Patience and Real Estate Investing: My Story of Getting Started with Rental Properties

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If you are anything like me, when you get excited about something… you want it right now!  When I first decided investing in Real Estate was the best route for me, I wanted to start buying houses that week.  I quickly realized it was going to take a lot of work and time to begin to invest in Real Estate.

How I Bought, Rehabbed, Rented, Refinanced, and Repeated for 14 Rental Properties

This is the dream right? Going from zero to 10+ rental properties, providing stable cash flow and long-term wealth for you and your family, and building a scalable business model to boot! Learn how this investor did just that, in this exclusive story featured on BiggerPockets!

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Lacking Money…

The first thing that slowed me down from jumping into the Real Estate was a lack of funds.  I decided to start investing in Real Estate in 2008 and I could not find a way around putting 20% down on an investment property.  I already owned a house so I could not go the route of buying an owner occupied house and then turning it into a rental in a year or two.  I was pretty green when it came to investing so I had no idea about hard money loans or owner financing either.

After about a year, I was able to save up enough for a down payment and I thought I was ready to buy.  Then I realized I was in the Real Estate business and I was not guaranteed a steady income – and spending all my savings on a rental property probably wasn’t the best idea.  I decided to wait until I had more than enough money for a down payment, some reserves and emergency money in case I ran into a slow time.

I finally got to a point where I had saved enough money for down payment, reserves and an emergency fund  for myself (about $50,000) and I was ready to invest.  Then my wife and I found a smoking deal on a house for us to live in.  Most of he money I had saved went to buying that house, since we had to buy it at the foreclosure sale. I had to pay cash which meant borrowing money from my sister and father in law as well as using my investment money.

About a year later I had saved up again and I also had the opportunity to refinance my personal house.   I was able to take out about $40,000 from the refinance and get a much lower interest rate.  Now I had more than enough funds to start investing.  I bought my first rental in December of 2010 a month after I refinanced.  As you can see, it took me a long time to purchase that first rental property.  I had to be very patient before I was in a good position to start investing.  Even if you don’t have enough money to invest with now, there are many things you can do to be prepared for investing.

Finding Properties

Once you have enough money to purchase a rental property, you have to find the right property.  The entire time I was saving money I was keeping an eye out on properties.  In fact, the house I ended up buying as my first rental I had made an offer on a few months prior to my refinance.  I lost out to another offer at that point, because I was never told there were multiple offers and never had a chance to raise my offer.  It was an estate sale and I was not happy with the other Real Estate agent and I let him know about it.  I think he felt bad, so when the home came back on the market he have me first chance to buy it without telling anyone else.

This was 2010 when the market was much weaker and home prices much less than they are now.  I still had a hard time finding many deals that met my criteria, because I want homes below market value.  Buying homes below market is pivotal to my investing strategy.  I get better cash flow, can refinance easier and I am in a great equity position if things ever turn sour.

I did not buy my second rental property until October of 2011, even though my goal at the time was to buy 3 rentals a year.  Once again – life got in the way: we had twins June 1st 2011 and there were a lot of costs associated with getting pregnant and having the kids (our insurance barely covered anything).  My second rental property I purchased was a short sale that had been under contract for months.  It came back in the market and I jumped on it and got it under contract.

I then proceeded to purchase rental property number three in December 2011 and number four in February of 2012.  I took another break to build up funds again (refinanced a property in October 2012) and bought number five in December 2012.  I bought rental property number 6 in March 2013 and in April I bought number 7.

I do not buy long-term rental properties, unless they are a great deal and have plenty of cash flow.  In order to find great deals, I have to be very patient.  Part of the reason I took long breaks to purchase properties was to build up funds, but another reason was there were no properties that met my criteria.  I have people telling me they want to invest in Colorado after reading my blog and seeing the great returns I get.  I have to caution people over and over that these deals are not readily available to anyone with the money.  I am a Realtor and that helps me get deals by being able to act quickly as I discuss here.  I check the MLS multiple times every day and I will go months without seeing a house that will work for me.  When I do see a deal, I jump on it as quickly as possible.  If I were to simply buy the best available property I could find on the MLS at any given time, I would not be nearly as successful.  It takes a lot of patience to find great deals.

Once You Buy

When I buy a property, I still have to be patient.  Most of my rentals have needed work and that is part of the reason I get a great deal on them.  I have to wait for bids from contractors and the repairs to be made.  If I have multiple properties being repaired at the same time (which always seems to happen) it can take months for the home to be ready to rent.  I think this is the hardest time to be patient, because I am so close to getting it rented, but the contractors always seem to take forever.

