My 2,000 Hours - Beyond Significant Frustration!

Buying & Selling Real Estate
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My 2,000 Hours - Beyond Significant Frustration!

Craig C.
Lawton, OK · Member since 2013 · 28 posts · 4 votes

This post/subject, is to help the new guy, and keep him/her from wasting thousands of hours to achieve nothing!  

So to begin:  Is anybody else tired of the "You can start investing in real estate with 0 down" garbage yet? 

I know I am!  I know that at the conclusion of 2015, I calculated a loss of over 2,000 vested hours trying to make something happen!  Multiple banks, multiple loan applications, multiple offers, multiple approaches, and what did all of 2015 get me?  Behind on other things that require our time, and Beyond Significant Frustration!  

Who else has put serious time into this and managed to get no-where?   Am I missing the broad side of a barn, or am I hitting the nail?  Numbers are simple!    Yet if you try to talk to anybody who would consider lending you money, they get a deer in the headlights look, and say "no" because they are uncomfortable at best! 

As far as 0-down goes:

1)  Banks: Wont work with you!  Unless you have an 875+ credit score and a favorable underwriter, this is coming from my experience with 4 different major banks, and 2 local banks.

2)  Other Peoples Money (OPM): Unless you are already well established as a real estate investor, OPM does NOT exist!  Don't waste your time with your hopes and aspirations on this subject, it is trash, and you wont use it until you are already well established.  Unless of course, you spend $20,000 at some guru's seminar for them to "give you a reference" for something entirely worthless to begin with.

3) Crowd Funding: Unless you want to blindly throw in $5,000 of your own money, forget about it!  I didn't go any further than that with this, because my gut feeling was: this is a total scam!  And I was not going to waste anymore time on it.

4) "Creative deals":  Sounds great!  I will just use a public records search on a house I think will make everybody involved some pocket change!   Next, I will contact the seller directly - bypass the realtors, and hope the sellers don't mind that I essentially stalked them so I could speak with them about making a sort of an offer that I already know they won't understand (Because if you're new, you hardly understand it yourself!), and then somehow someway I just know they will handover the keys to the kingdom, and everything will be hunky-dory, everybody makes their money and goes-home happy, healthy and wealthy!   -  False.  Stalking is illegal, and at best it is shady and discourteous to by-pass an employed realtor! 
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The other part of all of this?  Somebody prove me wrong here!  I am sick and tired of wasting my time, energy, and money chasing this false promise of "0 down investing!", And I promise you, more than half of the registered users here, quit coming on to discuss great idea's and common issues, because most people can't even get in the door!    I can't count on 1 hand how many inactive users I find by just browsing the "search bigger pockets"!  

So please, somebody prove me wrong, or make a legitimate effort to be blunt up front with people who are "brand new" to the game, because odds are, if they have $25,000 in their hip-pocket to play with, they aren't wasting their time on here looking for advice.

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Joel Florek
Rental Property Investor · Michigan City, IN · Member since 2015 · 530 posts · 741 votes
10y

@Tracy Selfridge

I bought my first 4 unit with no money down and a 16 unit with only $5k down(could have borrowed it but had money so I used what I had). I don't have partners and I cash flow about $2k a month right now and live for free. I bought my first place last June so am only 11 months into my investing.

I have used lines of credit, commercial loans, seller financing and private financing to close deals. Its possible and working for me. By the way, I did it right out of college getting approved for my loans signing a personal guarantee and having an employment contract. My credit score fluctuates around 725.

Calling around I have found half a dozen banks in my area and North Eastern Wisconsin who will lend on commercial loans with no money down by the buyer. Its all about cash flow, mitigating risks for all parties, and showing you know what your doing and are ready to take on the challenge. And its not luck my friend, its all about working hard, and working smart. If you have only called 6 banks after 2000 hours of work you need to work smarter. The other week I called and vetted a dozen banks in 2 hours of calling and found 3 who could work with me under my buying structure in an area I am looking at investing in.

At the end of the day I would challenge you to focus on building relationships with property owners, investors and bankers. Present yourself professionally, positively, and make sure you can speak their language. Get them out for drinks, or coffee. If you want to make it you can make it but its not easy, I can tell you from experience.

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  • Chad Olsen
    Lender · Morgan Hill, CA · Member since 2015 · 55 posts · 24 votes
    10y

    This is a great topic! I have so many ideas from this in my head I'm not sure I can get them all down here.

    First, I do think that zero down, market and economy timing are opposing forces and working against newbies right now. You'd think that the banks would have loosened up at this point, but my experience is that they haven't. They are only lending to people who have a track record and have worked with them for a while. So having a mediocre credit score and no money isn't going to fly.

