So, if you're reading this blog, you'll notice that up until now, every post was pretty much on the same day. It's not an error, it's me not getting around to this blog until now. I really wish I had started earlier as there would be much more detail on the initial days. Who knows, maybe I'll come back to all these posts and update them with more information as I get time.
So here we are in-between Contract and closing on house #4 (house #2 for 2013). From here on out, posts will be real-time and dates will reflect.
Sunday, May 19, 2013
House #4 identified
Using the same strategy we did for house #3, we have identified house #4. We located 2 houses we were ok buying and went after one. If it falls through, we move on to the other house. We currently have a contract on the first house for $79k so no need for house 2 at this time. We close sometime in June. We'll set the date after we've done our inspection and the appraisal comes back.
For this property (and all purchases going forward in Memphis) we will be using property management. We've found a property manager at a really great rate. My brother has a full-time job now in Memphis and while 1 house is ok, he can't be managing multiple properties.
We're also using a member loan for the down payment. We're using a $9k member loan to cover the down payment and most (if not all) of the closing costs. Why? Because we don't quite yet have the funds to purchase a house without dropping below $5k. It would be close but why risk it. Our next house should be able to be purchased with 100% company funds. Our target for that is July to keep on our timeframe.
So what does this equate to? The company is purchasing a house and basically not spending a dime. AND we're still cash flowing about $125/month after all expenses, management, and member loan costs. You may be thinking that's awesome, and you'd be right! You may also be saying "Why don't you open it up to others and then you can buy as many of these as you get your hands on?" I'd say you have a great point, BUT......we're not quite ready to go down that road yet. When you involve non-members (personnel outside of the LLC), you run into other situations that I'm not clear on yet. There are potential SEC issues, etc. So one of my goals for 2014 will be to find out as much information as I can on the ramifications, which will most like require some consulting fees and such that we're not ready to bear yet to make sure whatever we do is 100% legal. That will be a big talking point in 2014.
For this property (and all purchases going forward in Memphis) we will be using property management. We've found a property manager at a really great rate. My brother has a full-time job now in Memphis and while 1 house is ok, he can't be managing multiple properties.
We're also using a member loan for the down payment. We're using a $9k member loan to cover the down payment and most (if not all) of the closing costs. Why? Because we don't quite yet have the funds to purchase a house without dropping below $5k. It would be close but why risk it. Our next house should be able to be purchased with 100% company funds. Our target for that is July to keep on our timeframe.
So what does this equate to? The company is purchasing a house and basically not spending a dime. AND we're still cash flowing about $125/month after all expenses, management, and member loan costs. You may be thinking that's awesome, and you'd be right! You may also be saying "Why don't you open it up to others and then you can buy as many of these as you get your hands on?" I'd say you have a great point, BUT......we're not quite ready to go down that road yet. When you involve non-members (personnel outside of the LLC), you run into other situations that I'm not clear on yet. There are potential SEC issues, etc. So one of my goals for 2014 will be to find out as much information as I can on the ramifications, which will most like require some consulting fees and such that we're not ready to bear yet to make sure whatever we do is 100% legal. That will be a big talking point in 2014.
Addition to our overall strategy - a new approach
We've always been good with our money and we currently have other investments (mostly stock and such). Some do well, some do ok, and some lose. After running some numbers, we've determined that 5-6% in other mediums is a really nice gain. But I don't want to retire at 65. I want to retire at 45. This company is how that will happen. But how can we get to 5 houses in 2013. It's obvious that with our cash influx, 2 more is as good as we can do so something has to change.
So something is changing. We call them member loans. It's where one of us loans the company money. You can do this a bunch of different ways but we're doing it as a unsecured loan at 10% interest. They are interest only loans. What does that boil down to? It boils down to a place we can park our money and get a 10% return and the company can use the cash to purchase properties. Maybe one day I'll post a more detailed description of how it works. but please do your research. There are debt to equity ratio's you need to be mindful of so the IRS don't re-classify them as contributions and the payments as dividends or distributions. This could throw all your taxes into whack if this happens.
