Full time investor is going to be easy they said...

So, I think I'm a big shot because of my first deal, and how can you not think that, right? A six-figure bank account at 27 years old and practically no debt. I thought I was on my way to being financially free in no time!

MISTAKE #1
Living beyond our means

My wife and I lived with her parents for a month before we made the move out to Des Moines, Iowa. After quite a bit of research we decided on an area of town that had been booming and made an offer on a new build we found online. We actually ended up calling the listing agent and walking the house via Face-time, then made an offer and got it under contract without ever steeping foot in it before the final walk through before closing.

In hindsight, I cannot say that I am fully happy with taking this route, financially, but the wife is happy so it has been good in that respect. If I were to do it over again, I would of looked for a place that we could of made some cash from monthly like a small multi family, a house with a guest house or land that I could of charged people to store stuff on. But, we were caught up with the idea that we could buy the shiny new house that doubled our living space, was brand new and I wouldn't have to waste my time working on our own property. Turns out, it takes more money monthly to live in a bigger house, there are a lot of things to buy for a brand-new house and I still ended up putting in a bunch of work on it because we didn't budget for some of the items so I ended up doing the work to keep costs down. All I can hope for is the market to keep appreciating and hopefully this decision will work out in our favor when we are ready to sell it.

MISTAKE #2
Buying on a deadline

After we got moved in I quickly started looking for investment properties. I had a work friend of my sisters that wanted to rent from me and said she needed something before October, which was 4 months away at the time. For the first property, I identified around 30 properties that would work in the area I had decided on and made offers on about 8 of them within a months’ time. The only property that gave me a counter offer I ended up buying. We used up our last conventional loan to get this property from a local mortgage lender that we used for our primary house. We ended up putting 15% down and about $6000 in repairs to get it ready to be rented. The rent was negotiated lower than the average for the area because I was not wanting to be left with a property and no renter so I agreed to lower the rent. After all taxes, insurance cap ex, vacancy and management savings we are left with $35 monthly. This one will turn out better in the future as I believe I can increase the rents about $200 once that renter leaves.

MISTAKE #2.5
Stick to your numbers

Right after the first rental was put under contract the next week I found another property I wanted to flip. I ran my numbers and submitted my offer. The seller came back $10k higher than my max offer and after some pushing from "My Agent", I gave in and bought it for more than I wanted to just to be moving forward. I am not the most patient person... I thought "maybe I can make it work and save some money somewhere. I can't win if I don't play." I blew through my original rehab budget of $27k and ended up spending $42k after some unforeseen issues and deciding I need to do things the right way and not do it half fast. After completing the project, I ran comps and decided that I would most likely break even after everything is said and done and I may have to wait 4 months till it warms up to sell the property. 

So, instead of leaving it vacant for that entire time I listed it for rent and within a week it was rented and cash flowing (property was paid off). I planned on getting the rent payments to pay back the amount I went over in the rehab but after about 4 months of not being able to buy anything with the cash I had left I decided to get the property financed and pull out my money. We ended up pulling out 80% of our money back out with a local credit union cash out refinance (75% LTV, 5-year term, 4.75% amortized over 25 years). It now cash flows at $100 monthly after all expenses and savings are taken out.

Luckily, both of these projects are bringing in money, though not at the rate I would like to see. It has been a year since we have been in Iowa and I have been much more cautious and have not been able to acquire anything else since June of this year (1 year since we moved). It turns out that a barley six figure bank account gets depleted pretty fast when you are working with real estate and things can go sideways fast! I have made some mistakes along my journey but I keep reminding myself to stick to my numbers and stay patient. I still see the light at the end of the financially free tunnel and I am not giving up hope that I can reach it soon, but I think it will take quite a bit more effort than I once thought.

I am to a point where I am not happy with the amount I can produce from attending the sheriff sales and offering on properties on the MLS so I have just taken the next step in increasing my efforts with hiring a marketing company to assist me with lead acquisition through direct mail and internet ads. I hope to have an exciting update to write about after a few months of my new strategy.