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- [00:00]
Ashley Kerr
On this episode of Real Estate Rookie, we are going to be breaking down our very first deals. Welcome to the Real Estate Rookie podcast. I'm Ashley Kerr.
- [00:15]
Tony J. Robinson
And I'm Tony J. Robinson. And today you get to hear the origin story of Tony and Ashley. So we're both going to break down how we got started and what our deals look like, what lessons we learned, and maybe what even we do differently if we were starting over today, we'll throw that in there as well. So we'll talk about how we found our deals, how we funded those deals, how we went through our renovation periods, how we stabilize those assets, and then hopefully all of our Rickies that are listening can get some good lessons learned.
- [00:42]
Ashley Kerr
We definitely have some lessons learned to share, that's for sure. So, Tony, I think because your first deal is kind of famous on the podcast for all of our OG listeners hearing me stumble over Freeport, Shreveport, Shreveport, so long when you had your rental property there. Let's start with that property. Your first deal.
- [01:04]
Tony J. Robinson
Funny enough, I was actually just back in Shreveport. For all of our Rickies who are listening. I was just back in Shreveport this past weekend because my cousin got married there. She just so happened to marry a guy who grew up in that city. Small world. But I drove by that first rental, and I was like, man, this is the place that that started at all. And it was nice to kind of, kind of get back there. But in terms of how I found it, I live in California. I decided to invest in Shreveport, Louisiana, because my mom and my stepdad have briefly lived there after they retired. My stepdad has some family out there, so they were, you know, I think two years they were out there. And while I was here visiting them, I was like, man, real estate is really cheap here. And I said, let me. Let me kind of look around and see what I can find. And I. I spent some time getting to know the neighborhood, you know, while I was out there visiting them, you know, in my rental car, driving around aimlessly, just trying to get a better sense of the neighborhoods and, you know, where. Where the kind of lines were between the. The A class and the B class, B class and the C class. And what were some of the neighborhoods that maybe didn't want to invest into? I met with property managers. I met with a couple of agents with a couple of different banks and really just got a good lay of the land. And I was able to, within this big city land on a couple of zip codes that I felt made the most sense for me to invest into.
- [02:18]
Ashley Kerr
Tony, before you even had the deal, and you're meeting with these key people to build your network. How do you start those conversations with people when you don't even have a deal yet?
- [02:28]
Tony J. Robinson
Yeah, it's a great question. And I was just honest and said, like, hey, I am. I'm a. I'm a W2 employee. I'm looking to buy my first real estate investment here in your town. What should I know? You know, here's kind of what I'm thinking about buying. What are your thoughts? What are your thoughts on this neighborhood? What kind of product should I be looking for? And I think, honestly, one of the best conversations that I had in terms of getting a better understanding of the city was talking to the property manager. He and I met for coffee at some local coffee shop, and they have such a strong working knowledge of their city, of rents, of what kind of finishes you should do. You know, how to screen your tenants. So I think one of my most productive conversations before we actually purchased was with that property manager.
- [03:12]
Ashley Kerr
So you start looking for your first deal. When does that happen? And give us kind of the breakdown of the numbers. Did you pay the actual asking price or have to negotiate a little bit?
- [03:22]
Tony J. Robinson
Yeah, it took me a while to find that first deal. Actually, it was about 18 months from that, like, initial conversations to me actually finding the deal. And in between there, I started looking. Didn't really find anything that I was looking for. I end up getting married or getting engaged, buying our primary residence. So I had some life things that. That went on. But it was about 18 months from, like, me really deciding to actually find in that first deal. And it was on the mls. It was a property that was listed. I was working with an agent. She sent it to me. I analyzed it that same day, and I can't remember exactly what it was listed for. I want to say it was listed for maybe 150 or 130, 135 somewhere there. But we end up going under contract at $100,000. Right. So we got a decent discount on that first deal, but it was nothing super creative. It was nothing super, you know, ninja. It was, hey, here's a good deal that's on the MLS and put an offer in. Let's talk about you, Ash. How did. How did you find your first deal?