Probably the most important thing I can tell you is NEVER take shortcuts. There is so much money to be had doing everything legally. There are so many ways to be creative and still be 100% legal. It's important to have people you can turn to for questions. I know in the beginning it's not feasible (and it's still not for us) to have a team of people, but again, get creative. For example, I have a friend I went to college with that's a CPA and I hit him up with some questions. I recently sent him $100 gift card to his favorite restaurant to say thanks. Just remember, always do research first to learn as much as you can and hit these type of resources up when you're stumped or need an extra brain on it. I've learned that people are much more willing to help (without reward) when they know you've studied up on something and are asking the right questions and not just some idiot without a clue.
So something is changing. We call them member loans. It's where one of us loans the company money. You can do this a bunch of different ways but we're doing it as a unsecured loan at 10% interest. They are interest only loans. What does that boil down to? It boils down to a place we can park our money and get a 10% return and the company can use the cash to purchase properties. Maybe one day I'll post a more detailed description of how it works. but please do your research. There are debt to equity ratio's you need to be mindful of so the IRS don't re-classify them as contributions and the payments as dividends or distributions. This could throw all your taxes into whack if this happens.
Probably the most important thing I can tell you is NEVER take shortcuts. There is so much money to be had doing everything legally. There are so many ways to be creative and still be 100% legal. It's important to have people you can turn to for questions. I know in the beginning it's not feasible (and it's still not for us) to have a team of people, but again, get creative. For example, I have a friend I went to college with that's a CPA and I hit him up with some questions. I recently sent him $100 gift card to his favorite restaurant to say thanks. Just remember, always do research first to learn as much as you can and hit these type of resources up when you're stumped or need an extra brain on it. I've learned that people are much more willing to help (without reward) when they know you've studied up on something and are asking the right questions and not just some idiot without a clue.
Visit to Memphis
After the huge success of house #3, I decided to fly down to TN. I actually flew into central MS first and we all 3 met to discuss things. Also, during that time we met with our banker and took him to lunch. We laid out our company and our strategy, and asked for what we wanted. In doing our number crunching we wanted to make sure 10% down at 5.75% were doable going forward (barring no major change in the economy) or at least figure out what would be. They said based on our history and our balance sheet and P&L's (which we brought with us), they were comfortable doing that.
So now we're in a position where we are all but guaranteed a loan with 10% down and 5.75% interest on future properties. That's a good spot to be in. It's taken 3 years to get here, but we're here. I then trekked up to Memphis with my brother where we spent 3 days driving around and analyzing the area. We further defined our farm area and where we did and did not want to be. We drew a map of where we're interested in properties and divided it into sections so we can keep history on those sections and then in the future further weight them as to where we REALLY want to be as we start to buy property in those areas. That was the most valuable thing we've done since we started this company.
I have to say I can definitely see myself doing this for the rest of my life. Real estate is a real passion of mine and I can't wait until we can afford to do this full time. It helps to love real estate and love even the tedious stuff that most people don't (like financials and taxes). Even the most mundane tasks, you have to love doing or this might not be the path for you.
So now we're in a position where we are all but guaranteed a loan with 10% down and 5.75% interest on future properties. That's a good spot to be in. It's taken 3 years to get here, but we're here. I then trekked up to Memphis with my brother where we spent 3 days driving around and analyzing the area. We further defined our farm area and where we did and did not want to be. We drew a map of where we're interested in properties and divided it into sections so we can keep history on those sections and then in the future further weight them as to where we REALLY want to be as we start to buy property in those areas. That was the most valuable thing we've done since we started this company.
I have to say I can definitely see myself doing this for the rest of my life. Real estate is a real passion of mine and I can't wait until we can afford to do this full time. It helps to love real estate and love even the tedious stuff that most people don't (like financials and taxes). Even the most mundane tasks, you have to love doing or this might not be the path for you.
New 2013 Strategy - The year of 5 houses!
