Any Advice On First Deals?

Question

Hello everyone!

I'm about as much of a noob as you can be when it comes to real estate investing -- already though I'm contemplating the BRRRR route as an appropriate starting point in creating my portfolio.  My question is this -- when it comes to financing a potential deal, how likely is it I can do it with OPM given my lack of initial experience/funding?

By the way -- I already own a home through a conventional mortgage but I'm not sure I'll be able to refinance just yet. I did think about that as a potential source of funds towards my first deal, however.

Also -- what would you recommend towards finding that first opportunity? My research seems to imply the best ones are not the ones that appear on realtor.com or zillow but rather those you find offline or through networking.

Thanks for any input at all on these matters.  I really like that there's a community like this for investors.

Andrew Postell · Answer

@ST King so my challenges were the same challenges that you would have in any market really.  Keep in mind that I started before there was a Bigger Pockets.  I never read a book.  Never had a "mentor".  None of that.  Now I have lots of properties and am in a very fine space.  So if I can do it with no help - you can certainly do it!  You have a better foundation already than I ever had.  The one thing that I do well though is that I will go and do it.  And learn from doing it.  So my experience was my teacher.

I'll describe my first BRRRR property which was in 32209 zip.  My thought was "I have no idea what I am doing, so I'm going to start with a lower valued home".  That way, if I made a mistake, at least it would be a smaller mistake.  I purchased the property for $7,000.  I put $23,000 in the property.  After it was all repaired it was worth - $30,000!  I spent $30,000 to create a $30,000 home.  I could have just purchased a property for $30,000 and had no renovation risk.  But I did not know about estimating ARV.  I did not know how to estimate the rehab.  And I did not understand how those played a part in the value of the home.  I also didn't have a lending solution on this property either.  What mistake did I NOT make?  But after I rehabbed the property I rented it for $650 per month.  I did that for 3 years.  Then I sold the property for - $30,000 (go figure) but I sold it on an owner financed note at 8%, which means I received a monthly payment of $650 per month.  So I was still POSITIVE from that property.  I certainly could have done it better but how would I know how to do it better until I actually did it?

Generally speaking you will need several things to successfully complete a BRRRR:

• ARV - being      able to calculate the Value on your own (meaning, without the wholesaler      telling you the value) is really important.
• Repairs - You will      likely need to know how to budget the repairs as well.  Getting      a contractor can be extremely frustrating especially if you need to make      an offer without even looking at the property.  How do you calculate      repairs without a contractor?  You may need to lean on other      local real estate investors in the beginning.  Or maybe even      just focus on properties with a very light rehab?
• Lenders - You will      need a lender on your BUY step and on your REFINANCE step.  And I      would HIGHLY recommend to read this article I wrote for Bigger      Pockets on how to find good lenders that you can find HERE. If they are good, they should be      absolutely definitive on rate, terms, costs, etc. Trust me, many lenders      will tell you they can do this...but it's very rare to find. When I first      started BRRRR'ing my properties lenders would tell me "That's      illegal"....it's not, they just didn't know anything about it.
• Finding Properties      - and this is the absolute hardest step of anything right now.  So      network like crazy and find some good resources.  It's going to be      hard...but if it were easy then anyone could do it.

Can you do it without knowing any of that stuff?  Sure, that's what I did.  But I bet you can be even better than me.  Anyway, I hope all of that helps in some way.  Thanks!

Andres Rodriguez · Answer

Hi @ST King,If you're local in Jacksonville, I highly suggest stopping by http://www.whiteysfishcamp.com, Whitey's Fish Camp - 2032 County Road 220 Fleming Island, Florida 32003 on the fourth Tuesday of every month. 11:30am - 1pm. No cost to attend. Everyone pays for their own meal and the food is really good.Always a lively discussion about flips, rehabs, Airbnbs, private lending, goal setting, good contractors, and deals.It's put on by Glen Friedman who is a local investor and private money lender. He's an open book and has his finger on the market.Here's the link to the local REIA meetups as well.https://jaxreia.com/events-cal...

