How we did our first deal
When Ashley and I realized we needed to make our living as real estate investors, it was 2009. We were freshly married, just out of college and didn’t have two nickels to rub together. To put it bluntly, we were completely broke.
On top of not being able to find jobs that fit with our bachelor’s degrees, we had a mound of student debt looming over our heads. Constructions jobs were hit or miss. And to put food on the table, I was going door to door with a hand-me-down pressure washer trying to clean houses for $75 a pop.
Ashley and I realized quickly that banks were not going to loan money to two kids to buy investment properties when they had a bunch of debt and no W2 income. So, in order to get into the real estate world, we were going to have to find another way.
This fact didn’t stop us from looking and learning. We spent countless hours riding around looking at preforeclosures, properties for sale by owner and vacant houses. We also took classes and went to every Real Estate Investor Association (REIA) meeting we could find.
A full year later, we found ourselves attending a monthly REIA that Bill and Kim Cook hosted at their ranch in Adairsville. We were sitting around the fire pit one night when a man I’d seen at the meeting but hadn’t really spoken to approached me. He introduced himself as Mike Tarpey and asked if I wanted to be part of a deal. Without hesitation I exclaimed, “Yes.”
Tarpey laughed and said, “You haven’t even heard what I’m offering yet.”
It didn’t matter to me what he was offering. I wanted so badly to find a way in, to actually be part of a deal and be able to learn how to invest. And as long as it was ethical, I was willing to do whatever it took.
Tarpey heard that I had a background in construction and specialized in house painting. He needed his home painted and didn’t want to come out of pocket the full amount. He proposed that I paint his house at a discount in return for becoming a 50 percent partner in a Lonnie Deal he had recently acquired. As partial payment, he would show me everything I’d needed to know to do that type of deal in the future.
I’d never been so happy to paint a house in my entire life.
If you don’t know, a Lonnie Deal is where you buy a mobile home on a rented lot. You pay for it with cash, do little to no rehab on it and then offer it for sale with owner financing. And since there no institutional financing available for used mobile homes, you can buy them for cash very cheaply.
On a typical deal we’ll pay $4,000 for the home. We do no work to it and then sell it for $13,600. We’ll get a $1,000 down payment and then receive payments of $300 a month for 3.5 years. That means we should make our initial investment back in less than a year. Everything after that is pure profit.
Peter Fortunato has great saying: “Use what you have, to get what you need to get what you want.”
What I had was painting skills. What I needed was a way into the investing game and what I wanted was to do deals in real estate.
I got more than I bargained for in this deal, but in a good way. We learned how to do Lonnie Deals and Ashley and I went on to do many more of them. But the best part of this deal was the relationship that formed. Mike and I have done 30 or more deals together, and we’ve made a lot of money.
But the most valuable part of that first deal was that it led to Mike becoming one of my greatest friends. And there’s no price that can be put on that.
Robert Kiyosaki has a principle in his book, “Rich Dad Poor Dad.” He says, “Work to learn, not earn.” If you’re new to investing, I suggest you adhere to this principle. It will make all the difference in the world.
Joe and Ashley English buy houses and mobile homes in Northwest Georgia. For more information or to ask a question, go to www.cashflowwithjoe.com or call Joe at 678-986-6813.