Franchise Failure to Aspring Real Estate Investor

In my pursuit of being honest with the universe (and myself), I'm trying to put everything on the table. In short, I have yet to purchase my first property despite my efforts the past couple years. Granted, I'm sure many would scoff at my efforts, perhaps I didn't do enough, maybe I wasn't skilled enough in my sales process, maybe both.  Nevertheless, I am where I am. As I mentioned in my first blog post, "What am I doing? Did I miss that Left at Albuquerque", I started this blog as a therapeutic outlet, connect with other investors with similar stories or frustrations and provide some accountability in my journey to my first deal.

In order to determine where I'm going, I need to go back and take a look at where I've been.

Well, I I have been interested in investing in real estate since my early 20s (i'm 38 now) when I read Rich Dad, Poor Dad (much like many investors). However, I had saved up my pennies and scrounged enough money together to buy a commercial cleaning franchise. So, not real estate investing, but I wanted to be a business owner.  Yeah, that didn't work out too well for me. I ended up selling the company within a year of owning it.  At that point in time of my life, I thought real estate was too big for me, hence why I was looking for an affordable, low-start up cost franchise.  Needless to say, I had a mindset problem. While I think I was well intentioned, I have listened to enough podcasts to know that "kids" in their early 20s have been making it happen in real estate. Why couldn't I?

I kind of forgot about real estate, while I was licking my wounds from the cleaning franchise. When I say the cleaning business was a failure, it wasn't a total failure, as I did learn some lessons.  The moral of the story is that owning a business is great, but you really need to love what you do.  I hated cleaning, ironically.  I thought that I could own the company and operate it for a short time to understand all facets, then start hiring people and I could just manage the business.  It didn't quite work out that way.

After selling the company, I actually entered into the best time of my life. This was the phase of life when I got married and had kids in the next few years to come.  Real estate didn't really cross my mind, so I just kept plugging away at my W2 job.

My W2 job is actually a great job with flexibility and stability, but by my mid 30s, I started to get the bug again...thinking about my family's future. However, I think the coup de gras (did I spell that right?) was when my middle son, when tucking him in to bed on a random weeknight, asked if I had to go to work the next day. I, of course, told him I did. Someone had to pay for the house, clothes, toys, activities, etc.  He proceeded to groan and told me and I'll never forget: "Oh man, daddy, I don't want you to go to work. I want you to stay home forever."

In that moment, my "why" was beginning to form. But first I was asking myself, how can I make this happen, I need the income. A family of 5 in New Jersey is expensive!  Then fortuitously, my brother-in-law brought his new girlfriend over (now fiancé) and she was sharing with us her passive income streams and a lot of it revolved around real estate. Bing, the light bulb went off again. It had to be real estate!

I started to look for rental property in my backyard in NJ. Like most people you find posting in forums nowadays, I was asking the question, how do I find a deal in NJ? Its so darn expensive, how does anyone make any cash-flow?  Now, keep in mind, I wasn't swimming in capital to buy these rental properties. I did't really have much money at all to be putting down. Instead, I had taken out a HELOC to use as downpayment money...so I was basically looking to buy with no money down. I became disheartened because I wasn't finding any deals that would make financial sense doing the 100% leverage route.

I was determined not to give up, so I started to devour all the podcasts, books, blogs and forums that I could to educate myself in real estate investing. That's what I do, I research and I analyze a topic to death.

I took a solid 6 months of non-stop research, then I knew that educate without action was pretty much worthless. What I had decided at that point in time was that if I could generate chunks of capital to put down on rentals, it might make more sense financially from a cash-flow perspective.  Right, wrong or indifferent, that's just where my head was at that point in time.

How does one generate large chunks of cash? No, not crypto currency (well I guess a lot people have done quite well but I just don't understand it). I decided to hang my hat on flipping! I was going to flip houses to generate capital to use as a downpayment for rental properties.  Now, if you knew me, you'd know that I'm not the handiest guy...at all. But that didn't stop me as I had listened to many a podcast with successful people that did it without GC knowledge. Why couldn't I do it? I started my LLC, researched hard money lenders, went to networking events, set up a flashy SEO-optimized website, got polo shirts for my appointments, business cards...I was ready to make some money.

