I Quit My W2 Job After a “Home Run” First Deal (With No Money or Experience)

0:00Tony, one of the scariest but most exciting things about real estate is your first flip. And today's guest didn't just survive his first one, he crushed it. Yeah, but the real story isn't the flip that went perfect, it's what happened after. Because our guest today, Chris Rickenbaugh, learned more from the mistakes, the setbacks, and the partner issues than he did from the first home run. Exactly, and he's only been in the game since 2024, but in that short time, he's bought 10 deals, flipped houses, raised private money, and even dabbled in midterm rentals. Today, we're diving into what he learned the hard way, and how rookies can avoid some of these same pitfalls.

0:39This is the Real Estate Rookie Podcast, and I'm Ashley Kerr. And I'm Tony J. Robinson. And with that, let's give a big warm welcome to Chris. Chris, thanks so much for joining us today, brother. Absolutely. Thank you guys for having me on. I've been a longtime listener. Chris, can you walk us through your very first flip? How did you find it? How did you raise the money? And what did this first deal look like? Yeah, that first flip back in 2024, just a little about a year and a half ago, I found it on the MLS. So I was working on trying to find expired listings, maybe some subject to opportunities.

1:11And I just was scrolling Zillow, saw this house that was in my neighborhood. It was priced kind of low. And I said, you know, that house doesn't look bad. It just needs touched up in the middle. So I called the real estate agent I was working with and said, hey, I'd like to walk this house. Let's see what we can do. So we walked it and I said, OK, well, I know this area really good. I know I could sell it at about$225. And I said, let's put an offer in on it and see where it goes. So we put an offer right at their number. It got accepted a couple of days later. And then, you know, we went into the money raising game.

1:50So that's easily the scariest part. So after about a week or two of calling around, I got set up with hard money. We were ready to go. I was, you know, kind of at the end of end of my contacts. I'm like, oh, my gosh, who who do I reach out to? So I actually texted somebody whose Airbnb I stayed at. We sat down after I forgot my remote in his apartment. And he said, you know, if you have any opportunities come up, just let me know. So I shot him a text and he said, yeah, man, let's let's sit down. Let's go and walk it. So we walked it and I had to raise$35 ,000 to be able to purchase the home. And he says, yeah, man, let's do it.

2:30So that's how we ended up purchasing the home. We found a contractor who he knew and they brought his buddy down from Connecticut, who's a general contractor up there. They knocked the house out in 12 days. So it was a home run and then it was under contract to sell within two days of being on the market. Okay. I need to start taking notes because there's like 20 things I want to ask questions already. My mind is like spinning right now. Ashley, I know you got to follow up, but Chris, I just want to, I want to make sure I understood this correctly. You said that you stayed at someone's Airbnb, someone who you didn't know, you just booked an Airbnb somewhere, forgot something inside of that Airbnb, reached out to the, like the person who was hosting that unit and they became your first private money lender.

3:15Am I understanding that sequence of events correctly? Yeah. So how we kind of got to know each other was when I was doing a live-in renovation on my personal house, because I originally bought it to be a medium-term rental. And I said, you know, I had a couple of questions about Airbnb. And he said, yeah, man, let's sit down. So pretty much went from there. We're doing the live-in renovation. I didn't have a bathroom for 10 days, stayed at his Airbnb. And that's how we got to know each other. That's an incredible story. Right. So during the whole time of you telling this story and about this deal is you just screamed confidence.

3:53You seemed very confident as to what the ARV was going to be. You seemed very confident that you could get this deal under contract and you could find the money. You didn't have any money lined up. So walk us through how did you actually become confident in analyzing a deal, knowing what the ARV was and knowing that you could go out and find funding for this deal? Yeah, it was a lot of listening to you guys, truthfully, and lots of bigger pockets because at the end of 2022, I was about to graduate college. I started reading real estate books, and then I started listening to the podcast and pretty much went from there.

4:33That's the end of that year, I bought my first house as a fixer-upper. It was livable, but needed a whole bathroom, needed flooring, needed windows. So I was listening to your podcast, and Ashley, you talked about how you create your scope of work. So that's what I did for this house. I listed everything I need done to it, room by room, and then was able to hand that to a contractor. So during the time when I was I just started a new job at a startup company and then I said, all right, went into the BiggerPockets forums. I talked to somebody about how to have the money to be able to just do the project.

