This week we bought deal four, or so we thought. We won the auction on deal four but due to the rules of the auction we might not be able to win the property. On one hand this sucks because we needed that door. On the other hand, we might have overpaid for the door so losing it over a technicality might actually be a good thing.
The way that we buy deals NOW as compared to how we bought deals when we first got started is way more strategic. We do them this way because by applying strategy we make more money. The key though is that had we not bought and cash flowed our very first property we wouldn’t have the balls to negotiate harder and pass over not so good deals today to find the gems. I want to encourage you to buy your first deal knowing that the first deal isn’t to make you rich its to teach you how to get rich.
This, buy your first deal mantra, speaks to how I always say get started and get fancy. There are things that our fund is starting to implement that we never implemented until after we got started. But we got started. By getting started we were able to find better contractors, better wholesalers, better areas, and better platforms to buy deals. We also learned how to maximize the efficiency of all of this. The money we make on deals going forward will pay for any mistakes we make getting started. The key though is action, you build your life by the action you take not the podcasts you listen too. That said, you have to be strategic with your action. Don’t get spread to thin, stay in one area until successful.
Stay in your lane
When you start investing and making money you will be tempted to chase down other opportunities. Just this week we got hit with an opportunity to buy in Memphis. We have been hearing that areas like Memphis are good to invest in so I perked up and listened. This was a deal for three properties, each rented for about $600 a month and we could buy them for about half off market value with little to know repairs.
The problem was that we would have to completely learn a new market. We would have to learn how to buy effectively in that market. We would have to meet all new trades and start all over. When you find a lane, dominate that lane, become a player in that lane. Be a laser or a sniper, not a machine gun. If we got outside of our lane the focus and effort it would take to do well there is focus and effort taken out of the market we are already winning in. Not smart. Just because you can invest long distance doesn’t mean you need to be in every long distance market. You invest where you know just realize the area you know doesn’t have to be your backyard you still have to have knowledge of that market to avoid getting blindsided.
Don’t buy based on things outside of your control
Another lesson we learned was don’t buy a deal that only makes sense if you change something outside of your control. We like to assume that we are big bad landlord and we can come in and bump the rents but if that was true the owner would have already bumped the rents. Don’t buy a deal that doesn’t make sense on paper as is thinking that you can just bump the rents.
It sounds good to hear Grant say it, but you aren’t Grant. You will end up with no rents because you will be evicting tenants, repairing the units they trash and spending time with no cash flow while you also spend time and money marketing for new tenants. This is not smart especially if you are investing from out of state.
Back to the auction
So the reason why I went all in on the auction property and maybe had overpaid was because we had lost an auction before that. Actually, we lost two auctions before that. I lost an auction by $100 because I lost focus. And then I lost the auction because of the technicality. A lot of takeaways there. Those will be discussed below.
What I learned
This week I learned that the people you start with aren’t the people you finish with but the only person that has to stay down and loyal is you. We started with a contractor and now we use a completely different one. Not saying we won’t tap the old dude when we need him but we aren’t beholden to him or his rates. We started with old partners who were afraid to take action, now we have partners who beg to take action. Not saying the old folks can’t come back but they can’t hold up the show like they did last time. The choose yourself culture is about not letting ANYONE hold you back. It’s not just a job or an old white guy. It can be your mom, it can be your niece, it can be your wife. Choose yourself is about you determining that you will win, not anyone else. Not even other investors.
Second, I learned not to get emotional when bidding. One great thing about investing and getting in the game is you learn the numbers, FAST. You learn what makes sense and you learn what doesn’t. I know how much we should pay for a prop and how much we should pay to rehab and how much it should be worth like the back of my hand now. I’m not guessing, I’m not asking realtors I’m not asking contractors. I know. This has allowed me to be more precise when finding deals and knowing what to offer and being able to eyeball the rehab. The way you learn is by doing. I know this but when there is thousands on the line its easy to forget. We learned how to buy in deal one, we learned how to buy and rehab in deal two, now we are learning how to buy and rehab an auction property in deal three. Ever step is a new challenge, every challenge brings a new skill.
The last thing I learned with the auction experience is you have to make sure you learn the rules. Don’t just assume that you know how an auction works. Read the FAQ section on the auction website because failing to do so can cause you to lose the deposit or suffer other penalties. It can also cause you to waste a ton of time that you can’t get back.
In conclusion, rehab on deal two is close to finished, I’ll drop some pics in here. This week we close on deal three and should break ground on rehab shortly after. I will be sure to keep you all posted as things go along.
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Be great and invest well!