- [04:17]
Ashley Kerr
So my first deal was actually the second deal that I looked at. So it was pretty sudden. But I got into my head. I was working as a property manager. I got into my head, like, I wanted to do this. I was working for one investor, managing his portfolio. And his son was actually my first partner, and he was going to be the money on the deal. And so the first property that I wanted to look at, I didn't have a real estate agent. I'd never bought a house before. And so I just called the listing agent who had the property for sale, found it on Zillow or one of those websites, and I called, and she said, let's set an appointment. And I said. And she said, just so you know, this property has flooded. It has foundation issues. And I just really didn't know anything. And I was just like, oh, okay. And I didn't want to be like, oh, no, I'm scared. I'm. I'm going to cancel. This is how awful of a person I was. I got cold feet. And I never actually called the agent to say that I was canceling. And I was not showing up because I was so scared that I was just scared that I made this appointment and now I was already backing out. Like, I wasn't serious about buying a property. And so I hope I've made that agent money in another way someday. And I feel guilty about that of just ghosting the agent not showing up. But I was like, okay, yeah, you know what? That scared me. And that. That's not the property for me. So then I was talking to my mom, and my mom had a friend that was a real estate agent. So the next property I found was a duplex, and it was right in the town where I was managing other properties for this investor. And so I went and looked at it with the agent, and it was, you know, it was an old property, but there was people living in it. So I'm like, okay, at least people can inhabit it. And the second unit was vacant and needed some updating, which cosmetic. Which I've been kind of project managing any of the remodels that were happening at the apartment complex I was managing. So I was like, okay, I can take this on. And so we put in an offer. I think they had it listed at like 80, 85,000. We went back and forth a little bit. We got it for, I think, like 74, 9 or something like that. And we ended up getting it under contract pretty quickly there this was back in 2014. So there wasn't a ton of competition with other investors in the area. I'm pretty sure we were the only offer, the only one interested in the property. And, yeah, so that ended up being our first deal, and we funded it with cash to my partner's money, I.
- [06:50]
Tony J. Robinson
Think you even showed growth, actually, between the first property that you walked and the second property that you walked, because first one, just hearing that it had some sort of issue, and it, like, spooked you from even going to walk the property. But the second one, you said, like, it was old, it was outdated, it needed some work. But you. You had already kind of talked yourself through it to say, well, hey, I've. I've done things that are similar to this before. It just wasn't my own property. So this is probably something that I can take. And I think for a lot of rookies that are listening, there's a lesson in there, because we all want to make sure that we're growing. And I talk about this a lot on the podcast, and if you've listened for quite some time, you've heard me explain this. This theory. But we can't grow if we're only doing things that we're comfortable with. But we also don't want to stretch ourselves so far that we're. We're getting into that zone of doing things that are dangerously outside of what we're currently capable of doing. And for you, maybe that first deal, that's what it was. It puts you into your danger zone where you're like, oh, man, fly flood, foundation issues. Like, that's a little bit more than I'm willing to take on. But with that second property you walked, you're like, I've done something very similar to this before. It's just like, one step outside of maybe what I've done in the past. And I think as a rookie, those are the kind of steps you want to be able to take, like that one small baby step outside of your comfort zone.
