This step is where it starts to get really fun! Now you have B.ought, R.ehabbed, R.ented, and R.efinanced the property. Congratulations!! Now you have a bit more confidence, knowledge, and credibility to move on to the next property. Celebrate! The first one is, by far, the hardest. Now you can move forward in finding property number two and R.epeat.
Take a Breath
The first of the month has a really different feel now. You GET a check or online deposit every month. You see the balance of the account start to grow. You believe this real estate thing may actually work. So you get the fever and start to attend networking events. You meet other investors and wholesalers. Your private money lender is calling you to see if you have another deal for them to invest in because the stock market is crazy and banks aren’t paying any interest. You tell them that you are looking for another great deal and that you will let them know as soon as you find it.
Start Looking Again
You find a good realtor and start making some offers on MLS deals. You even walk a neighborhood you really like and knock on doors and hand out marketing pieces. You don’t know where it may come from so you try a little bit of everything.
You get a lot of “no’s” but you know that this is to be expected to find the really good deals. You eventually find the deal and let your lender know that you have another opportunity for them to earn double digit returns if they are interested. They will probably jump back in as soon as they can. This time you may even borrow the renovation budget if they are willing to lend it. They may like this option if they want to get a higher return on a larger amount of money. After all, you both have more confidence in your abilities than you did just a few months ago. They are beginning to invest more in you than in your properties. They have a lien on this property but you are the real “asset”. It is a shift in thinking.
Stay focused and excited about this adventure and the deals will happen. They say if the deal is good enough, the money will find it. This means that if you have a 50 percent of ARV deal, lenders will fall over themselves to lend on it. If you have a home run deal and cannot fund it, you aren’t pitching it enough places. This includes with me. I am part of your network and want you to succeed. If you cannot find a lender and you know the deal is amazing, reach out to me and I’ll help you find one. If we don’t find a private lender then you may use a hard money lender to get the first one done. A hard money lender will be more expensive but they will scrutinize your deal closely. This is a good thing. If they won’t lend on it, it may not be as good of a deal as you thought it was. This can add a layer of safety to your deal as well by having another experienced professional underwrite your deal.
The first deal you completed was not perfect. You learned a ton. The biggest value in getting the first one done is that you got the first one done! You are now over the largest hump. Your credibility to private lenders is much greater after doing just one deal than it was before. For deal number one, you may have used a family member to lend to you. Or you may have used hard money. After you have a couple of deals under your belt, you can begin to ask other private individuals for loans.
Reading blogs and books and listening to podcasts all help you to learn the language of real estate investing. Learning the language makes you appear to others as though you know what you are talking about. Knowing what you are talking about makes people trust you with their money. I’ll be listing some books I recommend. Don’t forget about Audible to listen on your drives. In my opinion, if you are nuts about this stuff like I am, your car should be a mobile classroom on investing. There is so much information out there for free!
Stay hungry. Don’t chase shiny objects as you are getting started. We fight the temptation to chase shiny objects as well. We see a speaker present on short term rentals and we consider changing strategies. That is another great strategy; but for us we want to focus on one strategy for now. We have done a couple of flips and we will do some other strategies in the future but for now we are focusing on building our rental portfolio. I suggest picking any strategy and working towards mastery in that strategy.
The first deal is the biggest challenge. You need to fight through a lot of unknowns. This deals is often important more for the fact that it got you moving forward than because it is the best deal ever. You will find better deals in the future. In several years from now you will likely look back at this one and realize that time has made it an even better deal. You will think about how you couldn’t buy this again at the price you got it at.
A lot of people think about doing this business and then never take action. I am urging you to decide if this is something you want to do. If it is; do something every day to get you closer to doing your first deal. If it isn’t, I urge you to go find something that you can be excited about. When people ask us how we got our private lenders, I always tell them they came from different circles of people we know but they all resulted from us knowing what we were doing and, more importantly, from showing enthusiasm and passion for real estate. This passion is attractive to others. I will continue to write about the reasons that real estate is worth being excited about in future posts. As you get passionate about it, always keep your life priorities in order and as always “keep the main thing the main thing!”.