After the success of this last house, we discussed 2013. We decided to keep a minimum balance of $5k in our account at all times. $5k became our new zero. This recent house had brought us down to $5k (our zero). With $1,950/month coming into the account we figured we could buy 2 more $70k houses before the end of 2013. I decided to set our goal at 5 total properties (around $70k each) in 2013. My Dad and my brother don't think it's possible but I wanted something to strive for!
So all in all, our 2013 strategy looks like this:
5 units
3 bed, 2 bath houses in either Memphis or central MS
~$70k each
We have no idea how we're going to do it, but it's our goal!
So all in all, our 2013 strategy looks like this:
5 units
3 bed, 2 bath houses in either Memphis or central MS
~$70k each
We have no idea how we're going to do it, but it's our goal!
Property #1 in 2013
We closed on the house in January of 2013. This post is about that house from closing to rented.
The story of how it rented: We posted on Craig's List again for our house prior to closing. We got permission to show the house 2 weeks before closing. We negotiated this at the contract signing. Our first post yielded several individuals. One who filled out the application. We checked him out and a court case came up where he was sued for non payment of rent. It was a few years back and he seemed like he had a good story about why it happened. We told him we would rent to him on a month to month basis. That means at non-payment in the state of TN we can evict within 30 days. We also said we would require first and last's month rent and a full month's rent in deposit up front and he could rent it. The beauty behind this strategy is he can only apply the last month's rent to his last month. Before you start poking holes in my strategy, let me explain the fundamentals behind it.
The idea was to sign a month lease that goes month to month after that. The lease laid out the items above. $950 would be held in reserve for the last month only and could not be applied to any other month. Once the lease was over (1 month), all month to month terms would follow the rules of the lease until they moved out. This way if he failed to pay rent, we could evict and apply the last month's rent to the month he did not pay after eviction. This does not violate any laws of TN.
Yes, that strategy is heavily weighted in our favor but someone with the history he had (we found out later he had 2 prior events of eviction) we had no choice. He verbally accepted the terms. We didn't hear back from him for almost a week after repeated attempts to reach him so we decided to move on. We don't know what happened but our strategy there most likely kept us from a bad situation.
Again we posted on Craig's List and found another renter. She had just moved from another area where she was a victim of the 2007 housing crash. She had just purchase a home and had to short sale when she moved to Memphis for a job. She explained this all up front and that's exactly what showed up on the background check. We told her he would rent month to month for 6 months and if she paid on time, we would do a year lease. We told her rent would be $1,000 for our risk. She agreed and not only paid her first month's rent + deposit, but her second month's rent up front for a total of $2,950 before she ever moved in. She even paid her third month's rent 45 days EARLY!
The lesson here is this. Always do background and credit checks on renters and don't be afraid to put things in your favor if they come back as a risk. This strategy saved us from renting to a bad person and finding a good renter.
The financial story: We closed on the property and since it's right across the street from my brother, we decided not to use a management company. After expenses, it cash flows $460/month. Yes, you are reading that right. This is not normal and in case your crunching numbers in your head, that's roughly 70% cash-on-cash return. Try getting that in any other normal investment vehicle! the 5-year and 10-year IRR's were over 80%!
After property #3 we're now sitting at $950/month plus our $1,000 month contributions for a total of $1,950/month cash influx every month.
UPDATE (12/23/13):
A couple of months ago we got notice the tenant was moving out. It was kind of sudden because she had a loss in the family and was moving somewhere else to handle that situation. We wound up using her security deposit (with her permission of course) to handle the pro-rated last month's rent and a few items that needed to be fixed. Turns out she had smoked in the house and we had to have the air purified to get rid of the smell. So as of this update it's unrented but has been turned over to the property management company that rented house #4 to get a renter in it. As of Jan 1st, it will be the only property we have not rented. Hopefully that will be rectified soon.