5:14So we went from there. And then during that project, I knew exactly what this house was going to be, what the target was. So we were expecting about 220 to 225. And then the house that I ended up flipping was pretty much a spitting image of it. Well, Chris, we love that you listen to us on the podcast because people can listen all day long, but actually taking action and implementing. And that goes for me, too. I was on bigger stays recently. Actually, it was two months ago. And Garrett Brown gave me this advice of this one piece of software I need to try out, need to try out. And I was like, wow, yeah, that sounds really cool.

5:54Did I implement that? No, I listened to it, but I didn't do it. Well, two nights ago, I finally sat down. I did it. It literally took 10, 20 minutes to actually do this. And I am just in shock that I let the last two months go by without implementing this software. Super cheap, super easy to put together. And so, yeah, everyone can listen. But will you actually take action and try out the things that are recommended to you. So Chris, you did exactly that. Yeah, it's super scary, but the action is definitely the thing that sets you apart. Because talking to a lot of other people, I'm in another mastermind group where people are looking to do their first deal and it's really just not taking the action.

6:38Once you get in, you start taking the action, start taking the calls and start walking houses, it gets a lot less scary. And after you get through those hurdles, for me, it was the first deal. I really got to see how a lot of those pieces moved, you know, finding the houses, running numbers, raising money that it was super scary in the beginning. But then for houses, you know, two, three, four or five, it was really, you know, simple to kind of be able to move in from there because you already had everything lined up with hard money. And then it was just, you know, reaching out and networking to more people about the private money to purchase the homes.

7:14Chris, let me ask a follow-up question because I appreciate so much what you just said of the first deal set me up for the second deal, the fourth deal, the fifth deal, and so on and so forth. And Ashley and I preach that so often that the purpose of the first deal, even though you were in this case, you did have a home run of a first deal. The purpose of that first deal isn't necessarily to have that home run, but it is to give you that foundation. But if we just go back really quickly because I think the piece that I'm still caught up on or that I'm still stuck on that I think our audience might be stuck on as well is prior to this, that first deal where you raised money from the Airbnb guy, had you ever raised private capital before?

7:51No. So I was, uh, in college. So that was my first year out of college. And, uh, so I originally was looking to be in NASCAR and then do real estate on the side, you know, as a safety net. And, uh, so once I graduated college, I got a, you know, a small job in racing and kind of realized that that wasn't going to be the road I took, moved to a startup company. And then so no raising money, no capital, you know, just trying to be a good person, you know, just being completely transparent. But Chris, that's even more impressive, right? So you'd never raised capital before, but yet you still went out, you got this property that you couldn't afford to take down by yourself.

8:32how did you get past that hesitation or that fear of, well, I don't actually have the money to take this deal down? Because I think a lot of people can find the deal. I think a lot of people can just say, hey, man, this looks like it's going to work out really well. But then once they realize that they don't have the money to do it themselves, they just stop. So how did you break past that obstacle that stops so many people in their tracks? Yeah. Listening to all the podcasts and reading the books, they tell you, if you have the deal, you're going to be able to find the money. And then you just start going through your contacts.

9:04Who would have that? Who would have funds to be able to, you know, invest in the deal? You're going to get a ton of no's, but it only takes one yes to be able to raise the money and be right. And I knew if I just kept reaching out, it's going to lead me to somebody. Maybe it's not that person. But you also add in the text, it's like, hey, I have this opportunity. Would you or someone, you know, be interested with being able to raise the money, you know, at night might not be that exact person, but what we can do, or it might not be that exact person. But when in that text, you're saying, you know, if you know somebody else, that's going to be able to lead to those other opportunities, because maybe they're in real estate, maybe they know other people looking for those returns, and then they can shoot it out to you.

9:52So, you know, just being able to listen and say, all right, I have the deal. I know I can find the money. I'm going to these real estate events. I'm going to be able to find somebody. And then not having a W-2 to back you up, it kind of puts your back against the wall and say, hey, I have to figure this out. Chris, what about rejection? Because I think that's what most people are afraid of is that discomfort or that uncomfortable feeling of reaching out to someone and the idea that they might say no. What about rejection? Were you not worried about that? Not really. Kind of like I said, you know, when your back's against the wall, it's like you have to do something.

10:33So you're going to get a lot of those no's, but it's only going to lead you to a yes. It only takes one yes to be right. So, you know, it really it really wasn't the fear of rejection, you know, especially when you start doing cold calls, you know, you're going to get a hundred and twenty no's. But, you know, it only takes one yes to be able to get a deal done. Do you ever notice how every passive investment somehow turns into a very active lifestyle? Active spreadsheets, active phone calls, active stress. Here's a better question. What if you could buy brand new construction homes, 10 % below market value, in the best markets across the country without making real estate your second job?