    What my wife and I have done is focus on building up and fortifying our financial house. We started on the same road as many here of wholesaling and blah blah blah. We drank the kool-aide. But we figured out quickly that it was just another job and that we already had good jobs that we didn't want to quit to do this. So we stepped back and looked at our options. We found our niche with learning about money, private lending and personal finance and financial education. In the past two years we started tracking our numbers, metrics and having regular family meetings to understand where we are at, where we are going, and hopefully how we are thinking we can get there.

    2 years of dedication, directing almost every dollar that comes into the family into specific, non-entertainment buckets, that are going to pay us back. In time. None of what we've learned is get rich quick. And our mentor even said at our last meeting "If you haven't lost money on a deal yet, keep doing deals." Pain is a big part of what this business is about. Financial education is the key to this whole thing though. We are just getting to the point where we have enough knowledge to go out and start doing things. But we spent a lot of time building up our emergency fund, improving our credit, getting our debt metrics and money metrics in line to appear favorable to lenders. The things that we have started take a lot of time. Years if not decades to fully mature. But when they do, they will be amazing. If you want to know more visit our website nesteggassets.com.

    My wife started by doing a FHA loan with 3% down. We just sold it and are doing a 1031 into six rentals. But we couldn't have just done that without going through the process. You have to pay your dues, add value to others, learn as much as you can along the way. Most importantly you have to get your financial house in order first. If you take a step back and spend the next 2-5 years growing you financial capacity and knowledge, you will be in a much better position to capitalize on opportunity when you see it.

    Good luck!

    2Reply
  • Jake Thomas
    Residential Real Estate Agent · Grand Rapids, MI · Member since 2013 · 803 posts · 689 votes
    10y

     Personally I found it quicker to get a second job and save money for a down payment than to try and look for $0 down deals. They are few and far between and honestly when you have $20K of your own money into the property you care a little more about how you spend it. I spent the first year not doing much then realizing I needed money and credit. I worked on both of those and over the next 12 months we have bought a house every 3 months. Get another job, get out of consumer debt and your credit score will increase naturally. Then saving money without debt is much easier. Good luck. 

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  • Jason V.
    Investor · Rochester, NY · Member since 2016 · 477 posts · 426 votes
    10y

    @Craig C.

    First: My hat is off to you for putting in so much time already. Work ethic will get you a long ways.

    Second: Stop thinking that Real Estate Investing is only about the numbers - It's as much about relationships as it is anything else.

    Third: If you would've put 2,000 hours into a part time job (that would be 20 hours a week for 2 years) you'd probably have enough extra money saved up for a down payment on a $50,000 property. If you don't have time to do this, then you don't have time to invest in real estate anyway. If you have to be investing right now, or else, then you might not have the right temperament for real estate investing.

    Fourth: Congratulations on reaching the point of frustration strong enough to make you want to give up! Every investor worth the name has reached that point, and fought past it. Keep up the pressure, and remember that every 'no' is one answer closer to your first 'yes.'

    Good Luck!

    P.S. I agree with everything you said about the folks trying to make it seem easy to get into REI - I think it's usually because they're trying to sell something, and it's a disservice to the business.

    0Reply
  • Craig C.
    OP
    Lawton, OK · Member since 2013 · 28 posts · 4 votes
    10y
    Originally posted by @Darren Eady:

    I own a lot of properties and have built up my holdings over many years.  I've never NOT needed money for my deals, at least initially.  I appreciate your take on your 2000 hours spent @Craig C. but I do not think you've wasted them.  I would imagine you've learned a ton.  

    1. Thanks @Darren Eady I greatly appreciate this! 

      The frustration comes in when nearly all 2,000 hours are focused on achieving a goal that becomes a wild-goose-chase.  Even Thomas Edison found a way for things to work after finding "100 ways that don't work". 

      Most definitely you are correct, education comes whether sought or not - the fact that you are doing something you will learn something! 
    0Reply
  • Frank Gucciardo
    Highland, NY · Member since 2013 · 169 posts · 130 votes
    10y

    Just curious, what did you spend those 2,000 hours doing?  

    Not trying to be sarcastic, I'm seriously curious what your time was focused on?  I think it would be a good learning experience all around to get a better understanding of how you spend your RE time.  I think everyone does it differently so there is no real right or wrong answer.

    0Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    10y

    Just a tip:

    Look up and understand some simple economics:

    Land, labor, capital and entrepreneurship, 4 factors in any business transaction. Land can never be substituted, you have to be someplace to do business or it takes land to support your transaction even if land isn't the subject of the deal.

    labor, capital and management or entrepreneurship can all be substituted, with more of one thing you may need less of another. 

