Newbie? How to Buy Your First Deal

[Wendell De Guzman]

I was a newbie once (back in 2003) and I was so scared to buy my first deal. It was overwhelming as well since there were so many things you have to think about.

Today, buying a house is "routine" for me. I built a real estate company that has 7 full time employees and we buy 1-2 houses a week (some wholesale, some lease options and some are fix-n-flips). Just today for example, we are closing on 2 deals today (Virginia Glen Ellyn and Wesley in Berwyn) and I am not even in these closings (since I have a team).

Anyway, if you're a newbie and you have not bought your first deal yet, let me simplify the process for you so you're on your way to BUYING your first deal.

Step 1: Line up CASH and your FINANCING - this has always been a debate: which one do you do first: find a deal or find the money? A year or two ago, I would say line up a good deal first. However, given how competitive the market is now, you should line up your cash and financing first. Why? Because if you can show a broker you have cash in your bank account and you've lined up financing from a hard money lender and a conventional lender, then the broker will know you can close a deal. If you can't proof up (or provide proof of funds by showing your bank account statement), then brokers and wholesalers won't deal with you.

How do you get the cash?

I wrote a post on how a newbie can get $40,000 or more through an unsecured BUSINESS LINE OF CREDIT. In fact, the title of the post is How You Can Fix-n-Flip with $0 Cash Out. Here's the LINK to that post. 

Also, you should line up HARD MONEY FINANCING  as well as CONVENTIONAL FINANCING. Hard money is good for buying a house that needs work while conventional financing is good for refinancing out of hard money and now you can keep the house as a rental because conventional financing has very low interest rates.

Step 2: Learn what a Good Deal Looks Like - pop quiz:

If the ARV (After Repair Value) or the value of the house when it's renovated is $200,000, your purchase price is $150,000 and the house needs $20,000 in repairs...
Question A: is this a good deal?
Question B: is the profit $30,000?

If you answer YES to both questions - then you don't know what a good deal looks like. If you answer NO to both questions - then that's the right answer.

How do you know the profit on a deal? Use the calculators here on Biggerpockets.

Another aspect of learning what a good deal looks like is getting yourself familiarized with different exit strategies. For example, a property that does not look good as a fix-n-flip, could be a very profitable deal as a lease option. We love lease options! We make $50K, $60K even $80K on our lease option properties. Here's a comparison of the profit you will make on a $200K house (ARV) that you buy for $120K and you put $30K of repairs into it - fix-n-flip vs. lease options.

Step 3: Look for DEALS Using My Science of Finding Deals

I started a post more than 6 months ago entitled "The Science of Finding Deals". It's a 6-part series of forum, blog and video posts - all here on Biggerpockets. Here's the LINK to post #1 (you can search it in the search bar by putting "Science of Finding Deals".

In these 3 steps, if you click on the links, you will learn MORE vs. what a guru will teach you. 

And it's all FREE.

So - when will you buy your first deal? 

What struggles or challenges do you encounter? Is it lack of deals, lack of funding or not knowing what to do? Share it here and let BP Nation help you so you will finally BUY your first deal!