💰How I Turned $2K into a LOT more
Happy Friday!
Here is an Idea, an Action, and a Question to consider this week.
Idea
When I was first bit by the “real estate bug”, I was bitten hard! I was so eager to jump into my new career that even while I was studying two hours a night for the real estate licensing exam, I was also trying to secure my first investment property. But there was one big problem: I didn't have enough cash to buy anything.
As a fighter pilot, I didn’t realize that I was living paycheck to paycheck until that paycheck was about to disappear. (If you don’t know, a handful of years ago I was diagnosed with Nodular Sclerosis Hodgkin Lymphoma, a type of blood cancer, and was medically discharged from the Air Force.)
After undergoing a painful heart surgery and completing chemo, the Air Force determined that I was unable to fly fighter jets anymore. I received a 10-day notice of my medical discharge via email, and then I was on my own. To top that off, I only had about $2K in my savings account.
At first, I felt like there was nothing I could do about my lack of capital. I was still recovering from my illness. I had to play it safe for my wife and kids. It was not the time to hit the throttle and race into a risky business venture.
But slowly I found a new way to look at my situation: What if I decided to not let my obstacles stop me? What if there was a way to achieve my goal without risking anything except my time and energy? My mindset became that somehow, I would find a way to make things happen.
I decided to try to jumpstart my plans from as many different points as I could.
First, I took my existing YouTube channel with its small following (I now have 1.18K subscribers!) and transitioned it from updates on my cancer fight to real estate topics. I made a few videos, including one on self-directed IRAs. It was not glamorous, and it did not go viral––in fact, it racked up a measly 150 views.
But the number of views doesn’t matter as long as they are the right views. One of the people who saw my video was a former colleague I hadn’t spoken to in years. He had $300K in an IRA that wasn’t performing well on the stock market, and he was willing to take a risk and invest with me by self-directing a portion of his retirement account into a deal, if I could find one. Initial funding secured!
Next, I actively engaged on the real estate forums on the investment site BiggerPockets.com. It had so much knowledge to soak up and share, and wherever I could, I engaged with fellow posters and added value. Eventually, I connected with an investor in Hawaii who had $50K to invest but few local opportunities to make his cash work for him. Based on my contributions to the forums, he decided to invest in me. Second funding secured!
From there, I connected with a stellar local wholesaler who brought me a potential deal. I analyzed it, walked through with my contractor, and decided to make a bid. Multiple offers were common at that time, but I ended up winning. Property secured!
Now that I had the capital committed and the deal secure, it was time to put it all together.
I spent $150 to start Robin Road LLC, named for the street address of the property we were flipping. I spent another $100 to start a business bank account at a local bank. Then my investors and I wrote up a brief operating agreement stating the equity ownership shares. We broke it down like this: I took 30% to run everything, the Hawaii investor took 30%, and the IRA investor took 40%. They wired me their cash to cover the purchase, rehab, and closing costs. We purchased the property for about $80K including closing costs and fees.
Next came the dirty work: I had to turn a crappy house into a desirable home. I functioned as the general contractor, receiving a lot of on-the-job training. I had to fire a lot of sub-contractors. I also pitched in myself––scraping down a popcorn ceiling, pulling up tiles, whatever it took. The previous owners had been hoarders, and we filled up four large dumpsters with the stuff they’d left behind. I also helped wipe down walls coated with years of cigarette smoke.
After four months and $50K of rehab, we sold the house for $180K. After fees, we were able to make a profit of $45K. Since I had also acquired my real estate license, I functioned as the agent as well as the investor. I had the LLC pay me three percent as the listing agent. In all, I was able to turn my $250 initial investment into over $18K.
My investors were stoked with their returns as well, especially the IRA investor who used his ROTH IRA to enjoy these short-term gains completely tax free!
The moral of the story? You have to get out there, be active, and connect. People aren’t going to knock on your door and offer you an opportunity of a lifetime. But if you’re posting to social media, creating quality content, posting in forums, and creating a brand for yourself, the right people will start to take notice.
To broaden your reach, first broaden your circle.
My first flip: Before
My first flip: After
Action
As a real estate agent, your network is your net worth. Start by identifying and engaging with online platforms where real estate conversations thrive, such as BiggerPockets.com. Commit to actively participating in discussions, sharing your unique insights, and connecting with potential mentors and investors. Each connection could be the gateway to your next big opportunity.
Question
What’s stopping you from connecting with a broader audience?
See you next week,
Matt “Roar” Gardner
Real estate investor-agent, Author of Supersonic Real Estate: Light Your Afterburner to Accelerate Your Investor-Agent Career (Coming Soon!), and keynote speaker.
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