Once the home is ready to rent, I need to find a great tenant.  I can’t pick the first applicant that comes along without checking their background and performing my due diligence.  This tenant will be in the home for a year (hopefully) and it is a huge pain when your tenant starts paying late or not at all.  You must be patient and pick the right tenant.

Related: Tenant Screening – The Ultimate Guide

Great Returns

If you get a great deal on a cash flowing home with great tenants, rental properties are a fantastic investment.  But, buying one or two rental properties won’t make you rich.  To become wealthy off of rental properties you need many properties.  To buy many properties you need a written plan on exactly how many you want and when.  Don’t be afraid to challenge yourself.  My goal is to buy 100 rental properties by January 2023.  My calculations tell me I will be making close to 1 million a year in passive income (unadjusted for inflation), have 60 properties paid off and millions in equity.  Getting to that point is going to take a lot of hard work and a lot of patience.

Don’t Waste Your Patience!

If you are waiting for months or even years to start investing, make sure you are ready to buy.  You may notice a recurring theme in my articles; act quickly.  If you have you money ready to go and find a great deal, but don’t have a pre qualification letter or proof of funds letter you could easily lose out on the deal.  You need to know what type of home you want and what classifies it as a great deal.  If you have to spend two days deciding what the rents are and what the ARV is, then you will probably miss out on the deal.  If you have partners, make sure they can act quickly, because losing a day or two can mean losing a deal.

Investing is like baseball. The baseball player has to wait in the field with no action coming his way, but he has to be constantly on alert and ready for the ball. When that ball is hit he has to go all out as hard as he can. Nothing much happens for extended periods of time in investing, but when the right property comes along you have to jump on it right away.

The baseball player has to backup his teammates on every play, in case they make a mistake. There is a small chance he will be needed, but he still has to back them up. The investors has to watch all opportunities no matter how small the chance is of getting them. If someone else makes a mistake it is well worth the patience and effort.

Do you agree? How has patience played a role in your investing business? Leave a comment below and let’s discuss!

Photo: Emmanuel Frezzotti ?

About Author

Mark Ferguson

Mark is Real Estate Broker and investor in Greeley, Colorado. Mark invests in long-term SFR rental homes and also does 8-15 fix and flips a year. Mark started a blog this year that focuses on investing in long term single family rentals.

44 Comments

  1. Great article Mark! Patience is playing out for me, learning everything I can at Bigger Pockets ; ) We have one vacation rental property that’s been very good to us – bought at a huge discount. We’re now getting organized and want to find similar properties using hard money to reno and rent…so very helpful information!

    All best, Penny

  2. Stephanie Dupuis on

    Agreed – I think there’s a misperception that you make an offer and get the property. And it’s that “easy”. Like going to the store and buying something when you need it.

    Property #1 took my 9 months to purchase. I viewed approx. 100 properties. Offered on maybe 20+ properties. The property I ended up purchasing was one of the original properties I viewed, but was overpriced. I kept watching it. It would go pending, then back on the market. This went on for 9 months. The price kept going down. Once it hit a certain price point I made my offer the moment it came back on the market (after going pending and then back on market for the – lost count – time). I made a very low offer but we came to terms and I have a great rental. It needed complete cosmetic repairs (and some odds `n ends, screens, etc.) plus water heater. Took 3 weeks to rehab. Was rented in 8 weeks.

    I’m trying to purchase property #2 now. It’s been 18 months of looking. Lost count of how many offers (I’m now making multiple offers per week if I can). But, I’m lined up and ready when the deal presents. Meaning, I view all properties, even ones out of price range b/c those properties that have been sitting will be lowered at some point and when that happens, I can put an offer in immediately w/out viewing them (viewing a property loses time – especially when you don’t have your own license). Further, I’m changing my geographic area.

    “Stop doing what isn’t working – do what works.” What had been working isn’t working as well anymore – so I need to change strategy. Patience involves realizes that REI is a moving target. I’m changing several things, but I think the most productive will be changing the area I invest in. Prices are lower, taxes are lower, rents are the same (why this took me so long, I don’t know!). It’s only 20 minutes away and I’m familiar with the neighborhoods from working there. This has been an exercise in patience – mostly with myself.

    • Hi Stephanie, you bring up a good point. There is a point where patience won’t work of you are in area that just won’t present good deals. 18 months is a long time without a deal and I would start looking elsewhere as well. I do look in about a 40 mile radius from me for our flips, but look much closer for rental properties. The area closer to me has much better price to rent ratios so I am lucky in that aspect.

