20 Years Old With 10 Deals Done. What Next?

Question

Hi, everyone! I want to give everyone a recap about how I got to where I am today as a 20 year old real estate investor in the Kansas City market with over 10 deals under my belt.

I started my journey off as most people do, working a demanding job and wondering how I can make enough money to quit said job and become self dependent. I come from a middle class family with no one involved in real estate, but my dad always told me that real estate is where wealth is made, so I always had it in the back of my mind. At the age of 16-17, I began obsessively listening to BP podcasts, reading forums, reading books, and reaching out to local investors offering myself as willing to do anything I could to provide value to them in exchange for experience. After a few weeks, I finally got in contact with two partnered investors who needed someone like myself. They were beginning a wholesaling operation and wanted someone to do the grunt work of finding leads, which I was more than willing to do. I happened to already know a lot about wholesaling and I immediately got to work, securing 4 good leads within a few months. I was beyond excited that I could be getting my first deal done so soon. But, they all fell through, for multiple reasons. During that time, the investors I was working with decided to quit working together, and ended up dissolving the operation. I was extremely disappointed, and it honestly caused me to take a break from real estate, just shortly after starting.

Fast forwarding to when I turned 19, I decided that I needed to take matters into my own hands and get serious about real estate. I couldn't quit after my short attempt, as I knew the reward would be greater than the risk. I knew college wasn't the right path for me, so I was working full time as a mechanic, saving every dollar I could in order to put it into real estate. This is when I noticed that the local market was exploding and local real estate companies were having a hard time keeping up. I didn't know what I wanted to do yet, but I began reaching out to local investors again, and stumbled across a local company that I knew was one of the biggest flippers in the area. I thought I had no chance of working with them, so I contacted them asking if they knew of anyone that may need help. It turns out they were looking for a new person to add to their acquisition team, but I was really underqualified (they wanted someone with a bachelors degree, 2 years experience in real estate, and a real estate license). I explained to them who I was, what I could provide them, and how much I aligned with their company values. I had 2 interviews and was offered the position within a week. I was completely shocked, yet I was so excited to get started. I began working with them right after I turned 20, and within my first week, I secured 4 great deals for the company (weekly quota was 1-2). No training with the company, no vast experience, I just worked as hard as I could to prove myself using my self taught knowledge. I was stoked. I continued getting deals and now have over 10 deals closed within the last 2.5 months of working with them. Things/deals started slowing down (due to the company's request), and I pushed through it, knowing it would pick back up. Then the company got even stricter with our buyer's criteria, and pushed our closing dates really far back (over 2 months until we could close on a potential property) and I knew that this wasn't sustainable. Last week, the company all of a sudden decided to shut down because their construction team couldn't keep up with acquisitions, and I am no longer with them. I went from a dead stop, to full speed ahead and killing it, to slamming into a wall and losing all momentum in real estate within 3 months.

I am more than grateful to have this opportunity, and I proved to myself that I could succeed in real estate. I was not expecting this sudden stop, and now I'm not sure where to turn. I made this post for two reasons: to prove that anyone can make it in real estate, and to ask for guidance on what to do next. What would be the quickest way to become self dependent on real estate? Flipping? Owning rentals? Wholesaling? I have $20-$30k to use as needed. I also need to eventually purchase a MFH to house-hack; would it be best for me to do this first, then refinance and use the capitol to invest in a flip? I REALLY want to own and operate my own real estate business, I'm just not sure how to grow my current knowledge, skills, and experience into something.

Jim K. · Answer

Account Closed

I know I'm generally short on the sunshine and rainbows, but I'm not here to blow smoke up anybody's crack, and this is what I've gotten from this thread so far.

So you mentioned why the flip team you were on failed: the acquisition team (which you were on) was buying stuff that the construction team couldn't keep up with. So the investors running the show tightened the acquisition requirements and asked you to find stuff that was worth more and didn't need as much work. And you knew that wasn't sustainable.

You called your time on that team "killing it." Were you, really? Only by the requirements of a failed operation, it sounds like. I think you need to look at that squarely, head on. A few guys who ended up being proved out as losers told you that you were doing well. This does not mean that you are a loser or a winner. It just means that you can't measure yourself with a loser's yardstick and call yourself a winner.