I did research on marketing and determined that I would set up a direct mail campaign, network with wholesalers, target craigslist sellers, and establish a Google pay-per-click campaign to draw people to my lead generation website. My marketing efforts were focused on two counties in New Jersey - Monmouth and Ocean, where I have lived all my life and knew the areas well.  I had people tell me that Monmouth county was near impossible to get a good return on investment from direct mail...these were wholesalers spending thousands of dollars a month. I was determined to do it anyway. My direct mail campaign would be focused on people that were delinquent on property taxes, inherited properties, absentee owners, pre-foreclosure with high equity.  I obtained leads from third party sources, but I also found neat ways to get them for free from county government sources. I felt good about it.

My initial response rate was over 1%, which I thought was pretty good, but by the end of 6 months it was hovering around 0.4-0.5%.  Nevertheless, I did get some leads from the letters I was sending out to probable motivated sellers.  Not all of them resulted in appointments...I'd say probably 10% of my calls and online leads resulted in appointments.  I made offers on all my appointments, but none were accepted.  Well except for one...but that ended up as a failed wholesale deal.

A year had gone by and I was still without a deal. I began to re-evaluate the business. I had concluded that there were 3 constraints to my business as a flipper: (1) hard money was expensive and decreased my competitiveness, (2) finding a good contractor was difficult. I didn't speak their language and always felt that I was getting bids that were too high having the same effect and (3) my marketing budget was too low so, consequently, I was not reaching enough people. With marketing being a numbers game, I viewed this as a big problem.

I researched and found some cheaper hard money, but I still had trouble finding contractors I could rely on.  However, my marketing budget, to me, was what made me decide to hang up my flipping business.  In my constant research and podcast listening, I had shifted gears to cash flow oriented shows.  I had listened to experts talk about buying commercial multifamily properties, which was very intriguing to me. I liked that they could force appreciation and refinance and get their money out of the deal.  

I made the decision to pivot my business into looking for small multifamily properties with 5+ units.  Where was I going to look? I still had the belief, some would call limited, that NJ was too expensive. So, I looked in neighboring markets like Delaware where the price-to-rent ratio was much more favorable than NJ. I started to build a network of agents, found a property manager and a contractor that I felt that I could trust and started looking for properties.

The last 6 months, I have been looking for deals all over Delaware. Granted, I have been looking on LoopNet, where I'm told is where deals go to die. I'll admit the pricing i'm seeing on there is very high. I learned to evaluate multifamily properties from listening to guys like Rod Kleif, Michael Bank and Ben Leybovich. Nothing so far has really panned out. I have made some offers...some cash offers, some with conventional financing and I've even gotten creative with offering to do a Master Lease Option or asking for seller financing in the right situations. Unfortunately, haven't gotten anyone to say yes...yet.

Lately, I have been working Craigslist "For Rent" ads...mainly targeting the owner/operator ads. I have been emailing and texting (when I can) these ads and have gotten a decent response rate. I'm trying to contact 10-15 Craigslist landlords a day. I had made it automated with setting up an IFTTT recipe with my Craigslist criteria, but that hasn't been working lately, so I have had to go directly to Craigslist to find those leads.  I'll keep trying.

I have been taking some cold calling training on youtube. Why you may ask? Well, I'm trying to be budget conscious, but I have created a sizable database from county records and skip tracing services of landlords all over Delaware.  I plan on starting to call this list of owners in the near future to see if I can find any off-market deals that way.

In some future posts, as my accountability pillar for my blog, I will be posting the progress I'm making on my marketing efforts, whether it be offers made to LoopNet listings, Craigslist Landlords contacted or calls made to my landlord database.

Wow, that was long. Sorry about that, but that's my story of how I've gotten to where I am today.  I'm not giving up. I will buy real estate.  Henry Ford said, "Whether you believe you can or you can't...either way you're right!"  Think about that...I have. I believe I can, its just a matter of time.

This has been great therapy for me, thanks for listening...and I didn't have to pay for it or lie down on a couch.