Checking my 2021 resolution, I realized that my only goal was to pull the trigger and to buy my first investment property. To my surprise, I surpassed my goals and got 7 doors in Indianapolis with 2 units as short-term rentals and a BRRRR (Buy, Rehab, Rent, Refinance, Repeat) project in progress.
Everything is easier AFTER pulling the trigger
I spent most of 2020 hesitating (and saving up for down payment), and having analysis paralysis.
Then in the first half of 2021, I said to myself "it is now or never". After making up my mind, I reached out to find agent, lender, and PM, and started my real estate investing journey.
I didn't regret anything at all. My GF and I just kept on acquiring more: we actually got one more under contract during New Year's Eve.
Many first-time investors have been worrying about how things can go wrong BEFORE investing. I think for a more affordable market, if you do your due diligence like everyone else, things can't really go too wrong. Even if that investment might not be the wisest, you will still thank yourself for not waiting longer.
With other partners, we acquired a property that needs some work in a very fast-appreciating area. We haven't finished the project yet, but the learnings so far are.
- Good contractors are very hard to find. Most reputable contractors are busy because other investors are doing the same things you are doing, and there are more projects than contractors
- The importance of a good general contractor: even though very hard to find, a good GC knows what needs to be done and how it can be done. Price is not the only factor you should consider in your project. Especially for newer investors, having less stress and not having to put in as much effort will make your project much more successful and make you more likely to invest next time.
- If you are doing anything beyond cosmetics, be prepared for the scope and especially how long the project would take.
- Time is money. Even if you are not using hard money loan, you are wasting potential rent and you are delaying cashing out your original investments.
Real Estate Agent License
To help with the analysis paralysis, I studied for and got my real estate agent license in California. As someone who's not going to use my license, my goal was to study the industry, and how it's supposed to work.
I learned about many related parties that you may or may not see during a real estate transaction, and how they provide value and make profits, and what they are not supposed to do.
Was it helpful and did it help me become a better investor? Yes. I'm very glad that I got my license.
Did it prepare me for my future investments and gave me a deeper understanding of the industry? Definitely.
Is it necessary for most investors? Probably not, it's not the only way to learn these things, but it's a great option if you are willing to put in the work.
Next Step: 20+ Units Multifamily, Syndication, or Fund
I realized that there are some bottlenecks with the traditional approach of buy-and-hold, while very easy, buying one by one and dealing with the appraisal, inspection, and management is not the most efficient, and the profit will only be significant in the span of 5-10 years.
Even BRRRR or flipping has their own problems: each project takes at least 4 months to exit, and it's not easy for investors who are not well-connected to keep getting deals. Even if getting deals is not a problem, to efficiently scale up, it's unlikely that anyone can find that many contractors to do rehabs at the same time .
Just like a startup, scaling up and growing is much more important than the number of profits in the beginning.
After talking to my friend Windy and a few experienced investors, what I thought was impossible doesn't seem so far out of reach:
Investing in a 20+ units multifamily is a good way of scaling up: not as expensive to buy, while still having all the benefits of a larger multifamily: easier and more profitable value-add because of cap rate, and strong cash flow.
Starting or being part of a syndication or a fund is another way of scaling up. Some investors have the capital, while some others have the team and experience, everyone can have more exposure and the economies of scale will only get better.
Multifamily, syndication, or fund is a different beast from residential real estate but will be my primary goal for 2022, and we are already making good progress.
I will update the blog once we have something more solid.