- [08:02]
Ashley Kerr
I think that was said perfectly. And I was scared of that foundation issue and that the structural issues from the flooding and things like that. And it's funny because recently I just had a property where I. I had tenants live in it for the last four years. And we decided it was time to sell that rental and, you know, move on to something else. And when we went into that rental after four years, it was literally like you went upstairs and you felt like you were drunk because the floors were so slanted. Like the property had just moved so much, and, like, the foundation was sinking in, in the front, towards the front of the house. So all the floors. Like, the tenant had left a can of cat food. And I remember taking the can of cat food, setting it on its side and just watching it roll down the bedroom, like, as that's what's happened. And so it forced me, because I already own this property, it forced me to have to figure it out. And honestly, it wasn't that scary. It wasn't that bad. I called a couple of companies, told them the issue, we got someone to come out and give us a quote. And I would have to say, like, the, the scariest part was that there was a lot of if, then, buts to this as to we have to, you know, we're gonna jack it up. We don't know exactly what's gonna happen, how it will shift, how it will change. You might need to put a beam in here, all these things. And so it ended up costing $7,000. Well worth it. We just listed the property and got it under contract to sell. And thinking about it now, like, that used to be such a scary thing for me. But I also didn't take the time to research, to learn, to talk to companies that actually do that type of work. And that's why it was scary to me, because I was not knowledgeable about that.
- [09:51]
Tony J. Robinson
I think a good exercise for virtually everyone that's listening to this podcast is to practice that exercise of having conversations with problem properties. And what I mean by that is I would encourage everyone who's listening to call on a property in a market you have no interest in actually investing in. Right. So for me, I don't know, say you send me a property in, in Buffalo, New York, right? Yeah, Right. So you send me a property in Buffalo, New York, but say it's got foundation issues, say it's got this, say it's got that. Use that property is just like your practice mode. Use it as like your batting cages to get your reps in. But. And just talk to the, talk to the agent and say, hey, you know, tell me about this property. I was. Got foundation issues. Hey, Mr. Mrs. Agent, do you know any companies that specialize in foundation repair and then call those foundation repair companies? And I think when, when, when it's a property we know we have no interest of actually investing in, it takes away a lot of that pressure of, well, I've got to make sure that I ask all the right questions. I've got to make sure that I get everything right. Because all you're trying to do is practice. And yes, you know, you're going to waste a little bit of time for the agent, for the companies you call, but in the grand scheme of things, that benefit to you is so great that I think it's worth so practice more as a real estate investor on deals that maybe aren't super, super critical for you to get it all right the first time.
- [11:10]
Ashley Kerr
We have to take a quick ad break, but when we come back we're actually going to talk about the funding of the deals. And I mentioned cash, but it actually wasn't any of my cash to actually purchase the property. So we'll be right back.
- [11:24]
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- [13:58]
Ashley Kerr
Okay, welcome back from our short break. Tony and I are breaking down our first deals. Tony, how did you actually fund that first purchase?
- [14:07]
Tony J. Robinson
You know, this is probably the, the thing that got me hooked on real estate investing was the way that I was able to finance this deal. I still think it's one of the best deals that I've done, honestly. But I found local bank that gave me a loan product where if I found a property where the purchase price and the rehab cost totaled no more than, I believe it was 72 and a half percent of the after repair values, a very specific number they would fund 100% of both the purchase and the renovation. I'm going to say that again because it was a really cool thing that they gave me, but they basically said, Tony, if you find a property that's worth a hundred thousand dollars, but you only have to spend $72,000 to buy it and rehab it, we'll fund the whole thing. And that's what I did. So my buy box was very tight as I was searching for properties because I had the guidelines of that bank as my, my frame of reference. So every deal that I looked at, I would try and say, okay, what, what is it going to cost me to purchase? What is it going to cost me to rehab? And the purchase price, I think for most rookies that's easy to understand. I think the, the renovation cost is a lot harder for Ricky to try and estimate. So let me tell you guys what, what I did to, to figure that cost out. First. I got a couple of references for general contractors from my bank and from my agent. And there was one contractor that showed up on both of their lists. So he was kind of the guy that I was focusing most of my time and attention on. And I, I asked him two different things. The, the first thing I did was I asked him for recent renovations he had done. Like, hey, can I just see Some photos of some recent work you've done and give me the ballpark on what it costs that person for that specific job. So I had one frame of reference there, and then I said, hey, here's a property that I'm thinking about buying. I don't need a full bid. I just need you to give me a ballpark on what it would take to get this subject property to look like that rehab you just finished. Just a ballpark number. And with that, I was able to get some price per square foot that I could kind of back into. That allowed me, as I was looking at deals, I could quickly kind of come up with a ballpark rehab estimate without having to ask that that gc hey, can you go walk it? Hey, can go walk it? Hey, can you go walk it? Because in your initial offering phase, that's all you really need. You need a ballpark number. You're going to be able to refine your rehab from an estimate to like a true bid during your due diligence phase. And it's okay if you estimated $50,000 in rehab and it turns into 75, because then you just take that information back to the seller and say, hey, Mr. Mrs. Seller, I'm going to be candid with you. I had budgeted X for the rehab. It's now actually Y. And the only way that we're going to make this deal work is if you gave me some sort of credit or reduce the purchase price, whatever it is. Right. But that was my process, Ashley. I found a bank that funded the entire thing and literally it was $0 out of pocket for me. I think I had to pay for like the appraisal and maybe a little bit of closing costs, but it was very, very minimal out of pocket cost for me on this deal.