    With no capital that means a lot of labor and management skills! 

    Without capital you need to rely first on entrepreneurship as that can manage labor.

    Any capital injected by others will have risk assumptions about lending their money, wouldn't you?

    Any lender must be able to trust you, they rely on your management skills to conduct business, if you fail at that they have a potential loss.

    How do  you gain trust and confidence in others about your ability?

    Knowledge comes first, you must demonstrate your knowledge and it dang sure isn't with goofy guru stuff on sandwich lease options or wholesaling or the BRRRR plan, but about conventional areas of the industry. What seems to be a wild and crazy way of getting around the real issue is just scary to investors!

    Understand what you really bring to the party, no capital puts you in an area of contributing services that can be substituted by others, why should I hire you to share in my leveraged investment? Are you a good manager, do you really know your business or are you winging it out of some guru book? Do you have the skill set for the labor required? 

    People pay well for my entrepreneurship, management, business skills and I rarely take a financial risk without being in charge. 

    Experience is knowledge that has been used creating a known outcome. 

    Those with money generally aren't stupid, if they are they have professionals they can call on. While you may have your marketing spiel, some puffing and stories to tell, you need the basics of real estate, the industry and basic business knowledge if you're serious about making money!

    When you can pull a rabbit out of a hat, banks and other lenders will love you. Also, think in terms of making money for others, it's not all about you. Look at the big picture and be entrepreneurial, stop following systems, ploys and step by step stuff.  :)      

    2Reply
  • Account Closed
    Investor · Frederick, MD · Member since 2015 · 43 posts · 21 votes
    10y

    First two were easy and were 2 years apart between purchase. The third was really difficult only 6 months from last purchase. It was zero-down using a heloc for down+closing. Now letting tenants pay it off and shoot some combined cash flow to it.

    It's time to rake it in for a year or more. Also save money from my day job. Just pile it up. Credit boosted to 828 as well. Maybe go for the 4th later, but I'm not losing sleep over it. Other things to do and enjoy.

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  • Ian WalshBusiness Member
    Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
    10y

    Zero down is very rare and not the norm.  Don't give yourself a reason to not do this.  Your assumption on OPM and experienced investors is not fully accurate.  I see people doing their first deals with OPM all of the time.  25k is not that much in this game.  I would certainly save a nice chunk of reserve money .  Wholesaling can really add up.

    0Reply
  • Tracy Selfridge
    Contractor · Lexington, SC · Member since 2015 · 62 posts · 50 votes
    10y
    Originally posted by @Jason V.:

    @Craig C.

    First: My hat is off to you for putting in so much time already. Work ethic will get you a long ways.

    Second: Stop thinking that Real Estate Investing is only about the numbers - It's as much about relationships as it is anything else.

    Third: If you would've put 2,000 hours into a part time job (that would be 20 hours a week for 2 years) you'd probably have enough extra money saved up for a down payment on a $50,000 property. If you don't have time to do this, then you don't have time to invest in real estate anyway. If you have to be investing right now, or else, then you might not have the right temperament for real estate investing.

    Fourth: Congratulations on reaching the point of frustration strong enough to make you want to give up! Every investor worth the name has reached that point, and fought past it. Keep up the pressure, and remember that every 'no' is one answer closer to your first 'yes.'

    Good Luck!

    P.S. I agree with everything you said about the folks trying to make it seem easy to get into REI - I think it's usually because they're trying to sell something, and it's a disservice to the business.

    I love the second point here. And it's something that's crossed my mind a good bit. And now it's where my extra hours are spent. I work enough overtime to make anyone go crazy these days. 

    It won't pay off now or even a year from now but in time...if I'm persistent with it, it will pay off in a big way. 

    0Reply
  • Cole Swartz
    Beloit, WI · Member since 2015 · 56 posts · 16 votes
    10y

    As others often point out on BP, focus on your strengths and not your weaknesses. Starting out, you obviously are lacking in capital and experience (track record of successful deals), perhaps for no fault of you own. However, you can make up for those initial deficits in other areas. Human capital (your education and knowledge) as well as networking (connections) are both things you have control over. If you know how to run the numbers and have invested a good amount of time in your education, you should be able to find good deals. And thus, if you have legitimately good deals and are out there constantly interacting with folks, such as on BP as well as local REIAs and so forth, you should be able to find ways to make those deals happen. Might not be the way you originally imagined your first deal or two going down, and you might have to partner up, but as is often said, a part of a deal is better than no deal at all. Plus, it would give you a successful track record to build on and give you more legitimacy when pursuing the kinds of financing you mentioned in the OP.

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