What made my first deal successful?
My team! Of course, the numbers made sense. Purchasing at $127,000 with an estimated rehab of $40,000 and an ARV of $350,000 surely makes for a good deal but moving the project from beginning to end wouldn’t have been possible without them.
First, I like to refer to deals as opportunities or projects. Everything looks like a “deal” or a “great deal” but when you think of it as an opportunity or project, to me, that’s where you begin to transform this piece of coal into that diamond that people are ready to pay top dollar for. Let’s be honest, our job as an investor is to use our insight, creativity, and MOST of all our resources to create something out of nothing…and get paid. So, on to how I was able to move acquire, manage and sell my single-family rehab.
Build your team! After sticking my head into the real estate investing scene almost 7 years ago, going ghost and resurfacing about 2 years ago I decided to go at it again with some college friends who would become my partners. Two people, one of which who had been in the scene the mid to late 2000s and both who lived within the same metro area as myself, the Washington, DC metro area. My thought was this team would help me; cover a lot of ground, create capital, provide insight about neighborhoods and the mentorship regarding rehabbing single-family homes.
Next, I realized that the 3 of us didn’t have enough purchase and rehab capital. We would definitely need a loan. But who do you trust for a loan? Are there lenders that your best interest in mind? Fortunately, I did. Again, reaching into my network I knew lender who was also an investor himself, that could loan on the deal and provide guidance on how the loan should be structured.
If you haven’t noticed a common theme yet, its, real estate investing isn’t something you go at alone. Surround yourself with partners and a team of people that are subject matter experts in areas you’re not. Oh! How could I forget…my lender, who didn’t even live in my area, referred me a General Contractor in my area that does good work. Again, see how my network continues to produce a team of people that will move my project from start to finish?!
So, lets move along a bit. My DC partners identified a project we could invest in. We engaged our general contractor who gave us our rehab estimation. We followed up with our loan expert to determine if the numbers made sense and if they could loan on the project. We used a title company and real estate agent that one of my partners used before…as well as a home stager, for a nice touch, when project was ready for market. Before we knew it, permits were pulled, dumpster setup, draws were being made against our rehab budget, our contractor was working through our final punch-down list, our home stager went with a concept that made sense, we reviewed offers within 1 week of being on market and finally, we closed.
Yes, I know, I skipped some intricate details. But the key takeaway here is, using my network to build a solid team. Go at it with partners who can also serve as mentors. Find investors to increase your capital that will split profit or equity…friends or family. Build your core team; contractors, lenders, title company, agents and home stagers. You’ll never know everything, nor have the time to do it all because you have to focus on building your business.