Now real estate is getting fun
The first few deals are hard. You have to grind it out. Once you do, they start to build on each other.
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I’ve always found real estate fun, but now it’s getting real fun.
In the last two editions of The Leonard Letter, I shared how I got my last rental property for $0 down and technically got two rental properties for free. In this newsletter, we’re going to continue looking at these deals and discuss what I’m learning from them.
I said it before, and I’ll say it again — The first few deals are hard. You have to grind it out. You have to get creative. Once you do, they start to build on each other.
Ryan, my business partner, and I grinded it out. We found ways to make it happen. Now, we’re really starting to see the fruits of our labor.
When we bought the second deal, we hadn’t connected all these dots, we were just trying to buy more good deals. Now that I’ve spent some time reflecting, I’m learning a ton and realizing just how much the first few deals build on each other.
We walked through how the first two rental deals were essentially “free”. Now, let’s talk about how we’re going to leverage these two properties to continue to grow our portfolio.
The first property we bought was for $65,000 and we put about $14,000 down. Two years later, we owe about $49,000-$50,000 on the mortgage or so. However, the property is worth about $85,000-$95,000. I’d say conservatively $85,000, more optimistically $95,000.
If we refinance and the appraisal came in at $85,000, we’d be able to take about $19,750 in cash-out (say $20,000 for easy round numbers).
If the appraisal came in at $95,000, we’d be able to take out about $28,250 in cash (say $30,000 for easy round numbers).
Using the $85,000 appraisal situation first — if we bought rentals that were move-in ready with no renovations, meaning no BRRRR, we’d be able to buy 1-2 rentals with the $20,000 we receive in cash out.
Using the $95,000 appraisal — if we bought rentals that were move-in ready with no renovations, meaning no BRRRR, we’d be able to buy 2-3 rentals with the $30,000 we receive in cash out.
That’s assuming they’re move-in ready. What if we found deals we could do light BRRRR deals on? Using just the $20,000-$30,000 cash out, we’d be able to buy nearly an infinite number of deals if we can keep getting $0 down deals, or maybe 4-6 deals if we get only have to leave about $5,000 in each deal.
That’s all without reaching into our pockets AT ALL. That’s without us putting a single dollar of our own money into these deals.
We could buy 4-6 (or infinite) more deals without using any more of our own money.
Remember, that’s only starting with one rental property, then adding a second. That isn’t 100’s of units. That’s TWO single-family houses for less than $75,000 each.
Then, as we acquire more, we can repeat the same process. In 1-2 years, we’ll be able to use the equity from the second rental property to do the same thing. We can also use the cash flow we’re receiving from these rentals as well.
This is how real estate is starting to become really fun. It started with one small rental property, then a second, and now it’s all building on itself.
As we end this edition of the newsletter, I want to remind you of the takeaways from these deals we’ve been discussing:
People doing these types of deals aren’t “special” and it isn’t a scam. Trust me, I used to think it was. It’s not, and it’s possible for you too.
Deals are out there, even on the MLS. Every deal I’ve bought, and continue to buy, has been directly off the MLS. Everyone else has the same access to these deals I have.
I don’t try to time the market anymore. If I find a good deal, I buy it, and I will continue to do so.
All the best,
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