We Bought Our First Rentals with Almost No Money (Here’s How We Did It)

0:00Tony:Today, we are talking about our very first deals. Tony and I are going to break down how we implemented action as rookie investors.

0:09Ashley:That's right. Now, both of our first deals happened a while ago, but there's still lessons to be learned about how we found them, how we finance them, the lessons that we learned. And the goal is that you guys can take our first deals and use it as motivation to get your first deal.

0:27Tony:This is the Real Estate Rookie Podcast. I'm Ashley Kerr.

0:30Ashley:And I'm Tony J. Robinson. And with that, let's take a trip down memory lane and get into the stories of how Ashley and I both got started. So there's two things we'll talk about here. We'll talk about prior to close, and then we'll talk about post-close, what happened after that. Okay. So the first thing we want to talk about is market selection. So drum roll, Ash, how did you choose your first market?

0:53Tony:I was a property manager in a market. And so I decided to invest in that market because I was already managing properties there. I knew what I could rent them out for. I also had gone to high school in that town. So I knew the streets. I knew the area. And that made me very comfortable. I have to be completely honest. I didn't even know about out-of-state investing or even think about another market. I just, this was the one that I knew. And I just thought if I'm going to do this, this is the only place possible in the world.

1:26Ashley:Yeah. It was a lot different, right? I mean, so you, you, you essentially invested in your backyard. Um, I went into a market I, I really didn't know much about, but I'm, I'm based in Southern California outside of Los Angeles. And, uh, my mom, uh, after she retired, she moved to Shreveport, Louisiana. Um, my stepdad had family there. They ended up moving closer to, to be with his family for a short period of time. And when they moved there, they ended up buying a home and renovating it. And she kind of walked through the numbers. I'm like, man, this seems like a really good place to buy real estate.

2:02Ashley:And again, I'd never heard of it before. But because I had a connection to that market, that was my initial introduction was seeing what my mom and my stepdad did when they moved there, which made it a lot easier for me to build some confidence. Um, so once we both chose our market, as you in your backyard, me, you know, 3000 miles away, how did you go about building your team in that market? And who did you kind of start adding to that team first? The first thing I did was I looked at listings and I found one listing.

2:33Tony:It was a smaller single family home. And I thought this is little, it's perfect. It's, you know, I think a manageable amount of money. And I went ahead and I contacted the listing agent. And so I called the agent to set up a showing. And on the phone call, she told me that this property actually is in a flood zone and there's issues with the foundation. Do I still want to see it? And I said, yes. And I realized as I hung up, like, no, actually, I'm scared of this project. I don't want to do it. And I just never went to the showing. And I am so sorry that I wasted this person's time, but I was afraid of confrontation and calling back and saying that I did not.

3:18Okay.

3:19Tony:So that was my first chance of building a team member of my agent. And then after that, I ended up contacting a friend of my mom's who had been a family friend and reaching out to her. So my agent was my very first contact. My second contact I didn't use for the first deal, but working as a property manager for another investor, I did a lot of the financing for him on his deal. So I had developed a relationship with a local lender doing his deals because I was the one sending all the information back and forth. So I had already built that rapport. So an agent and a lender were my first really big teammates, I guess.

3:59Ashley:For me, it was the lender first. And again, that came from the introduction from my mom because it was a lender that she had used. And the lender then introduced me to my agent. My agent and my lender both recommended me to the same contractor. and then I did a little bit of homework myself to find a property manager in that market. But the first domino to fall for me was the lender. And because they were local, they had a really good finger on the pulse of who else I should be talking to. And I think that's also the benefit of working with small local regional banks is that if I would have walked into the local Bank of America branch, maybe the guy or gal working in that office knows all the agents and stuff.

4:44Ashley:but it's like the local credit union or small bank, they tend to know because they're truly a part of that community. And working with investors, they tend to know maybe a little bit more. So for me, it was lender first and then everyone else. Now, luckily for you guys, everyone that's listening, now BP has the agent finder and lender finder. So virtually most major markets across the country, you can just plug in your city and BP will connect you with tons of investor-friendly agents and lenders to help shortcut this process for you.

5:13Tony:So next, let's kind of move into our buy box. So Tony, you probably had a spreadsheet with the exact type of home you were looking for and the type of siding and everything like that. And me, I had no buy box. I had no idea what I wanted to go after. I just knew like a small property, a small single family or like a duplex or a triplex maybe. But that was really all my buy boxes, small multifamily or single family and in that area, that market.

