What to Expect and How to Prepare
If you’re new to the world of investing or flipping houses and have yet to successfully complete a deal, don’t worry. Many others are in the same boat as you. You might be curious about how the process will unfold. Will it be as smooth and effortless as professionals make it sound? Or will it turn into a nightmare? Will you feel nervous or excited? It would certainly be helpful to hear about the experiences of other first-timers so that you can learn from them and manage your expectations better, wouldn’t it? Well, now is your chance. Below are accounts from several investors detailing their experiences, along with a summary of what you can anticipate when closing your first deal…
It can go perfectly.
Sometimes it just goes well. And when it does, it makes you feel like “wow, this really works!” and “I can do it again!”.
No hitches, no problems… it all goes according to plan. This was Shelly and Tyler’s experience. They got together and formed Simple Solution Homebuyer, and on their first purchase, “everything went smoothly and there were no major issues. We felt empowered because we learned that investing in real estate is much less complicated than we originally thought, and it taught us that it’s something that we can and should continue to pursue.”
If you hope to have this experience for your first purchase, it would be worth noting that for Shelly and Tyler, education played a large part.
If you take the time to learn:
- From others who have gone on before you,
- How to properly evaluate a home’s current worth;
- What potential damages/expenses to look for;
- How to evaluate the current housing market in your city;
- How to talk to clients, listen, and help them solve their problem;
Then you stand a much better chance of having a really smooth, profitable first purchase. Of course, everything needs to be learned on the job, and you’re bound to make mistakes here and there, but this “pre-deal education” will go a long way.
Niel, the founder of South Bend Fair Offer advises exactly that:
“I had 2 years in the beginning where I relied on other people too much that weren’t looking out for my best interest. I didn’t know the numbers, didn’t research the area or repair costs. After that dust settled, I realized if I’m going to make it I need to be willing to do all the research, know the numbers, and become the expert. Ever since I decided it’s up to me, things have gone well.”
Successful closes depend, in large part, on your commitment to “become the expert” in your market. That means knowing the local housing market, knowing current costs for certain rehabs/construction projects, and knowing your ROI numbers.
Your first deal can actually be profitable.
Now, I know that sounds obvious – or at least, what everyone reading this is probably hoping for, but it’s not always the case.
Lots of investors buy too high; get their rehab estimates wrong; miss something in the walk-through that’s going to cost them later; or any other number of things that can hurt profit.
So profit on your first deal is by no means a guarantee. However, your first close can make you money. “My first deal was in 2006 buying a house out of state, sight unseen,” says Carter, of Carter Buys Houses, “it actually was a fairly good rental that I ended up selling in 2011. I learned that single family homes that make a slight amount of cash flow in an improving neighborhood can be a great investment.”
If the thought of buying a home “sight unseen” makes your palms sweaty and your heartbeat a little faster, you aren’t alone. It can be a huge gamble if it turns out to be in worse condition than you thought.
In this case, it worked out.
It will be a mix of fun, excitement, and stress.
So let’s say you’ve done your homework and educated yourself on the process, how to price and value things, and you’re ready to go.
The truth is, you’ll still need hands-on experience.
In other words, there does come a point when you need to put the books and online courses down, and turn the podcasts off, and make an offer. When that time comes, you’re going to learn in a whole different way.
You’ll get to live it. Practice it.
That was the experience of Keith, who started Crowne Properties out in Oahu, as a Marine stationed there, “my first home buying experience was exciting, fun and stressful all at the same time. We were as knowledgeable as we could be with our ‘book smarts’, but having hands on experience is a whole other thing. I’m glad we had a good business partner and good people on our team, because otherwise it would have turned into a financial nightmare. What was supposed to be an 8 month flip with six figure returns, turned out to be a 1.5 year flip and with a mediocre returns at best. We learned very quickly that it’s good to trust people, but you must VERIFY that their information is true. In our case, the permitting process was so backed up that we didn’t get our permits back for more than 4 months. When we got them back, we dealt with contractor delays and change orders because we hadn’t hired the correct professionals (namely, a structural engineer), to look at the property before purchasing it. There was enough equity in the deal to account for these delays and extra expenses, but we would all agree that it’s not something we want to repeat. But I don’t regret it for a minute! We learned SO much, got connected with some really great people, and ended up making money in the end. I don’t consider it a mistake, it was just an expensive learning experience.”
OK, so a few notes from this one – because it’s full of great advice and takeaways…
- As I mentioned earlier, there comes a time when book smarts aren’t enough, and it’s time to learn by doing. When this happens, anything can happen.
- Profit is not a guarantee, especially not the profit you intended on.
- It’s crucial to have a solid team around you. That was one of Keith’s big takeaways – that he had a trustworthy team, who could help him salvage that deal, that otherwise might’ve been really unprofitable and hurtful.
- Always verify that the information the homeowner is giving you, is true.
It will (hopefully) make you equally excited to see how you’re helping the homeowner.
Closing a profitable deal is great, but, assuming you have a heart to help people in the process, that won’t be the only thing that excites you.
Conrad closed his first deal with Home Sold Speedy, and even though the first deal he ever closed went smoothly, and was super exciting for him – closing a profitable deal was only half the excitement, “it was certainly exciting to close on my first investment property and to get one under my belt, but it was just as exciting to make something happen for the seller and come through for them. For new investors, I would encourage them to strive to help and serve sellers in every transaction. Buy the house, but do it in a way that you are caring for the seller and helping them as a person, not merely looking at it as a transaction. You would be amazed how many referrals we get not because of the price we bought a house for but because of the level of care and attention we showed during the process.”
I could not say it better, so I’ll re-say it:
Don’t just focus on closing the deal, hitting your numbers, and walking away with a solid profit. Focus just as much on caring for the homeowner, treating them like a person (not a number), and find excitement and joy in that you get to help a real human being out, who is potentially in one of the hardest situations of their life.
So, what will your first deal be like?
Hopefully you’ve seen, even in this brief overview, that it really just depends on you. It depends on how much education you’ve put yourself through. It depends on how much you’ve worked to become an expert and get your numbers right. It also depends on verifying details the homeowner gives you, and being thorough in your walkthrough. But it also depends on things like having a solid, supportive team around you to help you get through the slog of a bad deal, and finding joy in helping someone go through a really tough situation. If you’re committed to that last one, then I hope your next deal is really profitable.
“It’s not about the money, though that’s nice to have. At the end of the day, it’s really about matching the right buyer to the right seller. We’re matchmakers—real estate matchmakers.”
–Valerie Fitzgerald, The Valerie Fitzgerald Group