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14:03Baseline is giving BiggerPockets listeners an exclusive$100 bonus when you sign up at baseline.com slash biggerpockets. So Chris, you kind of gave us a lot of insight into raising private money and how that looks for you. But as you've gone on to do more and more flips, what changed in the way that you actually analyze the flips now compared to when you first started? So now you have a little bit of data after doing the first one. So you're able to see, you know, what did I spend on that kitchen? Was there any electrical? Okay, I know how much windows or a deck is going to cost. So you have a little bit of data going into that next deal.

14:41And that was pretty confident. So being able to have a real estate agent who's been in the market for a long time, who's able to run those numbers for you, I felt really good about the ARVs. So I knew if I could send it to them and just for the safety net, now I know a little bit better. I was just taking their ARV and subtracting 10 or 20 ,000 saying, okay, well, this is about my base case scenario, base the worst case. And that I figured out was a little bit wrong. But buying that second deal, I said, okay, this is a really good number. We know it's going to take quite a bit of renovation to be able to get this complete.

15:20And with how fast this crew just completed this house and how quickly and efficiently they were able to move, I feel really comfortable going into the next deals. So I really didn't have any hesitation on getting the contractor in there. He's able to give me a solid quote really quick. And as long as the renovation numbers work with the purchase price, it made sense to me to be able to move forward and buy it. And Chris, during this time, you're working full time correctly? No, no. So I was full time real estate. So I left a kind of like a lower paying sales job in a startup company. And once my live-in renovation was finished, that's when I said I pulled out the money from the house and said, all right, I got six months to figure it out.

16:07That's kind of scary. Even just having that six-month runway as to really pushing yourself. But I have heard stories where people feel like they were more likely to figure it out because they had to. Even Tony, when he left his job, you're like, okay, I'm giving myself one year to figure this out. And either I make it or I break it. Tell us just a little bit about what was your plan? What role were you inserting yourself as full-time real estate investor? So what would be your roles and responsibilities day to day? And what did you actually need to do to survive past those six months? Did you have a dollar amount you had to make or a number of flips you had to do?

16:56Yeah, it was really figuring out the dollar amount because I was living relatively low. I had a house. I was house hacking at that time, running out of bedrooms. So I knew it was right around, you know, four to five thousand dollars that if I could make that every month, I would be safe. So say I do a flip and make it takes me four months from beginning to end and I make$20 ,000, that's$5 ,000 per month. I said, okay, well, if I can hit that, that sounds like a really good goal to me. But other than that, it was, I felt like I wasn't destined to become a W-2 worker. I was thinking a little bit outside the box and it just didn't work very well.

17:39I felt very nervous in a W-2 compared to being on my own and saying, hey, it's on me to figure out how to make money, how to move forward. And yes, it is very scary. But to me, I felt like I had no other options. I couldn't go back to another job leaving two jobs right in a row. So I said, all right, well, I can figure this thing out as a real estate investor and then go from there. Chris, the fact that you were doing this full time, I think puts more pressure on the success of each deal. And when we talk about renovating and flipping homes, one of the most important things is being able to accurately put a budget together and even more important, being able to stick to that budget.

18:24So what did you find as a good process? What process did you follow to allow you to have somewhat accurate budgets up front and then do your best to actually stick to those as you moved through the project? Yeah. So working with the contractor to be able to put those budgets together because they've done more renovations than me. So they're able to walk into that house. They're able to tell you, hey, this is what it costs. We've already done a deal together. I felt the connection that we had was really good. So, you know, being able to move forward and say to walk houses together and say, OK, this is how I'm analyzing these houses.

19:02So when you're going through, say it's if we need to do everything on the interior, it's going to be about forty five dollars a square foot. so being able to run quick numbers i can see a house that pretty much needs the interior redone nothing absolutely crazy you know i'm able to say okay we'll say it's a thousand square foot house 45 a square foot you know that's a 45 000 renovation now if you're adding anything exterior they say that's say if everything in the house needs to be done it's going to be about 60 to $65 ,000 a square foot or$65 a square foot. So again, a thousand dollar house, it's probably going to be between a 60 and$70 ,000 renovation.

19:44And then, you know, for bigger houses, that's all you got to multiply. So that's how we were running the numbers and being able to go from there. So I felt pretty confident walking every house with him to say, hey, this is where we're buying it at. you know, what's your cost going to be? So we were very on the dot when we would walk these houses. And then, you know, when situations come up, that's when it got really rough. And that's where the experience really hurt me because we did go over budget and we ran into unexpected permitting problems, inspection problems. So for my second deal, you know, where I thought, you know, the first one knocked it out in 12 days.