The story of how it rented: We posted on Craig's List again for our house prior to closing. We got permission to show the house 2 weeks before closing. We negotiated this at the contract signing. Our first post yielded several individuals. One who filled out the application. We checked him out and a court case came up where he was sued for non payment of rent. It was a few years back and he seemed like he had a good story about why it happened. We told him we would rent to him on a month to month basis. That means at non-payment in the state of TN we can evict within 30 days. We also said we would require first and last's month rent and a full month's rent in deposit up front and he could rent it. The beauty behind this strategy is he can only apply the last month's rent to his last month. Before you start poking holes in my strategy, let me explain the fundamentals behind it.
The idea was to sign a month lease that goes month to month after that. The lease laid out the items above. $950 would be held in reserve for the last month only and could not be applied to any other month. Once the lease was over (1 month), all month to month terms would follow the rules of the lease until they moved out. This way if he failed to pay rent, we could evict and apply the last month's rent to the month he did not pay after eviction. This does not violate any laws of TN.
Yes, that strategy is heavily weighted in our favor but someone with the history he had (we found out later he had 2 prior events of eviction) we had no choice. He verbally accepted the terms. We didn't hear back from him for almost a week after repeated attempts to reach him so we decided to move on. We don't know what happened but our strategy there most likely kept us from a bad situation.
Again we posted on Craig's List and found another renter. She had just moved from another area where she was a victim of the 2007 housing crash. She had just purchase a home and had to short sale when she moved to Memphis for a job. She explained this all up front and that's exactly what showed up on the background check. We told her he would rent month to month for 6 months and if she paid on time, we would do a year lease. We told her rent would be $1,000 for our risk. She agreed and not only paid her first month's rent + deposit, but her second month's rent up front for a total of $2,950 before she ever moved in. She even paid her third month's rent 45 days EARLY!
The lesson here is this. Always do background and credit checks on renters and don't be afraid to put things in your favor if they come back as a risk. This strategy saved us from renting to a bad person and finding a good renter.
The financial story: We closed on the property and since it's right across the street from my brother, we decided not to use a management company. After expenses, it cash flows $460/month. Yes, you are reading that right. This is not normal and in case your crunching numbers in your head, that's roughly 70% cash-on-cash return. Try getting that in any other normal investment vehicle! the 5-year and 10-year IRR's were over 80%!
After property #3 we're now sitting at $950/month plus our $1,000 month contributions for a total of $1,950/month cash influx every month.
UPDATE (12/23/13):
A couple of months ago we got notice the tenant was moving out. It was kind of sudden because she had a loss in the family and was moving somewhere else to handle that situation. We wound up using her security deposit (with her permission of course) to handle the pro-rated last month's rent and a few items that needed to be fixed. Turns out she had smoked in the house and we had to have the air purified to get rid of the smell. So as of this update it's unrented but has been turned over to the property management company that rented house #4 to get a renter in it. As of Jan 1st, it will be the only property we have not rented. Hopefully that will be rectified soon.
2013 kicks off
At the end of 2012, we had identified a property we wanted but alas it was in a pending state, however we kept a close eye on it. One day during our weekly updates to our spreadsheet, we noticed it was active again. We immediately called the realtor and asked to see it. It was listed at $69,500. Our research had told us it was priced right for the market. We didn't know the status of the house, so we went with 2 offers in hand. An offer for $65,000 and an offer for $69,500 (full price). We look at what others houses were renting for and knew we could list it for $950/month and at worse get $900/month. At $900/month it met our cash flow demands by almost 2X. We saw it and it only need carpet cleaning, new locks, and a good full cleaning. We estimated it would take about $500 to get it ready for rent. We offered $69,500 right there and then. We were told there were multiple offers on the property and he would let us know.
We were called back the next day and said if we could provide a pre-approval letter from our bank, they would accept our offer. They gave us a week to get this together. It took us 3 days and we provided it. On the back end we went to our bank and asked for 10% down and 5.75% interest based on our perfect payment history with our other 2 properties. They agreed. We presented the pre-approval letter and our offer was accepted.