- [17:10]
Ashley Kerr
So that was very different than how I funded my first deal. I had the mindset, because I didn't know any better, that you could not go to a bank, that you had to pay cash for an investment property, because that's what the investor did that I worked for. I didn't even know there was any kind of lending available out there. So I had to figure out how to fund that first deal because I didn't have any cash at the time. And so the partner that I took on had some money saved and we decided to go in 50, 50. But he would also hold the note on the property. So he would have own 50% of the property, have the equity, get 50% of the cash flow. But also we basically had him as a mortgage Holder. So we didn't file an official mortgage note with the county or anything, but we did type up a loan agreement where the capital he put in was amortized over 15 years and five and a half percent. And he would receive monthly payments to pay back his principal, including earning that five and a half percent interest on his money at that time was, you know, a pretty good rate for also getting 50% of the deal on the property, too. So I think the biggest thing for me was that I had this person that was putting the trust into me because they didn't know anything about real estate investing. I'd been a property manager, so I felt very confident about the management of the property and a little bit of the rehab, just from, you know, being the project manager and the remodels for the apartment units too. So we put together that agreement. When it came time to purchase the property, he brought the check to close on the property and then he was getting his monthly payments. Unfortunately, there was some repairs that needed to be done that we did not account for. And that's where I actually drained my. I think I had $5,000 in savings at that time, and I drained those savings to buy. We had to. Well, we had planned. We had estimated to put it in a split unit for the AC and the heat upstairs, that it had an old wall furnace that we knew we were going to take out. What we didn't know was that the panel actually, the electric panel actually needed to be upgraded to actually add in the. The split unit. So we had to spend some of my savings for that. And then there was a couple other unexpected things that came up during that time that we ended up using my savings for. And then we just did the same thing with my partner, where I got paid back a little bit at a time. I think it was like $100 a month. And then, like when we sold another property, I was, you know, paid back the rest as we continue to grow our portfolio. But I think that was a great partnership for me in the beginning because this person, I was handling everything. I was finding the deal, whatever, and they were taking, you know, risk with me doing my first deal. I was happy to give up that much stuff. I was happy to put it putting in the sweat equity. I was happy that they were making five and a half percent on their capital, knowing they were getting their money back and they were getting equity and some cash flow in this property. So right now, if someone brought me that deal, I would say, no, that's. I'm giving away too much while still having to do all the work for the property. But it was such a great way for me to get started, and it would have been so much longer for me to actually get started. I think it was probably four years later, after that first investment, maybe three, that I actually found bigger pockets. And in that year, I tripled my portfolio. Like, I learned about seller financing. Who knew that you could actually do that? And I was able to sell or finance a portfolio of properties from another lender. So I think I would have waited a lot longer to take action if I had enough given this suite of a deal to the. That other investor.
