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Updated almost 6 years ago, 02/11/2019
Would this deal likely hurt me or help me?
BP friends, I'd like some advice on how others have handled situations like mine, or your hypothetical "what if's" if you were in my shoes.
After reading countless books, listening to thousands of hours of podcasts, attending meetings and everything else it takes to get a good basic education on real estate investing over the last several years, I was getting nowhere and still struggled to find time for my family. So I left a W2 job recently to solely focus on this passion. (I know, some will say I'm crazy)
I've been working hard to move toward my goal of a 50+ unit rental portfolio, and I've been doing a pretty decent job of locating properties that would have good cash flow and having an opportunity to purchase them. But my biggest challenges have been these two things: 1) having an experienced resource to bounce my ideas off of who have the same or similar goals, to be sure I'm correct in my analysis and 2) funds.
Although I have helped others, mainly companies, obtain rentals, I have yet to land my own since I am struggling to land a deal without a current W2 income myself. I've tried a few times to approach the idea of seller-financing or some other form of creative finance, but haven't had any luck. It seems to come back to either no W2 job, or not able to provide a large enough lump sum up front.
That said, I am aware of a rental portfolio of 20+ SFR units in the Kansas City area with each property having a 1+ percent rule rental rate, that is available to purchase and not currently on the market. I would love to have them to greatly expedite my portfolio growth! And I know of some good property management companies in the area that could manage them if I chose not to.
But going back to my biggest issues of needing someone to bounce ideas off of, and a way to obtain the funds necessary to do the purchase, should I even bother going after this deal? Or should I have the "slow and steady" mindset that so many talk about as being the best way to grow a portfolio? I am eager to get that many properties at once, especially since this is my passion and I'm not sure how often an opportuny like this becomes available, but at the same time I don't want to do something dumb because I moved too fast. And as I mentioned, I recognized that I went so long getting nowhere before, so now I have a ton of motivation to start landing deals, even if it's partnering, to get the track record as proof for future deals.
Thoughts on the 20 units, or any other tidbits of advice please?
If you aren't in our Bridge Meetup group check it out. Lots of KC folks in there and could help you process through if you want that more local view point! Good luck, sounds like an awesome opportunity!
If you don't have deep pockets, it's REALLY hard to get momentum going without leverage, and that's nearly impossible to get without W2 income. Have you considered getting a less demanding job for a couple years to help you get started, but still maintain your quality of life?
Let's say you are able to get this 20 unit deal put together- sounds like you need little to nothing down? What if you need to replace two $5k roofs in the first year? Or in the first quarter? How would you do that without cash or credit? You could very easily be in a terrible spot.
I'd pump the brakes a bit and step back, start slowly. Get some W2 income coming in, pick up a property or two and gain some reasonable momentum. No income or savings and 20 units is a big mountain to climb.
- Corby Goade
@Oliver Sparks
Like others have said, get into some networking events so you’ll have other to bounce ideas off of. Maybe consider getting a source of income related to RE. If you’re adding value to properties then you can borrow most of the money to do so and then refi. However, refinancing with no income could be a problem. Especially when you don’t already have a portfolio kicking off income.
@Oliver Sparks Given your passion and commitment to this business, it sounds like you're headed down the route of becoming an investment syndicator. If you wanted to own 100% of these assets, then yes you need a job, income, large down payments, etc. If you're okay partnering with a capital partner, you can take down this portfolio of properties and still own a piece of it. Enough to get you some income, experience, and proof that your dreams are coming true.
Many people will tell you to slow down, get a job, etc. but everyone is different. If you want to make it happen, you can. I'm not trying to motivate you or anything, but it's what you already know is true. Some people are conservative and some are aggressive.
Originally posted by @Nathan Brooks:
If you aren't in our Bridge Meetup group check it out. Lots of KC folks in there and could help you process through if you want that more local view point! Good luck, sounds like an awesome opportunity!
Thanks! Yeah, I definitely will use that group to assist in growing my team and pitch in with thoughts.
Originally posted by @Enrique Huerta:
@Oliver Sparks Given your passion and commitment to this business, it sounds like you're headed down the route of becoming an investment syndicator. If you wanted to own 100% of these assets, then yes you need a job, income, large down payments, etc. If you're okay partnering with a capital partner, you can take down this portfolio of properties and still own a piece of it. Enough to get you some income, experience, and proof that your dreams are coming true.
Many people will tell you to slow down, get a job, etc. but everyone is different. If you want to make it happen, you can. I'm not trying to motivate you or anything, but it's what you already know is true. Some people are conservative and some are aggressive.
Man, I appreciate it! Yeah that is motivating. I don't think any of the suggestions given thus far are overly right or wrong, they're all just different for different reasons. I'm a guy who thrives off of learning from others, giving it my all at all times. So I'm wanting to grow the business in a way that does give me seeds of proof that things are working, knowing I'm doing the best I can, whether it ends up happening quickly or not.
@Oliver Sparks - If you start on a less lofty goal such as a sfr, duplex, triplex or quad it would be much easier to do. Capital expenses can blindside you and knock you out the game with a bad taste in your mouth and sour you on real estate. Starting smaller will give a better chance at becoming successful. As you gain experience, you will understand what is required of you including how big of a project you can handle and how fast you can grow. It will also give you some credential when you talk to others about partnering.