We were called back the next day and said if we could provide a pre-approval letter from our bank, they would accept our offer. They gave us a week to get this together. It took us 3 days and we provided it. On the back end we went to our bank and asked for 10% down and 5.75% interest based on our perfect payment history with our other 2 properties. They agreed. We presented the pre-approval letter and our offer was accepted.
The Memphis Market and our 2013 strategy
With my brother now in Memphis, we decided to explore the Memphis market. He started to learn the areas and figure out the good and bad. We started doing several things. We refined our strategy to specify the type of house we would look for. We found a popular realtor site that listed all houses on the MLS. This is important because without a realtor or an appraisal license (which no one had in TN), you cannot view the MLS. We did a quick search for houses within 2 miles of my brother and hundreds of results popped up. We started a spreadsheet which tracked properties in the area from listing all the way through sold. We started refining our parameters until we got ~50. Our parameters became the following:
-- 3 bedroom
-- 2 bath
-- $50k - $85 list price
-- 3 miles radius around the center of my brother's zip code.
With between 40 and 50 results to pick through, we had our farm area. Out of the 50 listings, ~30 were active and 20 were in some state of pending. Pending in this sense just meant that there was a contract but the purchase had not yet closed. Why care about pending? You'll find out later.
Our strategy became this. We would go through the list and by looking at pictures we would pick 5 properties to go see (regardless of status). Then after looking at them, we would rank them in order to go after them (we figured 2 or 3 would be suitable). Part of our strategy was to get them as turnkey as possible since we all had full-time jobs. We just did not have time to doing any work ourselves or manage a big renovation. We decided if we had to dump more than $1,000 to get it rent ready, it wasn't for us.
After doing this for about 2 months, we decided to put it into action. More on that in future posts.
-- 3 bedroom
-- 2 bath
-- $50k - $85 list price
-- 3 miles radius around the center of my brother's zip code.
With between 40 and 50 results to pick through, we had our farm area. Out of the 50 listings, ~30 were active and 20 were in some state of pending. Pending in this sense just meant that there was a contract but the purchase had not yet closed. Why care about pending? You'll find out later.
Our strategy became this. We would go through the list and by looking at pictures we would pick 5 properties to go see (regardless of status). Then after looking at them, we would rank them in order to go after them (we figured 2 or 3 would be suitable). Part of our strategy was to get them as turnkey as possible since we all had full-time jobs. We just did not have time to doing any work ourselves or manage a big renovation. We decided if we had to dump more than $1,000 to get it rent ready, it wasn't for us.
After doing this for about 2 months, we decided to put it into action. More on that in future posts.
Shakeup in 2012
In 2012, my brother and father lived in Central MS. I live in the Washington DC area. We had decided to pursue properties in MS because it was much easier (and cheaper) with both of them down there and with them both being appraisers and us having lived there all our lives, we knew the market the best. We decided to farm MS as best we could.
However, in late 2012, my brother's wife got a once in a lifetime job in Memphis, TN. They decided to move. My brother left appraising and started to look for a job in Memphis. He eventually found one as I explained in an earlier post. So at the end of 2012, we were now in 3 very different places. Some might see this as a challenge, but we saw it as an opportunity.
We decided that we would explore the Memphis market as best we could and farm in Memphis and Central MS.
However, in late 2012, my brother's wife got a once in a lifetime job in Memphis, TN. They decided to move. My brother left appraising and started to look for a job in Memphis. He eventually found one as I explained in an earlier post. So at the end of 2012, we were now in 3 very different places. Some might see this as a challenge, but we saw it as an opportunity.
We decided that we would explore the Memphis market as best we could and farm in Memphis and Central MS.
Our 2012 strategy
In 2012, we decided we would purchase another property. We had our eyes on a couple. One was a family member who needed to sell. We made an offer and landed on $95,000. The bank required 15% down and gave us an interest rate of 5.75%. Again, this took all our cash but this time we had a winner!