- [21:08]
Tony J. Robinson
But I think you bring up a really good point, Ashley, that sometimes there's. There's this theory in, like, startup culture, like tech startups, that when you're initially starting up your company, you should intentionally do things that do not scale. And there's stories of CEOs, like, personally calling and hopping on calls with their first 5 or 10 or 30 or 100 customers to get that real qualitative feedback. And the idea is, well, you're not going to be able to do that when you have a million customers. And the point is that is the point that you can't do that when you get to a million. So you should focus on those things when you're at the beginning. And I think that same theory, that same principle can be applied to real estate investing, where in the beginning you should be doing things that don't necessarily scale. You should be doing things at property one that maybe don't make sense when you're at property 15 or 30 or 1000, whatever it may be. And for you, Ashley, you said, like, hey, today, where you're at in your journey, that doesn't make sense. But when you're just starting out, that made a ton of sense. And I think that's why it's so important that rookies hear the stories of other rookie investors. Because if you only listen to, you know, Grant Cardone, if you only listen to Warren Buffett, you're hearing the idea and the circumstance of people who have already gone through that journey. And sometimes it can skew the way that you should be making decisions about where you're at right now in your business. So sometimes you gotta bend a little bit on what's important to you in that, that early phase, I guess. Let's talk about the, the rehab portion a little bit, right? We talked about how we found the deals, we talked about how we funded those deals. But the next part is the rehab. And I think it Was a different experience for both of us, Ashley, because you were investing in your backyard, I was investing several thousand miles away. Slightly different experience. So for you on the rehab side, Ashley, you had already, like you said, done managing the rehabs for the. The portfolio you were managing. But was it any different? Were there any unique challenges managing that rehab when you're doing it for your own property?
- [23:17]
Ashley Kerr
The property management on the side of project management for my own rental was very different than at working for the other investor with the. The apartment complex. Each unit was, you know, pretty standard as to what it was like. It also was built in. The apartment complex was built in, like, 2002, so at this point, it was only like 12 years old. And the property I was buying was built in, like, 1920. So very different as to what would happen if we opened a wall. And that was really one of my things. As my first investment. I did not, not want to open a wall or take down a wall or rip out a bathtub and see what's happening with the plumbing underneath the bathtub. So the property really needed cosmetic stuff as far as vinyl plank flooring, which we were starting to do in a lot of the apartments. So that was something easy. I knew what the cost was, who to hire. Kitchen cabinets. It was a very, very small kitchen. Lowe's stock cabinets. I could pull my pricing as to what the cabinets would cost. Lowe's designed it out for me as to what would fit where, and what cabinets I would need. Also the countertop. It was just the Formica countertops from Lowe's. How much I would need for that. One huge advantage of having a partner at this time was he had a roommate. And he decreased the rent for his roommate if he did the repairs for us in the property. So his roommate actually did all the repairs for him on for us and nights and weekends. And I didn't have to pay anything. He just said, oh, I'm just not going to charge him rent this month to live in my house. And so he did all the work for us. So, like, that was another benefit of my partner. Yeah. And I think all the time, as you're listening to this stuff, you think like, oh, well, I don't have. I don't have an investor mentor. Like, I don't have somebody with cash. I don't have somebody that has a roommate to do work. There has to be some opportunities, some advantages that you have that Tony or I didn't have. Tony had the advantage of his. His mom randomly living in this market for two years and him happening upon it and having somebody that lived there. So the all around there is different opportunities, advantages. You just have to, you may not realize what they are right now, but they will come about is it even as you continue your journey, especially the more people that know exactly what you're trying to do, the you'll, you'll start to realize, wow, like, this is an opportunity here. This is an advantage for me here.
