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SHOW NOTES FOR EPISODE #021 – BUYING PROPERTIES WITH LITTLE OR NO MONEY DOWN WITH BRANDON TURNER
In this episode, Brandon Turner, author, real estate investor and VP at BiggerPockets.com, shares how he got interested in real estate investing and further discusses how real estate investors can purchase properties for little or no money down.
What Will You Learn
- How going to garage sales prepared him to negotiate his first real estate deal
- How to get daily access to the MLS without having a real estate license
- How to create a real estate lead “funnel”
- Special “personalized” marketing technique to get good qualified leads
- Why he doesn’t want to be a millionaire
- Why it’s a good idea to systematize your real estate investing processes
- How he purchased a 24-unit apartment building for almost nothing down
- What is the BRRRR Strategy and why it is the method he always uses in his real estate investing
- A new product that BiggerPockets is about to release that only Old Dawgs listeners know about!
About Our Guest
Brandon Turner
Brandon Turner is an active real estate investor and VP at BiggerPockets.com. When he’s not growing his rental portfolio or flipping houses, he’s writing books and blog posts on BiggerPockets.com, helping others learn how to find financial freedom through real estate investing, spending time with his lovely wife and/or enjoying time with his beautiful new baby girl Rosie.
More about Brandon
- Just had his first child, baby Rosie, in June
- Went from garage sale bargaining to first real estate purchase at age 21
- Asked realtor what was the cheapest house in the area and bought it
- Learned all about rehabbing as he fixed up the house
- Developed a love for real estate through his first house
- Today, he has 52 units (includes a couple of fix ‘n flips in-process)
- Excellent time manager as he continues to read a lot, write books & blogs, do flips, conduct webinars, do the BiggerPockets podcast, invest in properties, landlord, rehab properties, plus enjoy his personal life.
How he looks for properties
- Has developed a lead funnel that generates regular daily real estate leads
- Has realtor agent send him daily listings that meet his criteria
- Sends 300-500 letters per month to absentee owners (people who own properties in the area but live somewhere else)
- Sends special “handwritten” letters to every multifamily property owner (approx. 500 owners) in his county. Writes 2-3 letters per day. Letters say, “I’m another landlord in the area. I know you have an apartment complex in the area. If you’re ever interested in selling, I’d like to talk with you about it.” – Uses a special program that generates a your handwriting in a handwritten font free through http://www.myscriptfont.com. Brandon has written a blog about this at biggerpockets.com/dmletter with copy of the actual letter he sends. You can also pay to have companies like yellowletters.com do something similar but for a fee.
- He spends 30 minutes a day reviewing deals
- Has trained assistant that analyzes deals, goes through craigslist.org, realtor.com and answers incoming calls from direct mail efforts
- His goal is to systematize everything he does for his real estate investing business so that someone else could walk right in and continue doing what he does. Got the concept from the books The E-Myth and The E-Myth Revisited.
His Biggest Mistake
- Confusing an inexpensive property with a “good deal”
- Didn’t analyze his deals in the beginning
- Especially did not account for Cap-X (capital expenditures) like roofs, aging items
- Bought a duplex to fix ‘n flip. Converted it into a single family home. Took 12 months to rehab. Sat on the market for another 12 months. Ended up losing $10,000
- If he would have kept it as a duplex, with light rehab, he would have made $24,000 in two years
Your Biggest Success
- 24-unit apartment building he bought with almost no money down
- Half-vacant. Needed a ton of work.
- He did 4-5 different creative financing strategies combined – Lease option (or master lease), seller-financing, partnered with parents to get rehab money in exchange for 50% equity share, re-financed with portfolio lender
Advice for senior newbies who want to get involved in real estate investing but have no money down
- Used a hypothetical situation to illustrate a point – “If you knew you could buy a million dollar property for $1,000 but didn’t have the $1,000, wouldn’t you be able to figure out how to get the $1,000?” Most people would say “Yes!” It is the same for real estate investing as a whole! You have to believe in the deal!