We put an ad on Craig's List immediately for rent and had it rented within a week at $1,100/month. For anyone who has purchased property in the price range, I can see you salivating already. After all expenses were paid, we were looking at $350/month in cash flow. Add to that the $200/month we had already and we were sitting at $500/month + our $1,000 contribution for a total of $1,500/month in cash influx. Things were starting to look up.
We now had 2 properties in Central MS. The first property is huge, but when you purchase that second property, you get a great feeling of accomplishment that this might actually work. Ahead we plunge!
We put an ad on Craig's List immediately for rent and had it rented within a week at $1,100/month. For anyone who has purchased property in the price range, I can see you salivating already. After all expenses were paid, we were looking at $350/month in cash flow. Add to that the $200/month we had already and we were sitting at $500/month + our $1,000 contribution for a total of $1,500/month in cash influx. Things were starting to look up.
We now had 2 properties in Central MS. The first property is huge, but when you purchase that second property, you get a great feeling of accomplishment that this might actually work. Ahead we plunge!
First Major Setback
In August of 2010, 3 months after we bought our first property, the air conditioning went out. On top of that it was out for almost a month. MS = 100 degree weather with an average of 90+% humidity. No air conditioner = an oven. We worked quickly but there were some parts that needed to be ordered and they took over 2 weeks to come in. Long story short, it was about 3.5 weeks in total from the day it went out until the day it came back on. We also credited rent back for the days our tenant was misplaced. All things considered it costs us about $3,800. Cash flowing $100/month at the time, this was devastating to cash flow. At the time, that costs us almost 6 months of contributions and earnings. I'm sure some people would have put it up for sale, cashed out, and said "oh well, I tried, time to move on" and given up. Not us!
So this setback occurred toward the end of 2010, wiped out almost all cash and it took us until 2012 before we were able to save up enough to purchase our second house. Our 2011 strategy wasn't anything more than float and build back up cash reserves. Out of the 3 of us, I make the most money in my day job so I increased my monthly contribution enough to make the total contribution influx to be $1,000/month.
So this setback occurred toward the end of 2010, wiped out almost all cash and it took us until 2012 before we were able to save up enough to purchase our second house. Our 2011 strategy wasn't anything more than float and build back up cash reserves. Out of the 3 of us, I make the most money in my day job so I increased my monthly contribution enough to make the total contribution influx to be $1,000/month.
Our 2010 strategy
Before we purchased our first property in 2010, we decided to come up with a strategy. We re-evaluate our strategy every year. Our strategy was to purchase 1 property in 2010. We also determined that we would stay below $100,000 on our purchases for now. This is not hard to do in MS, but can be in other areas. We weren't exactly sure how to go about purchasing our first property.
So we decided to let some people know we were in the market for our first property. It didn't take too long. The father of one of my father's friends was looking to get rid of a house he owned. I don't remember why he owned it, but he was retired an didn't want the "hassle" of a property anymore and since it was paid off would rather have the cash. They were nice enough to give us 6 months interest free while we lined up appropriate financing. They sold us the house (with a renter already in it) for $70k. We paid 10% up front ($7,000). We paid $450/month (all towards principal) for about 6 months. When we went to finance we were given a loan for what we owed. The house appraised for $77k, but banks don't care about appraisal value for purchases (if it's higher than the purchase price). Let that be a lesson for you. Appraisal value does NOT matter for a purchase if it's above the purchase price. Banks lend money based on the purchase price. They will however lean on the appraisal if it's lower than the purchase price. The days of lending on appraisal value ended in 2007 (at least it's still that way in 2013). Also, the days of 100% financing (especially for investment properties) is gone as well.
Once we had the property financed, it wound up being a 15% down payment and finance on 85%. We received 6.5% on the interest rate. After all expenses we cash flowed about $100/month. It was a pretty good property. It rented for $750 month. In 2011, we raised the rent to $825 and are about to raise it again. $75 was a big bump but it hadn't been raised in 6 years. So now in May 2013, we're cash flowing around $200/month. Pretty good for our first house.
