Real Estate Investing School Podcast

Episode 206: REAL DEAL: How to Get Creative to Get Your First Deal

Release Date: October 31, 2024
Host: Real Estate Investing School
Guest: Trevor Stackhouse

Introduction

In Episode 206 of the Real Estate Investing School Podcast, host A welcomes special guest B (Trevor Stackhouse), his brother-in-law and a dedicated member of the Real Estate Investing School community. The episode focuses on Trevor’s journey to securing his first real estate deal through creative strategies and leveraging the knowledge gained from the school.

Deal Overview

Trevor begins by providing a concise overview of his investment:

• Property Details: Originally a five-bedroom, three and a half bath home, Trevor expanded it to seven bedrooms by converting existing spaces in the downstairs area.
• Financials:
  • Purchase Price: Secured the property for $295,000, slightly below the listing price of $300,000.
  • Down Payment: Placed 3.5% down, amounting to approximately $11,000.
  • Mortgage Payment: $1,600/month.
  • Rental Income: Increased monthly rent to $2,800 by adding two extra bedrooms, resulting in a net positive cash flow of around $1,050/month after covering utilities and other expenses.

Notable Quote:

B (02:11): "I pull in about $2,800 bucks a month from adding in a couple extra rooms."

Creative Financing and Purchase Strategy

Trevor elaborates on the creative financing techniques that made his first deal successful:

• Negotiation on Purchase Price: Successfully negotiated a $5,000 reduction in the buying price from $300,000 to $295,000.
• Renovation Funding: The seller agreed to cover the renovation costs, providing Trevor with $10,000 designated for necessary improvements.
• Renovation Execution:
  • Budget Management: Utilized the $10,000 by personally handling renovations, incurring only $6,000 out-of-pocket expenses.
  • Cost Savings: Managed to pocket the remaining $4,000 not spent on renovations, effectively recovering 40% of his initial investment.
• Escrow Holdback: Implemented an escrow holdback for the renovation funds, ensuring that the work was completed satisfactorily before releasing the remaining funds.

Notable Quote:

B (04:28): "Right off the bat, I had already gotten close to 40% of my money back on the home."

Renovations and Property Enhancement

Trevor discusses the specific renovations carried out to maximize rental income:

• Conversion of Living Spaces:
  • Transformed a large downstairs living room into two additional bedrooms, each generating $425/month.
  • This modification increased the total rental income by $850/month, bringing the overall rental income to approximately $2,800/month.
• Additional Upgrades:
  • Installed new flooring in several rooms.
  • Addressed minor repairs such as cracked windows and wall painting.

Notable Quote:

B (07:45): "Deals aren't just made for you. You got to go out and create them."

Financial Performance and Cash Flow

The financial outcomes of Trevor’s investment are highlighted, demonstrating the effectiveness of his strategies:

• Net Cash Flow: After accounting for mortgage and utilities, Trevor enjoys a net positive cash flow of around $1,050/month.
• Long-Term Value: The property has appreciated, with an appraisal value now at $400,000, reducing Trevor’s mortgage balance to approximately $280,000. This equity positions him to leverage a Home Equity Line of Credit (HELOC) for future investments without additional personal capital.

Notable Quote:

B (11:07): "I pay my rent from that thousand bucks and still pocket the rest. So it's pretty awesome. It's like I'm living for free right now."

Challenges and Learning Experiences

Trevor candidly shares the challenges faced during his first investment and the lessons learned:

• Managing First-Time Investment Nerves:
  • Initially felt anxious about the possibility of vacancies affecting mortgage payments.
  • Relied on the knowledge and skills acquired from the Real Estate Investing School to navigate uncertainties.
• Escrow Holdback Process:
  • Acknowledges that the escrow holdback added complexity and prolonged the purchasing process.
  • Despite the headaches, Trevor considers the arrangement beneficial for his financial outcome.

Notable Quote:

B (09:28): "It was scary because, you know, it's the first deal. But I mean, now, I already feel like I'm ready, you know, I'm not scared to get property number two."

Scaling and Future Plans

Looking ahead, Trevor outlines his ambitions to scale his real estate portfolio:

• Appreciation and Leverage: With the property appraised at $400,000 and equity built up, Trevor plans to utilize a HELOC to fund additional property purchases.
• Investment Strategy:
  • Intends to acquire one new property each year without additional personal financial input.
  • Aims to continuously reinvest profits to build a robust and self-sustaining real estate portfolio.

Notable Quote:

B (12:45): "One deal, $11,000, and I'm going to be able to get a new home, at least one new home every single year, and not spend a single dime out of my own."

Advice for Aspiring Investors

Trevor offers valuable guidance for newcomers to real estate investing, emphasizing the importance of creativity and timely action:

• Take the Leap: Encourages investors to "go for it" and trust in the knowledge they acquire.
• Be Creative:
  • Look beyond conventional metrics and explore ways to make properties more profitable.
  • Example: Converting existing spaces to increase rental income.
• Start Early: Reflects on his wish to have started investing at an earlier age to maximize growth and wealth accumulation.
• Act Quickly: Emphasizes that real estate opportunities won't necessarily become easier, so aspiring investors should "start right now."

Notable Quote:

B (13:13): "It's just to go for it and... look at something that you can do to make the property a good deal."

Closing Remarks

Host A commends Trevor’s proactive approach and successful execution of his first deal. He highlights Trevor’s dedication to self-education, including studying at the library to optimize his investment strategies. Trevor provides his contact information, inviting listeners to connect via Instagram (@TrevorStackhouse11) for further questions or discussions about his deal.

Notable Quote:

A (14:01): "Such a cool deal. Like, way to get after it and do it. Way to invest in yourself and actually learning and diving into it."

Conclusion

Episode 206 of the Real Estate Investing School Podcast offers an inspiring narrative of Trevor Stackhouse’s first foray into real estate investment. Through creative financing, strategic renovations, and leveraging education, Trevor successfully transformed his initial investment into a profitable and scalable asset. His experiences and insights provide a practical blueprint for aspiring investors aiming to secure their first deals and build wealth through real estate.

Connect with Trevor Stackhouse:

• Instagram: @TrevorStackhouse11