It has been about 25 years now since I first started toying with real estate investing. As part of throwback Thursday I thought it would be a good idea to share how I started and the lessons I learned. My desire here is that you learn from my mistakes – or even remember the lessons you learned from you own mistakes so that they are not repeated.
Shortly after being promoted with American Express and moving to Atlanta, I Started to get the itch to do something different. I was realizing that each promotion simply meant more responsibility and more time away from home and family. I was already intrigued by real estate having watched the construction of the house next door and the builder bringing his family out to show it off. Then late one night, there it was…..
An Infomercial to learn how to invest in real estate!!! Not only that, but I could be closing on deals within 30 days earning $5,000 – $10,000 – even $50,000 on a single deal. And the program to learn all of this was only $149! I ordered it right away and I was ready to submit my resignation the next day.
Luckily my wife had more sense (she hadn’t seen the commercial) and encouraged me to wait and see how the first month went. I reluctantly agreed, but I knew I’d prove that her concern was unfounded.
Shortly thereafter I received the program and tore into it. I consumed every bit of information (all 100 pages!) within a day or two. I was ready to set the world on fire…and then it hit me…I knew a lot of what to do, but not how to do it. I had no idea where to start. I read over the material again looking for the answers that I must have missed. They weren’t there! How could that be??!!!!! How could I start closing deals and making all that money if I didn’t even know where to start.
Now there was one good piece of advice – join your local Real Estate Investors Association (REIA). I found a local REIA and went to the meeting. I heard about some more programs, and so I bought those. And I followed the advice:
- Call the FSBO ads in the paper
- Have real estate agents pulls listings with key words
- Drive for dollars – drive around looking for vacant or abandoned houses
- Run a classified ad (this was well before the internet and Craigslist)
So I did all of that. Tenaciously. I called every ad in the paper. I returned every call from the ad. I went through dozens of agents. Weeks turned into months and months turned into years with no deals. I wanted to quit so many times, but my wife kept pointing out that other people in the REIA with less education, who didn’t work as hard as me, who didn’t look as good as me (she may have been biased) were closing deals and making money – so we must just be doing something wrong.
I decided to change our approach. We started working with wholesalers and found a great deal. The problem now was money. The house was $97,000 and needed over $100,000 in work. No one wanted to lend to us because of the size of the project and our inexperience. Finally we found a money “partner”. He would give us all the money we needed in exchange for 75% of the profits.
At first I was appalled at the terms. We found the deal. We had to do all of the work. And he receives 75% of the profit??!!! Then my wife reminded me – what is Plan B? There was no back-up plan. We either accepted those terms or don’t do the deal. We accepted and our profit became $38,000. Obviously our money partner did much better, but we made a good amount of money AND we learned so much with absolutely no financial risk.
We invested those funds into mentoring and marketing (which was my college major – duh – why didn’t we think of that before?) and started finding house after house. Before too long, my wife and I realized we were making more part time at real estate investing than we were making combined in our two full time jobs. So she left her job first; and I left mine a few months later. That was 20 years ago and real estate has provided us more money – more free time – more flexibility that we ever would have had staying in corporate America. Was it worth the struggle? Absolutely!
Lessons Learned
That adventure taught us a few lessons that we have never forgot…
- First of all, don’t quit your regular job until you have your real estate up and running. Thank goodness my wife had the foresight for that one.
- Commit to real estate. Do whatever it takes and don’t quit. At times you may feel like “the dream” will never happen, but I promise you that if you persevere, you will be rewarded.
- Get help. Don’t try to do it alone. I wish I had sought out a mentor so much sooner. We could have saved years of hard knock and heartache.
- Don’t get stuck on the cost or the principle. Sure, did I think it was fair to give away 75% of my profits? No, and I was ready to walk away on principle. In reality, I had no better option, and walking away would have cost us $38,000. If you have better options, take them. But don’t discount a viable option just because of the principle. Funny thing is – looking back – I would have charged us 75% too. We were a huge risk! Thank goodness he was willing to take that risk.
- Don’t buy into the hype. I believed that a $149 course would give me all of the information I needed to start earning tens of thousands of dollars in just 30 days. That wasn’t reasonable. But I am not mad I bought the course – it gave me a great overview and pointed me in a direction, and from there I grew. I just needed to temper my expectations. You can do deals in 30 days – just not your first 30 days; and you must have your system all set up.
- Build a solid business by applying good sound business principles. Don’t shoot for the pot of gold at the end of the rainbow – just grow strong and steady.
- You really can buy deals with no money – well at least none of your own money. That doesn’t mean the business doesn’t still need to have money. You need good marketing to find a steady stream of deals and that does cost money. A rehab can provide the seed capital you need to really grow your business.
- Real estate is one of the best vehicles for earning large amounts of money – don’t let anyone shatter that dream for you. If what you’re doing isn’t working, so something different.
Expect abundance,
Lou Castillo
