Every investor should begin by choosing a niche, or strategy, in real estate; for instance, do you want to buy houses and hold them for cash flow, do you want to fix and flip, are you going to become a wholesaler, is commercial real estate appealing to you. There are an extensive amount of strategies, as well as types of assets. I elected to focus in on purchasing multifamily apartments and holding them for cash flow.
It is vital that you complete this first step. It will allow you to concentrate your efforts on one strategy and master that niche. There is so much information that you need to learn to become successful, and jumping around will only confuse and frustrate you.
Once you’ve chosen a niche, it’s time to focus in on a specific asset class. Choose whether you want to invest in single family homes, multifamily properties, commercial, etc. I became very specific in my investing criteria. I narrowed my niche to “Mom and Pop” apartments, a termed I created to describe multifamily properties that were being run by individuals or family members who were showing signs of burning out.
These properties were being run with no systems in place, and showed signs of neglect and incompetent management. Once I narrowed my search for properties, I became focused on analyzing these types of deals. To my astonishment, the market was filled with these types of properties.
Now it was on to choosing a market. I felt that investing in my backyard was not going to yield the results I was aiming for, so I decided to invest in Rochester, NY. I purchased a couple of duplexes that were generating cash flow, but fell far short of wealth creation.
At first, I viewed this decision as a mistake. But as time passed, this “mistake” became an opportunity for me to explore. I had learned how to deal with a management company, how to run an asset out of my immediate market, how to analyze deals and how to run a real estate business. I switched gears and began to invest in Knoxville TN with my friend and partner Jake Stenziano. This was the point when Jake and I began to build our team members.
Jake and I purchased our first mom and pop property approximately 18 months after we began our search. It was frustrating at first, being told by brokers that “You will never do business in this town!” But we stuck with it and persevered.
First Multi-Family Purchase: It was a 25 unit gem (actually, it was a run down weekly rental full of tenants who paid when they felt like it). Since we were a bit short of funds, we asked the seller for owner financing, and she obliged. I think she was finally happy to be rid of the property.
The second acquisition went a bit smoother, but not by much. We took on another partner to help expand the portfolio, and it was one of the better decisions we made. Our partner recognized the potential of our business plan, and we decided to scour the market for another property.
As luck would have it, we stumbled upon the ultimate mom and pop property that consisted of 136 units. The fear and doubt came rushing back to Jake and I, but with help from our partner we acquired the property.
It had only taken us 18 months to buy our first deal, but only 24 months to accumulate an additional 300 units. Once you have momentum and experience behind your back, the sky is the limit. The key is to get into the game and buy that first deal.
10 Steps To Land Your First Deal
Let me give you a brief recap on how to land that first deal:
- Decide to invest in real estate
- Start to read books and interact with real estate professionals
- Choose a niche
- Choose an asset class
- Continue your education. Look for mentors, coaches.
- Choose a market
- Consider a partner. This worked well for me.
- Begin to build your team.
- Take action. Buy that first property.
- If you enjoy the business, look for your next investment.
Once you decide to invest in real estate, follow this framework to land that first deal. Please leave a comment below and let me know what made you start your investing career.