decision to take up real estate, what came next? Did you know how to begin? Walk us through that process of determining how to proceed.
What came first for me was joining the local REIA. I attended some of the classes they teach, did some homework, etc. I also downloaded lots of podcasts from various RE instructors across the country. Most of them try to sell you stuff but you do get some nuggets of good information. I had bought two home study courses but never really used them, but they did help me learn the “real estate language”; I’ve [also]probably read between 10-20 RE books. I ended up focusing on short sales because you could borrow 100% of the funds and they are so abundant in AZ. I had no money at the time, so it was a good approach for me. After joining BiggerPockets, I met Nick Johnson who mentored me on short sales. I completed 3 deals with Nick and 4 on my own. The last two years though, is where I really put my effort. I was working a day job and learning as much about RE as I could. It was very long weeks for 2 years but worth it in the end.
How did those first deals go? How did you and Nick end up connecting, and how did this mentor relationship evolve?
The first few deals had their bumps, but they eventually closed. The hardest part was probably the rejection and the anticipation of closing the first deal. It took me nearly 8-10 months. After spinning my wheels for so long, I met Nick on BP. He offer to mentor me and we’ve closed 3 deals together. He also introduced me to other people that I still network with today. During those times, Nick and I emailed non-stop but he never gave up on me, even when I lost a few deals. We ended up splitting some great deals. He really helped me through the tough times of rejection and losing deals. He kept me pointed in the right direction.
How did you end up on BiggerPockets? Other than meeting Nick, how has the site been helpful to you? Have you done other deals as a result of it?
I ended up on BP looking for a hard money lender. To be honest, I’m not sure why I needed it at the time, probably just building my network. The site has been extremely helpful to me, I have done some sort of business with at least five other members. Its great source to find answers but its also a great source to find business partners.
Wow, you did deals with 5 other BiggerPockets members . . . that’s great! How did you end up meeting them?
I ended up meeting most of them by simply participating and being active on BP. I try to be positive and professional on my posts because I know business relationships can be built on BP. There is always someone watching asking, “Do I want to do business with this person?” So I’ve tried to keep that in mind while posting on BP. As a result, I’ve made some great relationships and network with a quite a few people outside of the forum. In short, most of the relationships happened organically.
Since then, I understand that you’ve linked up with another member and have partnered up. Can you tell us a little about that?
Yes, Vikram and I have partnered up. We started buying properties together about a year ago. We took it slow at the beginning but then ramped up and have acquired 8 figures in properties together and have made a very profitable relationship. We really created a win-win relationship which is very hard to do these days. Our partnership has allowed to me quit my job and become a full time real estate investor. We are really looking forward to 2011 and have geared up our team to take on more houses in Phoenix and expand to others states as well. We both work very hard at our business and our blend of personalities have made us a strong team.
Acquiring over $10,000,000 in real estate in about a year is pretty incredible for someone who has only been doing this for two years. It sounds like you two have created a very successful partnership. How are you guys working together? What different roles are you playing? What is it that makes you two such a good team?
At the beginning our roles were somewhat undefined and we collaborated on most things. Over time we have naturally evolved; I handle short terms aspects of the business and Vikram focuses on long term goals. We are both very good at finding competitive advantages and exploiting them. We are a good team because our strengths and weaknesses compliment each other. What I am weak in, Vikram is very good at and vice versa. We challenge each other and do not always agree, which is what you want in a relationship. If someone always agreed with you, then there is no reason to ask them questions. We both also have a very good sense of humor which is more important than people think; we can laugh at the mistakes we make (at first we were not laughing), learn from them and implement processes so we do not repeat them. Believe me, we made a lot of mistakes at the beginning, but we both had vision and passion to build this business. Lastly, we are both very trustworthy. We had a written agreement on our first deal but after that we have done everything based on a handshake and good faith. We are now formal partners in an LLC but that was only recent, when we decided to expand nationwide.
What were some of those early mistakes and what did you learn from them?
The early mistakes were not properly budgeting for rehab and holding costs. Paying too much for materials and labor, etc. We should have hired an interior designer immediately for our rehabs. We were not familiar enough with the neighborhood or price point to accurately estimate the amount of rehab we needed. Also, comping properties correctly is harder than some people think. We bought and rehabbed wrong, but we learned it from, built our team, and now we are very successful at it.
Where do you see your business going over the next 6 months? Year? Care to share more about your plans?
I see us expanding to other states and setting up rehab teams there. Ideally, we would like to be in 2-3 states in 6 months and 5-6 states by the end of this year. We have been talking with other BP members about this opportunity and have a few great candidates lined up. We have already set up our local team and are looking to hand over the reigns so we can focus on expanding nationwide. Vikram and I are both really excited about this and we are looking forward to providing as many opportunities to BP members as we can.
I’m excited to hear how it progresses for you guys. Ultimately, how would you say that BiggerPockets has helped you and your business?
BiggerPockets helped me tremendously. I found my mentor, who got me over the “1st deal”, and then I met my current business partner, whom I’ve been doing business with for over a year. I’ve borrowed money from BP members, I’ve done deals with BP members, I’ve hired short sales negotiators from BP. Its truly a remarkable place. You can ask any real estate question and most of the time it is answered within 24 hours by several long time professionals. It is such a valuable tool that if you are not using it, then you are at a disadvantage.
NOTE: Attached images are of rehabs that Justin has completed.