I went to school to become a software developer. Got a degree in computer science and went to work developing software in San Antonio, TX. The money was great, but I really dreaded having to sit in an office for eight hours a day and being told how much vacation time I could have and when to come to work and when to leave work. I wanted to be my own boss.
While in college, my father began real estate investing with an old friend of his. His friend had been investing for over 20 years and showed him the ropes. I was fascinated with how fast my father picked it up and with how much fun he was having.
I had been saving some money to take a trip and decided to use the money as a down payment to buy a house instead. That first house was to be my first investment. It took months to find the right place. It had to be somewhere I wanted to live and also have room to make a profit. After looking at dozens of houses and starting to lose hope, I found the perfect house. It was a HUD house that needed only cosmetic repairs. I quickly learned that I did not want to be the one doing the repairs. I fixed a toilet and did some demolition and that was enough. If I wanted to ever have the house finished, I was going to have to hire a contractor that knew what he was doing. I probably would have spent more money trying to do it myself than I did hiring somebody to do it (after all I did not have any tools).
I was excited. The numbers looked good. The house cost $72,000 and I only spent about $10,000 on repairs. The house was worth $129,000. This is what I wanted to do!
Now with my wife, I started to attend the local REIA meetings and learn as much as we could from my father and his friend. I firmly believe that anyone beginning in investing really must have a mentor. Our mentors were priceless in our education and direction.
We started mailing postcards to owners of vacant houses and this is how we found our second deal. It was a burned house that was damaged pretty bad, but salvageable.
The problem was that they owed way more than it was worth (owed 60k and figured only worth $25k). So, on the first deal, we attempted a short sale. The bank accepted the $25k offer, but the seller, not happy about how cheap we were getting it, decided they were not going to show up at closing.
They were at least 9 months behind on payments. The bank asked if we would like to buy the note for the $25k. We did. An attorney shortly after approached us before we foreclosed and offered to buy the note for $50k. We did that also. We learned A LOT with this deal!!! He went on to fix it for around $45k in repairs and sold for around $150k.
We continued to work our jobs and invest on the side for about 4 years. We got to where we were doing 10-15 deals a year at that point and I still wanted the security of having the job, even though I knew deep down that I could make more if I went full time with the house flipping. Then one day in 2006, I got word that I was going to be laid off. My manager told me he was fighting to keep me and I told him not to bother. I WAS EXCITED. It was exactly what I wanted and needed to push me into full time flipping. Sink or Swim.
We have now bought and sold well over 100 houses. The vast majority have been rehabbed and sold retail. We have sold many houses with owner financing as a way to create cashflow for retirement. Our goal this year is to flip 50 houses. To do this, I figure I will need to generate about 100 leads a month. I am currently on track.
It is not all pie in the sky, but we really enjoy the lifestyle it has afforded and especially the freedom to decide what we will do each day and how much vacation we will take each year.Next: Follow Along As I Open Up My House Flipping Business
Inspiring story for me, I’m on a simliar path that you took through and after college. I found you on BP today and will be catching up on your posts.
Glad you found the site. Do you do any web development?
Hey I’ve been going to your site since you got the ‘up and coming’ award at REIclub. I’m just curious. Is there is business niche opportunity by negotiating the short sale and then buying the note from lender and flipping the note opposed to the property? Any insights appreciated.
I’m not sure that would be the best way to go about short sales. We have done that before, where we negotiated a short sale and then ended up buying the note for the amount, but only because the sellers were hesitating to close and we had done all the work (it’s a long story). Basically, you’d be buying a non-performing note, as they are likely not making their payments if you are doing a short sale. If the bank approves a short sale, I feel, after brief reflection, that it would be best to just buy the house and not the note. If you bought the note, you would still have to foreclosure to take ownership of the property and that will cost more and will include a lot more hassles and potential problems (like if they decide to file bankruptcy over and over again to avoid foreclosure).
So, to answer your question, buying the house with a short sale, to me, is more preferable than buying the non-performing note.
Yeah that makes sense now that you lay it out for me. Thanks man.
No problem. It’s what i do. 🙂