So that's how our first real year wrapped up. 1 property purchased which used most of our cash. Our contributions at this point were $600 month in 2010. Please view our company overview for a quick status on where we stood at the end of each year.
So we decided to let some people know we were in the market for our first property. It didn't take too long. The father of one of my father's friends was looking to get rid of a house he owned. I don't remember why he owned it, but he was retired an didn't want the "hassle" of a property anymore and since it was paid off would rather have the cash. They were nice enough to give us 6 months interest free while we lined up appropriate financing. They sold us the house (with a renter already in it) for $70k. We paid 10% up front ($7,000). We paid $450/month (all towards principal) for about 6 months. When we went to finance we were given a loan for what we owed. The house appraised for $77k, but banks don't care about appraisal value for purchases (if it's higher than the purchase price). Let that be a lesson for you. Appraisal value does NOT matter for a purchase if it's above the purchase price. Banks lend money based on the purchase price. They will however lean on the appraisal if it's lower than the purchase price. The days of lending on appraisal value ended in 2007 (at least it's still that way in 2013). Also, the days of 100% financing (especially for investment properties) is gone as well.
Once we had the property financed, it wound up being a 15% down payment and finance on 85%. We received 6.5% on the interest rate. After all expenses we cash flowed about $100/month. It was a pretty good property. It rented for $750 month. In 2011, we raised the rent to $825 and are about to raise it again. $75 was a big bump but it hadn't been raised in 6 years. So now in May 2013, we're cash flowing around $200/month. Pretty good for our first house.
So that's how our first real year wrapped up. 1 property purchased which used most of our cash. Our contributions at this point were $600 month in 2010. Please view our company overview for a quick status on where we stood at the end of each year.
How it all began
The purpose of this blog is to detail my endeavors into real estate from the beginning. When I entered into the world of real estate, I did not have anyone to talk to with experience in buying and selling real estate. I didn't have a mentor. I didn't have any experience in real estate buying and selling. My parents were not rich, they were average. I always had a roof over my head and food on the table, but we did not live a life of luxury. I would say my childhood was very average with no special advantages. I went to college and got a good job that pays decent money. All of this happened before I even thought about real estate. I wish I had known when I was 18 what I know now. But hey, it's never too late!
So how did this all start? As with many individuals like myself, it all really started with Rich Dad, Poor Dad by Robert Kiyosaki. Someone recommended this book to me. I read this book in 2004 and I really wish I had read it sooner. If you have read this book, good for you, if you haven't, please go buy it now or borrow it from someone! It was written in 1999 but the message applies today. I won't elaborate here, but if you have read it, you're off to a great start.
So after reading that book, I was hooked. I immediately started reading as many books as I could. Please visit my Book's I've Read page to see all the books I've read. I'm constantly adding to it. I didn't really have a lot of cash to begin investing in anything so I decided to start with the same thing everyone who wants to embark into a career in real estate investing should do. Increase my financial intelligence. I don't care what anyone says, until you have a solid level of financial intelligence, you won't be as successful as you can be. Most likely you won't be successful at all. A solid financial intelligence includes knowing how money works, understanding basic accounting, understanding real estate terminology, and understanding how to analyze any deal (real estate or otherwise).
So when I read this book in 2004, I changed my entire outlook on money. I immediately started saving what I could so when I was ready to invest I would have some capital. There are other ways to get capital but I wanted to start this venture with my own money, but whatever method you choose, everything I talk about still applies. I spent the next 2 years reading books, studying financial websites, and learning general accounting practices. I have a full time job so my time was limited to pretty much the evening and weekends. I also have a family which limited my time even more.
I want to make sure the record is clear. I did have some small advantages that others most likely do not. My father is a real estate appraiser. But before you think that was a big advantage, he was just an appraiser. He has never bought nor sold real estate with his own money. My brother went to college and then worked for my father for a few years as an appraiser before deciding appraising wasn't for him. He recently (2013) took a job working for another real estate company that buys and sells hotels in Memphis.