  3. Wow! This has been very educational, and inspiring. Both the article and the comments. I am JUST getting started, kinda. I read Rich Dad Poor Dad in mid August, and immediately made an offer to the owner of the house we’ve been renting for almost four years. It took a few weeks to realize that I probably should have done a little more studying to maximize the investment opportunity, and I’m still stoked. I’ve been watching the local market closely for more than a year, and knew what a good price would be for the house. We will close on this deal October 1, having put down 23%, with the seller financing. But this has cleaned us out of investable money.

    I now wish that we had offered less of a down payment. And I’m nervous that we have to replace the seller’s financing with a conventional mortgage in 2018. Our plan has been to live in the house til the summer of 2015, move to Galveston TX, and then rent the house out. Now, I’m thinking that refinancing will give us more cash that we can use to purchase our next property.

    Also, I know that I’m ready to actually write don my plan, even if it’s gonna be sketchy because I still have so much to learn. Speaking of which, please give me any feedback that comes to mind!

    • Hi Nan, thanks for the comment. On your seller financed deal, did you do that out of necessity because you could not get another type of loan or another reason? if you are living there, you should be able to refinance with a fairly high loan to value ratio, but you may have to wait a year.

      Write out your plan as soon as you can. It doesn’t matter if it is perfect, just start writing and you will be amazed at how much comes out. Then share your pan with other people, even if it is just here on Bigger Pockets. The more detailed you are and the more you think about it and share it the better off you will be.

      • thanks mark. i’ll start working on the written plan today. what is loan to value ratio, and why do i care about that? and why would i want get conventional financing before the balloon is due in 2018? oh, because i could get cash to use on purchasing the next property?

  4. Mark, very well put and relevant as I’m having to exercise some patience right now. Just getting started investing and can’t seem to find any great deals in my market. Most of the properties seem overpriced and seeing lots of bidding wars. So for now I’ll keep educating myself and wayching the markey since I’m in it for the long run.

    Thanks for the perspective.

  5. Mark, sounds like the same situation(s) I am in as well. I bought my 2nd property in April, and due to some money and contractor hang up I was only able to put in on the market 2 weeks ago. I paid cash for it, so I don’t have any holding fee’s which is nice.

    I plan on re-fi’ing this property to purchase a quad very soon and I am while I am planning on this happening withing 3-4 months, I have come to understand that business doesn’t usually work on MY timeline 🙂

    Great article, reminding us that patience is a huge part of this job.

  6. I am a realtor in Illinois and Missouri and I wanted your opinion on how to get other investors to come into my area? We have many great investment opportunities here and there is not enough people to buy. I am assuming it is because most of the sales are bulk. Do you have suggestions? Or does any one have suggestions on how to get large investors to look at the product?

    • Joshua Dorkin

      If you’re in an area where there are deals and investors aren’t coming in, they must not know about these deals. Investors will put their money where the profits are… work with others in your area to get the word out — this is a great site to start that. Post some of your best deals in our Marketplace. If they are good, you’ll get lots of interest!

  7. Hi Mark,
    This article really speaks to where I am at now…..I want to get my first property so bad I can taste it, but only have about 1/4 of the money I need so far, but I am working hard to change that.
    How did you finance your first deal, by the way?
    Thanks
    Joe

  8. Thanks for sharing your story. I also want to buy NOW now too since the interest is low and the price of houses are creeping up little by little. I think I need to wait a little for the right property that give me the cash flow I want. Do you have certain set parameters and how much you want all your property to cash flow before you pull the trigger??

    • Hi Kevin,
      I try to shoot for 24% cash on cash return on the first year. I fully repair my homes so I assume no maintenance or repairs for the first year, which doesn’t always happen. I figure all my cash into the home for closing, down payments, holding costs and repairs and then my returns for the year.

  9. I appreciate this article. Of all that I’ve read on biggerpockets.com, this has probably been one that I relate to most.
    Patience is a difficult thing for me. I’ve determined what direction I want to head, and I’m ready for it to all play out NOW. However, a great lesson over the last couple years in dealing with rental properties has been that it takes time. We (my wife & I) purchased our 4th property earlier this year, which is a work in progress. We’ve been taking baby steps, but are at least moving forward.
    Thanks again for sharing!

  10. Flipping multiple houses every 2-3 months is one thing, and I can see how it can be done. Buy, fix, sell. It’s a faster, more controllable process that you can streamline and scale up. But buying and holding multiple rentals per year, esp one every 2-3 months or so? Now thats gets intriguing! Can you go into a little more detail about how you were able to buy properties #2-7? If I read things right, it looks like you refi’d your house to get things started, had 40k, and bought 2 3 4 in close succession, then refi’d another property a few months later and bought 5 6 7 in close succession? Are you buying on a contract with minimal down and then going to bank right after for a refi into a conventional loan?