I would say that this clearly indicates that you do not fully understand what the construction team is going through. The work, the processes, the jobsite politics, the scheduling, what goes into the work of flipping a property. And if you don't really know what's involved in flipping a property, do you know what's involved in turning it into a productive and reliable rental?

Maybe that should be your next step. Working on the renovation/maintenance side of the business for a while. It's not just the work, it's the scheduling, how the different tradesmen work with each other, the jobsite politics, how the team leads work with their guys, there's a lot that goes into it that I think too many new investors ignore to their peril.

Genny Li · Answer

You definitely have the drive to become a successful agent. You should work as an actual agent and do investing on the side as you have the money. You were actually working for someone else before, even if you got paid on commission--while you were technically in real estate, you weren't an investor. And that's okay. A lot of people have this nutty idea that they will get one house and quit their job. And then what? Live on beans and rice forever and tell everyone they're "early retired" living on passive income? Use the job! Learn the market! Acquire the best properties for your goals over time! The world is your oyster. ;) lol

Honestly, if you got your first fourplex in 2 years...then your next one five years later...then another three years later...you'd have 12 doors in less than 10 years, which would be fabulous. You want a lot more money just hanging out in the bank than you probably think at your age. I personally wouldn't quit my day job until I was netting more than $100k a year on my rentals, and after self-insurance and the rest, that would be pretty beans and rice if I was still trying to save like $25k a year for more investments. It just takes a whole lot more money than you think to have a nice life on rental income. Like $200k a year before a big capex expense wouldn't make me groan because I'm now not able to buy my next unit when I hoped. That can be 50 doors...or more. 50 doors gives you a very comfortable middle-class lifestyle from cashflow and then a bangin' wealth level. A real estate millionaire is wealthy according to normal standards, but they aren't rich in terms of income. You can turn your wealth into income, of course, but then it's not wealth anymore. lol.

People quit their jobs way too fast. I like watching one guy who buys houses for less than $20k and rehabs them from the inside out completely by himself for less than $15k and then rents them out....for all of $600/mo, because that's the rate in that area. Seeing all the work he does, and all the time it takes him, and the fairly low resale value of the houses, it just kills me. He's happy, he's debt-free, he does woodworking on the side for more income and youtube as well with sponsorships, but all of that incredible work for a measly $2000 a month he's up to now after years, when he's spending so much on the cost of the rehabs and so much on the houses (which is a lot when you're only making $2k per month) is just mind-blowing to me. If I busted my butt for nearly 10 years, I'd want some actual creature comforts by the end of that, not making "bored cashier"-type money. There's nothing at all wrong with being a cashier, of course, but it's a far cry from killing yourself working 12 hours a day.

Caleb Brown · Answer

Me personally I have focused on investors. I don't work with normal home buyers, I refer them out. Networking and prospecting will be the 2 things you need to do daily. From there you will grow. When I started I knew no one and knew nothing. Took research, trial and error and experiences to grow. This year I will do 75-80 deals so hard work, consistency pays off

Jim K. · Answer

Hey, Jim!

I can totally see where you are coming from. I was a bit vague with my reasonings as to why the company decided to close its acquisitions department since it is apart of my short term confidentiality clause that I agreed to.

We had a strict set of metrics we had to hit in order for us to proceed on a deal; multiple of which had to do with the amount of rehab and if the profit would be worth it in the end. I made sure to run all my numbers properly, and passed on 80% of the properties I encountered because of the amount of work they needed. It didn't fail because we were buying a lot of houses that needed a lot of work. The flipping side of the company didn't come to a point where it failed at all, actually. Things just took longer than the company wanted. We actually got through rehabs relatively quickly, but we just acquired so many that they were always backed up.

The company operated for over a decade with that structure, and it just so happened they wanted to change the direction of the company once I was there since I overwhelmed them even further. I knew it wasn't sustainable because we weren't able to close on properties quickly. With that said, I figured they would do the obvious: find a way to rehab more properties. I know it isn't as easy as it sounds. I've been in jobs that operate similar to construction for years. I've done construction/rehab on the side. I know a 'decent' amount, and I understand how things can go with construction, but I agree with you. I would love to learn more about how things operate on a day to day basis and how things could be optimized. I'm just not sure what else I could've done, because I was meeting everyone's needs.

Now, I would love to focus on the renovation side of things. Once I begin my own flips (whenever that may be), I will be super excited, yet nervous, to begin subbing out rehabs and seeing how it really operates. In the meantime, do you have any advice/suggestions on how to go about learning more of that side of flipping?