Andrew Postell · Answer

@ST King thanks for posting.  I always recommend networking with local investors.  It's the most helpful method to doing just about anything in real estate.  Even you posting here is a form of networking - so you are already doing it!  But there are some actual groups in Jacksonville, Florida that you can go to in person (maybe online still?) so absolutely go and get involved with those.  You can certainly use other people's money...as long as you know "other people" to borrow from.  But that's how I got started.  I started on $30k homes in Jacksonville, Florida.  No bank would lend to me at that price point so I had to use OPM to get started.  So it's entirely possible to do.  I would also state that finding properties "off market" is easier right now than finding properties on the MLS. Network like a madman and keep learning. Thanks!

Minna Reid · Answer

Your very best deals will almost always be off market, and any investor should have an ongoing plan to find off market deals. That will be true in every market, not just Jacksonville. The entire goal of listing on MLS is to expose the home to the masses in order to get the highest return. That's not to say you cant find "deals" on MLS, but that you will be competing with traditional homebuyers as well as investors, so you will inevitably pay more. There's a ton of investor activity in Jacksonville right now, so finding off market deals will also be highly competitive. However -if you get there first there is no competition.

James McHugh · Answer

I am also on the newer side but doing my homework. You can also look at rolling your 401k into a self directed IRA. You can look for personal investors, then micro loans of credit and numerous others. I’ve been researching hard lately and it really is like drinking water out of a firehose!

ST King · Answer

@Andrew Postell Wow look at all this gold.  I really feel like I owe you lunch for telling me this story.  Especially given that you've probably told this story quite a bit before.  Words can't describe how grateful I am that you took precious time out of your day to give the lowdown on how you got your start. To your contribution, sir, I say thank you.

I know I said initially I wanted to do BRRRR but it occurs to me given my particular starting point that maybe straight flipping and/or wholeselling might be a good way to build the capital I need to get the ball rolling.  These investing strategies I think also fit better with my current lifestyle (managing a full-time job. not for long I hope) and assisting my fiance with getting her business off the ground with any time I can spare.

Thank you again for your post.  I'm the type of person that really likes to hear the stories.  Not the dramatized infomercial-testimonial kind, but the kind that really gets the wheels turning.  Naturally I know the market conditions now aren't the same as when you got your start but for me there's nothing quite like hearing about the journey of another human being. The success and the failures. Really, particularly the failures.

All in all, though, it does seem like you made it out pretty good on the other end of that deal.  Good cashflow after the rehab and continued income after the sell.  A hell of a start, friend.

Andres Rodriguez · Answer

That's correct. We're still wholesaling in JAX and things are really picking up. Most likely I'll be attending the meet-up at Whitey's, but let's stay in touch. In regards to D4D, I would say literally drive everywhere and save the properties that meet your criteria. I tend to stay away from properties valued over $250k since most of my buyers are in the $75k - $150k sweet spot. But if you do find properties that are valued higher, you can always JV with a Realtor and try to move them.

ST King · Answer

@Andrew Postell Really appreciate your thoughtful response on this.  Since posting my initial message I've already learned so much more listening to the podcasts here and by taking real estate courses on Udemy.

Would you be willing to share a word on how successful you were when you first got started in Jacksonville?  Challenges?  Lessons learned?  Any additional feedback is most appreciated if you can spare it.

Thanks!

ST

ST King · Answer

I totally agree with the firehose analogy.  I mean, I know we live in the age of information and all that but, jeez -- there's so much of it.

James McHugh · Answer

Thanks for sharing all this. I am also in the Jacksonville area. Would you mind clarifying what you meant from “I would also state that finding properties "off market" is easier right now than finding properties on the MLS.”? How so just from networking or for other reasons? Thanks!

Any Advice On First Deals?

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