just start!

Where do I start…

There are so many different ways to invest money in real estate. Everyone’s strategies are different for many reasons. Their goals, their resources, their experiences, etc. However, the real answer is just start. It can be very overwhelming when you think it to death. A lot of people call it, “analysis paralysis”. I am sure you have witnessed this in other areas of life as well where growth is bound to happen. For example, travel. Everyone loves the idea of a big vacation to backpack in another country yet, so few do it. But once you buy that first plane ticket you will never stop (at least I haven’t, I am as addicted to travel as I am real estate at this point)! You learn so much on that first trip about who you are, how you travel, who you can travel with, what it costs, etc. It is the same in real estate. Buy that first house, trailer, building, mobile home park, note, whatever it is-just buy it. 

Realistically, what is the worst that can happen? You will learn SO much. By simply just having the conversations with the realtor, or the lender you will learn things you never even knew to ask. Now I am not saying just jump in and trust the first person you meet. It is a relationship game. Call a few lenders, talk to a few realtors. See how they make you feel. See if they teach you or just push you. There is a difference. Once you find the people that teach you, that is when you know you are set. 

When we started, we had no idea what anyone was talking about (honestly, sometimes I still don’t). With all the acronyms and jargon, you are literally learning a new language.  I asked so many questions and kept asking until I understood. The infamous “they” always tell you to find ‘off market deals’ and ‘drive for dollars’. But I knew no one in the industry and don’t live where we invest…so I couldn’t do either of those! Instead, I researched and found a little company that sells the emails and phone numbers of property owners. I was not about to pay for this list of information (I mean I work in big data and I know how bad these aggregators can be) so I signed up for the 1-week free trial and downloaded 2000 emails. Be forewarned, they aren’t stupid-they don’t make it easy to scoop up gobs of information for free. I spent hours screenshotting the information until my trial was up. Then I went back and manually entered it all into excel to organize and keep notes of who I had talked to, who responded (and what they said), and who bounced. I spent hours stalking people online to get the information I was looking for but I had to be creative since we didn’t have connections yet.

I would be terrible at sales because cold calling is my nightmare, but as it turns out, I can craft an enticing email…so I emailed all the people from the list. As I mentioned earlier, I did get a lot of bounced emails, but I also had a decent response rate. People were willing to help me, mentor me, introduce me to other people and a couple even were willing to sell me their property. 

The first man I talked to was so pleasant and he owned a 5-unit property in Greencastle, IN (I went to college in Greencastle). It was fate, he and I talked about DePauw and all the changes that had happened over the years. It was a great way to get my feet wet and connect over something I was confident talking about, my alma mater. After the trip down memory lane, we did dig into the real purpose of my call! I discussed an owner finance strategy with him which wasn’t something I’d had experience with at the time. We got pretty far into how that would work before he decided he wasn’t ready to sell. I didn’t walk away from the phone call as the new owner of the 5-unit property but he now knew I existed and that when he IS ready, he could reach out (and let’s not forget I learned things about owner financing I couldn’t get from YouTube). This allowed me to really get past the butterflies and nerves of talking to people about things I literally knew nothing about!  I realized what questions I needed to ask to run the numbers and organize deal structures. I began developing a system to track the calls I was making and the information I was receiving from them. The next call went even better and we even met and walked the properties. Had the foundation not been falling completely out of one we may have closed a deal this way! 

Saying we got lucky on our first deal is a stretch, I worked really hard to find the deal and make it work; but it was a bit like the stars aligned. “They” tell you ‘on market’ deals don’t make the same returns. But being the Zillow addict I am, it’s only fitting that it’s where I found our first deal. (If you haven’t seen the SNL skit about Zillow addicts you should go watch it now). It has become my main form of social media. One weekend I was deep in the spiral and I saw that little red pin in my home town of Tipton, IN. I immediately called my dad and asked him if he could go look. As fate would have it, the listing agent was also my parents go-to realtor and she walked them through it. After an extremely nauseating facetime with my dad (consisting of me staring at the floor most of the time) I was sold! 

It needed work but it was in a good location and was an insane price. I learned a lot on this one. Residential loans can be used for properties with up to 4 units, 5 and up require a commercial loan (which also means 25% down in most cases). This was a tri-plex…easy-peasy, right? I can get a low interest, residential loan, RIGHT? Wrong. The building had been a commercial storefront at one time with a legal clause that allowed for the space to be used as residential “as long as there was no significant lapse in renters”. Luckily, I’d already been talking to a couple of commercial lenders since I was also interested in buildings with 5+ units. He and the realtor helped me navigate through the clear-as-mud process! To make it even more exciting we were buying it from an estate, so multiple parties were involved. 

Once we had lending and an offer figured out, we submitted. Of course, there were multiple offers (including one all-cash offer that came in hours before the decision was to be made). It was stressful but also made us realize we weren’t wrong; there was opportunity here. Our realtor was awesome and told us to use an escalation clause. I had never heard of that before this deal, now I love it! It allowed us to make an offer but say we are willing to go up to a predetermined amount if another offer came in higher than ours. For example, if you offer $100,000 but are willing to go up to $110,000 and another offer is 105,000 your offer will jump to $106,000. The amount you jump by is determined by you. We’ve used both $1,000 and $5,000 increments, depending on the deal. This is a fun tool in the toolbox to beat out other offers BUT keep in mind, the seller will know how high you would have gone. In our case the sellers pushed us up a bit but it wasn’t worth letting the deal go. 

Your first deal teaches you so much. I was angry, stressed and annoyed (all the feels really) when we were asked to pay more. I was scared, nervous, and more stressed when the appraisal came back low (typically good for you but we didn’t want to lose it or pay for more than it was worth. You quickly realize if the numbers work then that small concession is worth it). It was quite the emotional rollercoaster. However, the day we signed and closed on this property I was sure we would not be stopping here. 

You will gain a lot of momentum and foster some interesting relationships with the first deal. Use it, and doors will just continue to open. Our next two deals just came along organically (not to say we aren’t always “looking” for a deal). The second one we found because I was looking for a property management company to manage our first building. They introduced me to the realty side of their business and had some great properties on the market. By the time we closed on our second building, we’d already decided to switch asset classes to short-term. At the closing we were talking to our lender about short-term opportunities and he opened doors for us to financing we didn’t even know existed. Even though he wouldn’t be the one helping or making money on the deal, he was willing to help us! I still connect with these people regularly and continue to grow my network to find new people to have on our team. I would say we still don’t know everything and never will. Instead, we find smart people to help us grow and when we are in a position to help them one day, we will! 

I can’t say it enough, the things you learn by taking that leap into the first deal are invaluable. You can’t learn them reading and studying. Practice makes perfect! In short, when you ask yourself where to start the answer is, just start!