- You can get partners if you offer to do all the work and they just invest to make a great return
- He recommends that you at least have some funds to act as an emergency reserve
No Money Down Tips
- If you find a property that the seller owns outright (no mortgage), they might be open to seller financing – to continue to draw income from the property without the headache of being “the landlord”
- One third of all properties in the U.S. are owned outright
“No Money Down” Evaluation Process and the B-R-R-R-R Strategy
- First, ask yourself, when considering a “no money down” deal: “Can I find an person (private lender) that will be willing to put up the money for this deal, plus rehab costs?”
- Step One: Purchase the property – Buy
- Step Two: Fix it up – Rehab
- Step Three: Find tenants to rent the property – Rent
- Step Four: After you’ve fixed up the property, re-finance the property through the bank to pay off the individual (private lender) a year later – Refinance
- Step Five: Repeat
- Brandon calls this the B-R-R-R-R Strategy
- Benefits of BRRRR
- Buy fixer-uppers that no one else wants
- Fixing it up means you won’t likely have big capital (Cap-X) expenditures later on
- You get to know the property very well in the process
- Get better tenants because it becomes a nicer property
- Boost equity and value of the property
Little or No Money Down – Lease Option
- A deal he is doing now:
- Duplex
- On MLS
- For sale for $150,000
- Expired – off-market
- Is offering seller a lease option
- He will rent duplex from seller
- Will pay rent equal to the mortgage payment directly to the mortgage company
- He has the option to buy the property within a certain number of years
- Will put no money down because he’s renting
Some key differences between a Lease Option and Master Lease
- Lease option usually for houses
- Master lease is for apartments
- Lease option – seller pays taxes and insurance
- Master lease – renter pays taxes and insurance
Why He Only Buys Local
- He knows his area very well
- Because it works for him
- Buying out-of-state requires much more work
His Long Term Goal
- 100 units – $100,000 a month in income
- Not going for more units right now because he is not sure he wants the lifestyle required to get to and sustain that goal
- Read a book called Lifeonaire that made him think about quality-of-life versus a slave to your lifestyle
- Bill referenced Susan Lassiter-Lyons interview on episode #009 (Finding the Money for Your Real Estate Deals – Part 2) where she talks about setting goals that allow you to enjoy life not be a slave to your goals
- If he had 100 units that gave him $100 per month/per unit he would receive $10,000 per month in income
- Real estate investing is one of the best ways to reach these goals
Rap-It-Up
- Favorite real estate book: The Unofficial Guide to Real Estate Investing by Martin Stone & Spencer Strauss
- Favorite Bigger Pockets real estate books: The Book on Rental Property Investing & The Book on Managing Rental Properties by Brandon & Heather Turner
- Favorite business book: The One Thing by Gary Keller & Jay Papasan
- Most valuable web site for success: Realtor.com and BiggerPockets.com
- Favorite apps: My Fitness Pal, Periscope
- If you had to start all over, knowing what you know, and you only had $1,000, what would you do to launch your real estate investing business? He would find someone who’s already successful and doing real estate investing in his area and say “If I can find you an amazing deal in our area, will you partner with me on it?” When he says “yes,” then he would work with him until he could build up his portfolio again.
EXCLUSIVE TO THE OLD DAWG’S REI NETWORK — NEWS ITEM!!!
- New “Lead Manager” program to be released by BiggerPockets.com in the near future that will allow you to:
- Track all your new deal leads
- Can input to your phone
- Track the leads through your direct mail funnel, from conception to phone contact to analysis to offer to close
- Systematized by how you run your business
- Kinda like a CRM
- Coming out soon!!!
How People Can Reach Brandon
- Always on BiggerPockets.com
- Social media: Instagram, Facebook & Twitter
- Personal website: BrandonTurner.me
Until our next podcast, keep moving forward and God bless!
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