- [26:07]
Tony J. Robinson
Ash, you make such an incredibly good point and I'm so glad you brought that up and I could not agree with you more. But if you're hearing Ash, then you're still like, Ashley, you just don't get it. Like, I literally don't have anyone, I literally don't have any resources. I strongly and firmly believe that the harder you work, the more opportunity you get. And if you put in the work of educating yourself, if you put in the work of networking with other investors, if you put in the work of just trying to do more deals, typically that's where more opportunity comes. Had I not been listening to a bunch of podcasts and talking to different investors, I maybe would have never even connected the dots on Shreveport being the right place for me to invest. Had Ashley not had the courage to walk away from her job in accounting and go work for an investor doing property management, she never would have saw the, the, the, you know, the, the light at the end of the tunnel that she could do this herself. So the more activity, the more action you take, the better you get at spotting opportunities.
- [27:13]
Ashley Kerr
And too, when I left my accounting job, I was ready to go be barefoot and pregnant on a farm. Like, I was not, I did not leave my job to go into property management. It's just like the offer happened and I was like, well, I can work from home and part time, like, sure, it will, you know, give me a little extra money. And so I think, like, as life goes on, other opportunities will open. And I'm not saying go out and quit your job right now and wait for a real estate job to happen, but one big thing is like, what's your skill set, your job right now, how can that transfer to real estate? Like, what will you be really good at? Do, do sales. Like that is a huge skill set to have as a real estate investor, to be able to go direct to seller to negotiate the deals, things like that. So yeah, I think look at what skill sets you do currently have and use those for opportunities. But also Tony, for him going out of state, that scared me. That scared me more. And like, so we were the complete Opposite, he didn't have the opportunity to invest in the hometown where he's lived his whole life. And he went to a different market. And like that to me, like that I saw as a disadvantage to Tony that he had to go to a whole new market. Like he figured it out and then he figured out his advantage. Like, I know someone that lived here for two years. This is where I'm going to start. Instead of spending all this time analyzing markets all across the US not knowing which one to start, start looking at those markets where you have those little subtle advantages of maybe you live there for a little while, maybe you know someone else that lived there, maybe you know a great real estate agent in that market. Or if you literally know nobody and you're going to end up like my one son who just wants to be an expert at Fortnite and you play video games and you don't know anyone, then go into the BiggerPockets forums, network with people in the forums, set up keyword alerts for markets you're looking in. Create an Instagram account that is specific to real estate, where you're only following other real estate investors. See where they're investing, what they're doing, and then from there pick a couple markets, look at the people who have similar goals or reasons to invest as you do, and then maybe see if some of their markets align with what you're trying to do. Just because I invest in Buffalo, New York doesn't mean that is a great investment. That it is the best return I could get with my money. It's literally because it was the most convenient and it was the easiest for me at the time. That is literally the reason why I invest here because I felt like I had an advantage because I knew the market.
- [29:57]
Tony J. Robinson
I think the rehab experience for me, like you mentioned was, was slightly different because I was doing it remotely and I was doing it while working a pretty demanding W2 job as well. And the way that I found success in managing it remotely was, I guess there were, there were a few layers, actually. The first layer was the bank that I was using. They released all the funds to the contractor in draws. Before that draw was released, the bank would send someone, an inspector of some sort to actually go validate that the work that the contractor said was done was actually completed. So there was this layer of validation that I was getting at this, this bank that really wanted to protect the, you know, the hundred plus thousand dollars they just gave me. They were sending someone out there to validate the work was being done. So that was the first that gave me a lot of confidence to do this remotely. And, and that's not uncommon. I've talked to other investors who have worked with a lot of these local regional banks that have a really strong local presence where when they do land on rehab and in construction, it isn't uncommon for them to send someone out before that draw is made to validate the work is done. So there's one thing, the second thing was I met with the contractor virtually every like Friday I think it was, and we would FaceTime, he'd walk into the property, give me an update on here's this, here's that, here's this, here's that, and that just visually kind of gave me what I needed as I was going through. And then as we neared the completion of the rehab, I'd already selected my property manager. They knew what was going on. They were doing some final walkthroughs with me to say, hey, you should probably have them take a look at this to make sure that it's ready to be rented. Hey, I noticed this, this might be an issue when we get a tenant in there, so make sure they fix this. So having that kind of three legged, you know, beast of me doing my visual inspections, the bank sending out their inspector, my PMB in that final set of eyes really gave me the confidence to do it. And honestly, that was probably the easiest rehab I've ever done. And it's like because I couldn't go and drive over there, it just wasn't even on my brain as much. And it was the easiest, easiest rehab I'd ever done.