    • Hi Jeff, I got started with a refinance and I have refinanced two of my rentals, one in 2012 and one earlier this year. That helped I make good money from being a Realtor. I also flip houses with my father (he just retired) which brings in good income as well. I have purchased every rental with at least 20% down.

  11. HI Mark,
    I love reading your posts. Thank you for sharing all your knowledge and insights with us!
    I have just purchased my first rental property and was able to rehab and rent out in 7 weeks. Now I’m trying to find a way to get the funds for a 2nd rental property. The first property was purchased in cash, so I know in about 5 months I will be able to do a cash out refi. My question for you is, would you use the money from the cash out to purchase another property in cash or purchase a few properties using the cash out as the down payment? I’m also open to any other suggestions you may have for someone in my position…. Thanks Mark!

      • Would it be difficult to get a mortgage after a cash out refi (assuming good credit, income, reserves etc…)? Also, how much higher are rates when purchasing an investment property as opposed to a primary residence? Thanks!

        • It shouldn’t you at all to do a cash out refi if you still qualify. I would definitely talk to your lender about it. It depends on the loan type, but I would estimate .5 to 1 percent difference on investor loan versus owner occupant.

  12. I enjoyed your backstory. It was well put. I’m still in the beginning stages of learning REI and I figured out ARV and comps not too long ago (after reading J Scott’s Flip book). I have money saved up but nothing closely compared to $50,000 (I don’t make that in a year). I’m yet ready to buy and hold and am initially trying to make my way into wholesaling first. One part of me is saying dive in, and another side is saying be cautious – since I’m apprehensive about a deal flaking on me. I am performing my due diligence though. Besides a hard money loans and owner financing and banks, what other ways to borrow money have you seen used that has resulted in some success. Every little bit extra I can borrow helps. Thanks

    • Hi frank, you don’t necessarily have to have $50,000 to invest in a long term property. If you can find a turn key property it will reduce initial costs. The other option for money is private money. Do you have any wealthy friends or family?

      • Unfortunately, I don’t have any rich friends or family. The idea of turn key has never sit well with me. Any certain business operation has its history and I don’t want the prior owner’s transactional mishaps to come back to bite me in the a$$ later down the line. I’m still relying on wholesaling as my initial REI strategy to start from and with as much as $4K saved up so far I feel that should get me by.

  13. Great story and is nice to get this perspective to better understand where you are coming from when discussing your investment strategies in other articles and on the forums.

    I think it will help a lot of newer investors to see how long it can take to get started and to get a property that meets your criteria. If you are finding properties with no effort your criteria is probably to lax or you are missing something. Not saying you can’t find deals but you usually aren’t just tripping over them either.

    When we first got started in 2007 we bought a couple places in quick succession (Against our original plan, but the 2nd deal was even better than the first one) but they both turned out to be mediocre and, as so many first timers do, we over estimated the rent and under estimated the expenses. We also thought we were buying at the bottom and values went down for almost 4 more years so no equity to play with.

    Basically treaded water for a few years until I decided to get serious about things again and started looking for rehab deals. Using a more conservative approach I started getting good deals for that, picked up a MUCH better rental that was pretty much the same property as those other one in the same city and started building my out of state rental portfolio.
    Put in about 600 offers before I got my first deal of this rededication to real estate.
    If you are picky it WILL take a while to find stuff, but the stuff you get will be SO much better.

  14. Hey Mark,
    Awesome article! Your so right, the saying at our brokerage office is “you cant steal in slow motion!” I tell my clients, myself, and I am even told that all the time by my colleagues. Likewise being a Broker, it is so awesome we can keep our eye on the market and be aware of precisely what were after. I’ll tell you what though, you got more patience than a hospital! Keep it up and thanks for the post!

  15. Hello Mark,

    Thanks for your articles. I have now more confidence about doing my own investment business in China as a real estate agent over 10 years. Your suggestion is very helpful.

  16. Charles Burkholder on

    Hi Mark, interesting article. I am a 20 years old and have huge goals and aspirations of being a real estate investor. I already own my first duplex rental property and everything is going great so far. I do have a question on how you can purchase a different property every year. Is this solely from re-financing all your other houses for the down payment money?

  17. justin kane

    hey mark, I noticed that you said you did not know about hard money and owner fi at the beginning but you then saved your money for downs, but you did not talk about your future deals .. how did you purchase your future investments cuz im worried about having a bunch of rentals that soak up my credit buying power and hard money that uses points

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