Derrin, since you're 20 years old, why don't you start with getting a job on a painting crew?

Account Closed · Answer

@Caleb Brown

That's awesome!! Congratulations on your success, I'd love to get to that point. Would love to stay connected with you too, especially since you're not too far from me. I'll DM you my email/number :)

Genny Li · Answer

Your pre-approval means nothing since you don't have that income now!

It is really, really hard to get decent cash flow out of SFHs without just letting them rot. The idea that it's something that you can snap your fingers and get just isn't there. Rent has not kept up with housing prices. I have no idea what MFH house-hacking is.

Just get your license and see who is good locally--who has the numbers. There are RE businesses structured in different ways. You'll want to find one that is hands on with its agents at first, with an office building where agents actually spend time. In some, you have specific duties for the office, like being the real estate agent on call for the agency certain hours and so on. I've had friends who were agents buy I wasn't myself. :)

And open the 401-k as soon as you can. :) And get the health insurance! You don't need it until you do!

Genny Li · Answer

I'm just sort of baffled at where you think the money is coming from for you to acquire these properties to begin with. House-hacking can be great, but....where's your down payment and proof of income for the conventional loan?

It is not actually simple or easy to house-hack a SFH into a legit MFH. You have zoning, first of all, that excludes it in many jurisdictions. You have lots of contractor expenses--and heavy costs, dividing utilities, adding kitchens. You really need to know construction. Most SFHs just don't cashflow as rentals, either.

I'm also a weeeee bit concerned with the idea of sweat equity when you are 19 with no construction experience. I learned on my first house, poor new owners. looool. And I had a contractor who stood beside me and taught me the whole time. It can be a lot harder to learn to do stuff well than you might think.

How will you pay for health insurance?

Without active income, you don't get a 401-k, and that really matters, too.

You weren't an investor before. You were an employee. Probably a contractor, actually. This is a totally different thing. You will make so much better money as a real estate agent than as a grunt for a fly-by-night wholesaler. It may seem exciting to get those deals, but they weren't your deals. They belonged to the investors. Get your license and work for a big RE office. That's the job I mean that you should do--not being a mechanic again. There's nothing wrong with being a mechanic, but unless you own your own shop or specialize in big trucks, the pay and benefits aren't very good, and you can easily outdo that with real estate.

Caleb Brown · Answer

I would become an agent. I am 21 and have been licensed since I was 18. Your grit and hustle will pay off. With being an agent you can grow the business with how much work you put in. You can find the deals like you were and network with investors to close them. From there save till you can invest.

Michael Penny · Answer

I sent you a connect request. Let’s connect and I’d be happy to give you some advice.

Account Closed · Answer

Hey, Jim!

I can totally see where you are coming from. I was a bit vague with my reasonings as to why the company decided to close its acquisitions department since it is apart of my short term confidentiality clause that I agreed to.

We had a strict set of metrics we had to hit in order for us to proceed on a deal; multiple of which had to do with the amount of rehab and if the profit would be worth it in the end. I made sure to run all my numbers properly, and passed on 80% of the properties I encountered because of the amount of work they needed. It didn't fail because we were buying a lot of houses that needed a lot of work. The flipping side of the company didn't come to a point where it failed at all, actually. Things just took longer than the company wanted. We actually got through rehabs relatively quickly, but we just acquired so many that they were always backed up.

The company operated for over a decade with that structure, and it just so happened they wanted to change the direction of the company once I was there since I overwhelmed them even further. I knew it wasn't sustainable because we weren't able to close on properties quickly. With that said, I figured they would do the obvious: find a way to rehab more properties. I know it isn't as easy as it sounds. I've been in jobs that operate similar to construction for years. I've done construction/rehab on the side. I know a 'decent' amount, and I understand how things can go with construction, but I agree with you. I would love to learn more about how things operate on a day to day basis and how things could be optimized. I'm just not sure what else I could've done, because I was meeting everyone's needs.

Now, I would love to focus on the renovation side of things. Once I begin my own flips (whenever that may be), I will be super excited, yet nervous, to begin subbing out rehabs and seeing how it really operates. In the meantime, do you have any advice/suggestions on how to go about learning more of that side of flipping?

20 Years Old With 10 Deals Done. What Next?

20 Years Old With 10 Deals Done. What Next?

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