- [32:13]
Ashley Kerr
Well, we have to take our last ad break, but when we get back we're going to find out what happened to those first deals and what's going on with those properties today. We'll be right back.
- [32:26]
C
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- [35:00]
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- [35:42]
Ashley Kerr
Okay, we're back from our short break, Tony. I guess first, before we get into what happened with those deals, let's talk the final numbers. What were you cash flowing on that property after you did your rehab? You rented it out. What does the cash flow look like on your very first property?
- [35:59]
Tony J. Robinson
Yeah, if I recall correctly, like after everything Capex property management reserves, I was cash flowing about 150 bucks per month. Definitely not life changing money, but it was a very good proof of concept on my first deal and I think even more impressive because again, my out of pocket cost was virtually zero. So I got an almost infinite return on that first deal. So it was about 150 bucks per month on that first deal. What about you Ashley? What did your, what did your first deal look like?
- [36:31]
Ashley Kerr
Mine was honestly about the same. Like after everything, like it was so measly and when I actually had ran all the numbers, I forgot to add snow plowing. So that ended up taking off like I don't know, 50 bucks off of my original estimate of what my cash flow would be to do snow plowing for the property. But yeah, it was definitely not life changing either. But one thing that I have learned is that first deal isn't meant to make you rich. It was to start your journey and to propel you. And it did. It launched us. We got our second deal within three or four months of that when it was like right down the street, we're like okay, this is perfect. It's on the same street. We need to figure out a way to make this happen. And we did. And from there it just started to slowly snowball. We found other ways to fund the deals. And that first deal was life changing and not in cash flow but the fact that it got us started. So yeah, same thing, a measly $150.
- [37:38]
Tony J. Robinson
But like you make an incredibly important point Ashley, that the purpose of the first deal is not to make you rich. Ashley and I have interviewed, you know, we're on what episode 570 some odd now of this podcast and out of those almost 600 episodes, exactly zero people have retired off of their first deal. No one's done it. We have not met a single rookie investor who with just one deal they've been made. So the purpose of the first deal is exactly what Ashley Said laying that foundation, building that momentum. And you said, ash, it was, you know, within a couple of months after your first year, you got your second. I actually didn't find in my second deal while I was under contract on my first, you know, so it's like it really does start to snowball once you're in it.
- [38:20]
Ashley Kerr
Somebody could retire off their first deal if they paid cash for a million dollar property that's putting out 10 grand a month in cash flow. Okay. So I think that's a really good to understand when you're comparing apples to apples is we had zero dollars into these deals. They were full burrs. So we were making $150 and we had no money into the deal. Okay. So I think that's when you're seeing all these flashy things on Instagram and social media of like, wow, they're getting $1,000 cash flow. Well, maybe they put down 25% on the deal so their mortgage payment is lower. They have more equity into the deal. Like all these different things. So really take that into consideration when you're trying to compare apples to apples as to what's actually going into the deal. And also time that you're putting into a deal too. Like we could have said that, you know, maybe have a better return on it because our rehab only cost $1,000. But that was because we did all the work ourselves, but it took us six months of our time, you know, so take everything with a grain of salt and if you really, really want to understand a deal, really take a deep dive into the numbers too. It's like cash flow is including what they're saving for Capex. Is, you know, that including their time to do the bookkeeping or is the other person paying a full time bookkeeper? Like there's all these different things. So it's really hard to compare deals. Tony, let's go over these deals now. So what has happened with your deal?