Wait, did he say OUR holdings? Yes, I did. In 2006, I had a long talk with my father and brother. I told them what I wanted to do and my father was also thinking along the same lines. He was consistently running across great deals and was tired of watching others snatch them up. My brother was still in college but is very intelligent so I wanted to make sure he was involved. We decided to go into business together and form an LLC for the purpose of real estate investing. First, we had to build up capital. Since I had already started to build up capital, I had a decent chunk to begin funding. My father and I both put in $2,500 and my brother put in $2,500 later once he was able. At first, since real estate was expensive (pre-2007), we decided to invest our capital in the stock market to see if it would grow (it did not).
So we open opened up a stock account and put most of our money into it. We also each contributed money monthly to the account. Long story short, after about 1.5 years, we lost a little money (thanks to the crash of 2007-2008. In 2009, we took all the money we had out and decided to buy our first property. And that's pretty much the story of how our company began. The point to note here is we built up capital from 2006 to 2009 before we made out first purchase in 2010. I also kept reading and researching and increasing my financial education (which I never plan on stopping) at the same time.
So how did this all start? As with many individuals like myself, it all really started with Rich Dad, Poor Dad by Robert Kiyosaki. Someone recommended this book to me. I read this book in 2004 and I really wish I had read it sooner. If you have read this book, good for you, if you haven't, please go buy it now or borrow it from someone! It was written in 1999 but the message applies today. I won't elaborate here, but if you have read it, you're off to a great start.
So after reading that book, I was hooked. I immediately started reading as many books as I could. Please visit my Book's I've Read page to see all the books I've read. I'm constantly adding to it. I didn't really have a lot of cash to begin investing in anything so I decided to start with the same thing everyone who wants to embark into a career in real estate investing should do. Increase my financial intelligence. I don't care what anyone says, until you have a solid level of financial intelligence, you won't be as successful as you can be. Most likely you won't be successful at all. A solid financial intelligence includes knowing how money works, understanding basic accounting, understanding real estate terminology, and understanding how to analyze any deal (real estate or otherwise).
So when I read this book in 2004, I changed my entire outlook on money. I immediately started saving what I could so when I was ready to invest I would have some capital. There are other ways to get capital but I wanted to start this venture with my own money, but whatever method you choose, everything I talk about still applies. I spent the next 2 years reading books, studying financial websites, and learning general accounting practices. I have a full time job so my time was limited to pretty much the evening and weekends. I also have a family which limited my time even more.
I want to make sure the record is clear. I did have some small advantages that others most likely do not. My father is a real estate appraiser. But before you think that was a big advantage, he was just an appraiser. He has never bought nor sold real estate with his own money. My brother went to college and then worked for my father for a few years as an appraiser before deciding appraising wasn't for him. He recently (2013) took a job working for another real estate company that buys and sells hotels in Memphis.
Wait, did he say OUR holdings? Yes, I did. In 2006, I had a long talk with my father and brother. I told them what I wanted to do and my father was also thinking along the same lines. He was consistently running across great deals and was tired of watching others snatch them up. My brother was still in college but is very intelligent so I wanted to make sure he was involved. We decided to go into business together and form an LLC for the purpose of real estate investing. First, we had to build up capital. Since I had already started to build up capital, I had a decent chunk to begin funding. My father and I both put in $2,500 and my brother put in $2,500 later once he was able. At first, since real estate was expensive (pre-2007), we decided to invest our capital in the stock market to see if it would grow (it did not).
So we open opened up a stock account and put most of our money into it. We also each contributed money monthly to the account. Long story short, after about 1.5 years, we lost a little money (thanks to the crash of 2007-2008. In 2009, we took all the money we had out and decided to buy our first property. And that's pretty much the story of how our company began. The point to note here is we built up capital from 2006 to 2009 before we made out first purchase in 2010. I also kept reading and researching and increasing my financial education (which I never plan on stopping) at the same time.
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