20:24We're going to be, you know, that 45 to 60 day on a much bigger project, you know, we hit that and it delayed us three months. So, you know, it was a really big learning curve. But, you know, the back against the wall, it's like, hey, I got to figure this out. We got to raise more money. We got to do more deals. So, Chris, you mentioned delays, right? And I think all of us who have done rehabs have experienced some sort of delay. Having gone through that, did that change how you underwrote your future deals? And if so, what changes did you make? Yeah. So a lot of these kind of took place at the same time.

21:00So, um, so doing my second deal, I was looking for the next one because now it's like, I got one under my belt. I was able to raise money. It's looking for that second, third and fourth deal. So, uh, going from there, it's, we had a one project going on. We were kind of in the middle of that. Then I bought my next one and then I bought another with a, with a, partner. So being able to roll into those, it's learning how the money flows. That was a big learning curve for me, because what I ended up finding from the partner is that they weren't doing things correctly, and mainly on the money side.

21:40So they were teaching me how the money flows through the project, how you can kind of survive during this time to where, hey, you have a bunch of flips going, you don't have money coming in. They're saying, okay, well, if you know you budget an extra 10 ,000, that's for you to kind of, you know, put back into you. And that's where I figured out that's wrong, you know, if you're not budgeting that correctly. So, and that's where the domino effect kind of started coming from. So doing that project with that partner, you know, I learned a lot about what they were doing and how they were doing business.

22:17And I realize, oh my gosh, like I've made a lot of mistakes here because now we have, you know, three, four, five flips going on, one or two aren't selling, we're kind of hitting roadblocks. And it makes you really take a deep look at what you've been doing for the past six months on these projects and, you know, going forward. And that's kind of what I'm cleaning up right now. So year one was a lot of getting into the game, making a lot of mistakes. So year two is a lot of you know, damage control, trying to clean up those mistakes so that we can set us up for a really good year three. And Chris, I appreciate you sharing that because I think your story echoes a lot of what Ashley and I have both experienced as we somewhat rapidly scaled up our portfolios.

23:03And for all of the rookies that are listening, when you think about scaling, there's a few different ways that you can scale. You can scale in terms of the actual scope of the project, right? Like how big of a project are you taking on? And you can scale by just continuing to do bigger scale, right? Like bigger scopes of work on the actual project. So for Chris, maybe the first one was just, hey, we're painting cabinets and swapping out fixtures. The second one, hey, we're actually redoing kitchens and bathrooms. The third one would be, hey, this is a full gut rehab. We're taking it down to the studs, right?

23:36So you can scale in terms of the scope. The next way that you can scale is by the quantity, like by the batch size. So how many deals are we doing at one time? So maybe Chris says, hey, I'm going to continue just to do these super light cosmetic jobs, but I'm going to do 10 of them at a time, right? That's another way to scale. It's just increasing the batch size. And then the other way to scale is the time in between those deals, right? Like how much time are you giving in between the deals that you're doing? And I think the challenge is that, especially as a new investor, and especially when your first deal goes so incredibly well, it can become almost addicting just to keep adding the next deal and the next deal and the next deal.

24:16And the challenge with that is that you're not giving yourself enough time to see one of the deals all the way through to take all of those learnings and then apply them to the next one. So Chris, you mentioned that you had some good learnings, but you were already in the middle of five other projects going on where it would be difficult to go back and apply those learnings. And I think that is where a little bit of patience and a slightly more measured approach as a rookie can actually be beneficial. And we're living this out in our own portfolio right now because we launched our hotel about a year, a little over a year ago, 18 months ago now.

24:53And we're still learning today. and I've been hesitant, even though I know we could raise the money, I know that we could find the deal on it. I know that we could take another one down. I've been hesitant to do that because I'm trying to make sure that I've got enough learnings from this deal that I can make sure that the next deal is a strong enough iteration. So I don't find myself in the same position all over again. So all of that to say, Chris, I appreciate you sharing that, but more importantly for our rookies that are listening, don't scale just for the sake of scaling and make sure that you're giving yourself enough time to learn from the first deal so that you can then apply it to the next deal.

25:26Now, Chris, you had mentioned that there were some, you know, mistakes that you saw in your partner and lessons learned of things not to do. Were there any red flags that looking back as to like, oh, I should have known this wouldn't be a great partnership based on these red flags? You know, I think about that a lot now. So being able to go back through, I think their mindset was more towards rentals and building equity. But it wasn't something that I really saw until we did a project together, because then you're working a lot closer. You know, they're managing the contractors. My job in that was I said, I want to see how you work, how you operate, because you've done a lot more than me.