I bought 2 properties in year 1; where do I go from here?

Question

Hi everyone,

In a 22 year old investor looking for advice from those with more experience than me on where to go next. This was my first year investing in real estate and I purchased two properties (a duplex and a single- family that I house-hack) read numerous books, listened to dozens of podcasts, and met a number of successful investors through real estate meet-ups. I’m primarily interested in buying and holding property as opposed to flipping because I want to build significant long-term wealth/passive income.

I’ve learned an incredible amount from the two deals I’ve done and from a couple other investors who have taken the time to help me. In 2019 I plan to take significant action to start really building a business and working towards being in the industry full-time.

The key to everything in real estate is finding a good deal so I have been planning to work for free on the side of my day job for a wholesaler I know in order to learn how to find and buy distressed properties.

This seems to be the most logical next step, however; I’m well aware that I’m a newbie and know very little so I would love any advice or feedback from those who have been in the business longer than I have.

Any input is much appreciated!

-Dan

Joe Villeneuve · Answer

Here's what you should have learned...how to recognize the difference between a property and a deal.  What you have is two properties...not two deals.

What you still need to learn, is when to fold them and move forward.  I can't help but look at the limited numbers you have provided (lacking the rest of the expenses), and see that you are losing money by the day.  These are not investments...they are asset liabilities.

However, notice I did include the word "asset" here.  That's because they have an immediate value to you, but a value that is limited to the immediate.  The longer you hold these properties, the more money you are losing.  Add/subtract ALL the numbers.

You want to move on?  Sell these properties, take the cash and invest in better deals...flips.  Why flips?  Flips in the beginning will generate profits to buy your desired hold properties.  Flipping the same cash, over and over, will generate profits for these hold properties...over and over again.  In other words, you are your own source of cash for each of your future hold deals.

JD Gunter · Answer

I agree with Teri. Off-market does not equal good, and wholesalers won't bring you dramatically better deals than what you can find on your own. Some of the best deals I've done have been on the MLS, and some of my biggest duds were off-market.

Especially in a desirable market like Colorado Springs, there is a reason homes are selling below market. I can buy rough homes quickly for cash, and I expect a certain margin for my service. I'm upfront about that and I don't need to find secret backroom deals to make it work.

Joe Villeneuve · Answer

There's nothing wrong with the MLS.  If you focus on specific markets, and use a defined financially based Market Analysis, then the MLS works well.  Trouble is, too many investors focus on properties, not markets.  They group all properties under one analysis defined profile, and expect to find properties that work.

When you focus on the markets, not the properties, you'll find that many of the properties you passed on...actually work.

Teri Feeney Styers · Answer

@Daniel Haberkost "I have to find off-market deals that can be bought at a discount in order to build significant wealth." I don't necessarily agree with that statement (although off market deals can be good) and I don't necessarily agree with donating your time to a wholesaler... BP is full of great podcasts and blogs regarding finding good deals - I'd donate my time to learning and trying their approaches. I also recommend finding a really good investor friendly Realtor who will essentially become your "wholesaler" - they work for you for free instead of the other way around... Ask for recommendations from investors in your area.

Teri Feeney Styers · Answer

@Daniel Haberkost it looks to me like you should connect with @JD Gunter... A "BP Realtor" in your market area is a good place to start...

Daniel Haberkost · Answer

Agreed, I will definitely do so, thanks! @Teri S.

Daniel Haberkost · Answer

@JD Gunter

Ironically, one of the most recent BP podcasts featured an investor from Denver who buys in CO Springs and purchased her first few deals on the MLS so I know you're right. Thanks for your input!

Joe Villeneuve · Answer

So what are the numbers on these two deals?

Account Closed · Answer

Daniel, I commend you for getting into real estate at 22. Wow. If I would have started at 22 Wow. I also commend you for diving in and making mistakes. Lastly I commend you for posting to and being a member of the bigger pockets blog.

I'd recommend creating a well defined criteria or as in the army we say a Standard Operating Procedure and using that as your guide to buying deals. Accompany that with the BP calculators and keep driving forward.

If you need any input or advice on the Springs feel free to reach out, I've been here for a little while now.

Alec Avery · Answer

Hi @Daniel Haberkost ,

Can you give us a status update on these properties and what your plans are?

This is one of the first discussions I followed upon becoming a member of BP. You caught my interest because you and I are essentially the same age, and I’d like some insight from a younger investor - I’m 23.

Question. What do you do that allowed you so much capital at a young age?  Looking forward to your response.

- Alec

I bought 2 properties in year 1; where do I go from here?

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