- [39:55]
Tony J. Robinson
My deal today is cash flowing exactly $0. We, we sold that deal, I want to say, three years after we purchased it. As we made our transition from short term to long term, we kind of reassessed and said, okay, does it still make sense for us to hold these long term assets? And I believe this was after I had lost my job. So we're just like looking for some additional ways to free up some capital to live off of, to keep investing into real estate. And that, that property, gosh, again, we bought it for 100. I want to say the rehab was about 50 grand, but it appraised for 230. I think we end up selling it for closer to 200. But we still made like a decent amount of money when we sold that property and that helped us during that transitionary phase of Tony's unemployed. So we sold that deal. And actually again, I drove by it just a few days ago and looks like right now the current owner is renovating it again. So yeah, it's, it's about to change hands again, it looks like.
- [40:53]
Ashley Kerr
So my deal, I actually had to look it up on Zillow right now as to what it actually sold for because I couldn't remember. So we did buy it for 74,900 and we ended up selling it in 2019. So we held it from 2014 and we sold it for 105,000. So made a little bit. We didn't lose money on the deal. We pretty much had no other major expenses or any other rehabs happen. But we did have a tenant that we had to evict that we did put a judgment against them. I think it was for like $3,000 that hasn't been paid and will expire in a couple of years. But, but really no like major headaches with that property. And yeah, so we had some equity in it. And I mean by that time we had paid down, it was on a 15 year note. So over five years we had paid down that note to my partner. So we had paid down a third of the property by that time. So we did have a bunch of equity. And yeah, it was a nice payday. And even at that time in 2019 when we sold that property, I didn't really realize the value of holding properties long term. But that's something I've really realized the last couple of years as to, wow, maybe cash flow isn't the greatest play, like waiting until you get that perfect property that has great cash flow. What's the property that's going to cash flow? Little. So you're not putting any of your own money in, but also is going to have that appreciation play the mortgage paid on to build up that equity. So that, okay, I need some money, I'm going to sell this property and it's doubled in value or you know, it has tons of equity in it that I have options. And I think that is one of the things I am most grateful for about buying properties 10 years ago is that the amount of equity I have available in them, if I am, if I were to need those funds and that could be a refinance, that could be a commercial line of credit that could be just to sell them and take the money, that could be to do 1031 exchange into something bigger. So if you have any hesitation, I would say down the road, investing in property, Investing in real estate has been better than I could have imagined to give me the options I have available today. I started investing with the sole purpose of I'm never selling a property, I'm being a long term buy and hold investor and I'm holding these properties forever. I've bought and sold a ton and I have changed my portfolio so many times. And there will be properties that don't serve you, properties where what they'll sell for just will out beat what you'll get in cash flow for the next five, 10 years. So I think really looking at other things then besides cash flow can really help you see the tremendous impact that real estate investing can happen in your life.
- [43:43]
Tony J. Robinson
I think you hit the nail on the head, Ashley, that cash flow is just one piece of what it means to find success in real estate. And I think even when you look at real estate investors who are doing this at a very large scale, a lot of times their big paydays aren't when the cash flow check comes in every month. It's when there's a capital event, when they sell a property that they've had for 10 years, when they refinance a property and now they're getting some of that equity tax free. Right. Because loans aren't income, it's debt. And you know, you're getting these big refinances on these multimillion dollar properties. So the perspective, real estate investing I think shouldn't be so singularly focused on cash flow because there are so many other levers that are important that help you build wealth over the long run. So I hope that for the rookies that heard our stories today, although actually's was in 2014, my first deal was in 2018. We get that the market has shifted, that things have changed, but the underlying idea behind those first deals is that a, the purpose of the deal is to lay that foundation and B, focus on the resources you have at your disposal to help you get that first deal.
- [44:57]
Ashley Kerr
Thank you guys so much for joining us today on real Estate Rookie. I'm Ashley and he's Tony. Let us know in the comments below what you're doing to get your first deal, what market you're investing in. We love seeing and following real estate rookies journeys. Thank you guys so much for joining us. We'll see you guys next time.