My first deal... stumbled onto private money by accident!

[Jonathan Blum]

The story of my first purchase is a favorite that I've been wanting to share for a long time. I now own more than 20 units and have been working on REI for 10 years, but this one deal got me started and showed me a world I could have never imagined.

I was working as a river rafting guide in Oregon, and had saved about $20k over four years guiding.  I injured myself on the river and decided it was time to look toward a more "adult" career, so I settled on nursing school, and was accepted to a few programs.  I decided on the local community college program and decided I would buy a house in the neighborhood so I could walk to class and build equity while attending school.  I had been living in a tent for a few years with the river company, so living rent free was the goal for me.

I looked around the local market and with the guidance of my real estate agent ("This one's got great po-tential" he would say, convincingly), made a $70k offer on a modest 2/1 bungalow that had a 1/1 ADU in the back yard. Both were in terrible shape, and the ADU in the back was literally sitting in the dirt, foundation crumbled, floor sloping at least 15 degrees to one side. It was a sorry sight. They countered at $80k and we accepted. It was an estate sale and the owner had died and their heirs were in Idaho.

The next three months would change my life forever.  

The inspection cost $500, the appraisal cost $600, the appraisal failed so I did $1000 of repairs myself (with sellers permission, the estate wouldn't do any themselves), paid another $500 for another appraisal, it failed again, bank made more requirements, and I thought, "This is insane for a property that only cost $80k!"  I pushed forward and made more repairs, poured more sweat equity into a home I thought might never be mine.  It was disheartening to spend $3000 of my own money to fix a house I didn't own and pay a bunch of fees to convince a bank that this home was loan-worthy.  As time ticked by, we got closer to the closing date, and I realized, "We won't make it..."  So we applied for an extension.  Another two weeks.  I was scrapping bottom.  I could feel the money bleeding from my dwindled savings as I poured work into a home I thought might never happen.  We waited for another bank appraisal and it failed a third time, six days short of my extension.  I was done.  Or so I thought. 

In the final days before my extension expired, I stumbled across an advertisement on a community forum.  "Looking to loan $50-150k to a qualified investor.  Send us your proposal and we will be in touch."  I knew nothing about private lending, and it was my first deal, so I had no idea what I was getting into.  I sent a quick proposal to the listed email and got a call back within an hour.  We met the next day and they wrote me a check for $60k to close the deal the very next day.  I couldn't believe my luck.  I didn't realize it for years, but I had just scored my first private money borrowing by accident.  I had found a great deal, secured private money, and bought my first investment property!

This first deal turned out to be one of my best investments ever.  I house hacked the two homes, lived in them through school, fixed them up and made them cash flow, and now own the entire property free and clear.  It nets $2800/month.  I have used it as collateral to borrow on at least ten other deals with private money.  Even more valuable is the relationship I built with those investors.  They became mentors of mine and have loaned to me on five other projects.  

I now specialize in buying distressed properties with cash, fixing the issues no one else will touch (like messy titles or eroding foundations), and hold them all as rentals.  I am hoping to continue to build my local portfolio here and expand to owning 100 rental units before I am 40.  

I have learned an incredible amount from this community, and am so grateful for all the advice, inspiration and positivity here.  For anyone reading this, you can do it!  Take action and work hard.  You will have great success!