5:48Ashley:But even that, Ashley, I mean, that's a bit of a buy box to start with. Like how did you land on that as your first buy box?

5:53Tony:I just didn't think that I could take down anything bigger than that. And I honestly didn't know about any other kind of investment strategy. Like, I didn't think of self storage or think of campgrounds or think of short term rentals even. So really, it was just that I was clueless and thought this is the only way to invest in real estate, honestly.

6:18Ashley:what's the saying um ignorance is bliss right you know it's like hey you know what you know um for me honestly i mean i at the end i definitely did have a pretty tight buy box but when i first started it was pretty open um but my lender did give me some uh very clear guidelines on what i needed to do in order to qualify for the loan and what I needed was a property where the after repair value, um, or really I should look at the other way where the purchase price and the construction costs were no more than I believe it was like 72.5%. It was like a very specific number, 72.5 % of the after repair value.

6:59Ashley:So that was my initial guard where I was like, I don't know if it really matters what I buy. I just got to make sure that my purchase price and my rehab are no more than 72.5 % of the ARV. Um, and then in working with my agent, she was the one that started to give me more guidance on like, okay, you know, maybe don't go in this area because my plan was to bury this property, turn it into a rental. Talking with my agent, talking with the property manager that I wanted to hire, they kind of guided me toward, hey, here's the type of property that maybe makes the most sense given the strategy that you're trying to execute.

7:28Ashley:And from that, I was able to start analyzing different deals and say, no, I don't really like this spot. Or hey, then maybe they're a little harder pencil out here. And I landed on, I want a three bedroom 1950 ish build, uh, in the seven 1105 or seven 1104 zip code, right? So I had narrowed it down from the whole city down to two zip codes within that city. And I ended up finding a three bedroom, I believe it was built in like maybe 1958 or something like that, uh, in the zip code that I was looking for. But it came from getting insights from my lender, from my agent, from my PM. And they kind of guided me toward what my buy box should actually look like in that market.

8:03Tony:Yeah, I think a big thing is to just show like Tony and I weren't perfect with our buy box. We just took action. If you're somebody listening that's in analysis paralysis and feel like you don't know everything, yeah, you probably don't know everything and neither did we. And we took action and we made it out okay. We survived that first deal. So I think as we go through our first deal stories, like I may not have a lot of like great advice or like really cool or unique things I did because I, like Tony said, I just was ignorant and didn't know any better. So I, but I think the real motivation here should be that you can do this and you don't need to know everything.

8:48Tony:So Tony, what's our next thing after building up our team.

8:54Ashley:How do we find the deal? So Ash, back to you, how did you find this first deal?

8:58Tony:The good old MLS. And I sent it to my mom's friend and I said, I'd like to go see this. And I went and walked to the property. It was a duplex. And I, after seeing it, I decided, okay, I'm going to put together an offer. I honestly can't remember what it was listed at, if I offered lower or higher right at, but it was like pretty close to what their asking price was. It ended up being like 72 ,000 or 74 ,000.

9:26Ashley:Same for me, right off the MLS. And I was working with an agent and she kind of had me on her drip and I can't remember if I found it or if she found it first, but I do remember, I believe it was listed at like$150 ,000. And I was like, hey, I like this one. Here's my offer. And I remember her saying, hey, we should start lower. I remember that specifically. I can't remember how off I was. She was like, hey, just come in at 100. And they ended up accepting that offer at the lower number that she suggested to me. So same, right off the MLS, there wasn't really a whole heck of a lot of negotiation on the deal because it penciled for me.

10:01Ashley:And yeah, we moved forward from there.

10:04Tony:Tony, what month and year was this?

10:06Ashley:This would have been – we went under contract, I believe, in September of 2018 because I remember closing. It was like right before Halloween of 2018. So it was like mid-October of 2018.

10:19Tony:And mine was September 2013, I think. 2013 or 2014, maybe. I can't remember which year, but one of those. Yeah, so definitely very different markets, very different times. But still the same principles apply. We didn't know everything. We stuck to, you know, figured it out along the way as we went. and there was things we researched, things we studied, things we did that made us come out of this alive and successful. We have to take a quick break here, but when we come back, we're going to find out more about our first deals.

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12:16Tony:When you buy your first rental property, there's usually a moment right before you pull the trigger where your brain starts spiraling a little. What if I'm making a mistake? What if I can't figure this out? What if this whole thing becomes way more complicated than I expected? Honestly, building any business feels like that at first. And for a lot of investors, that next step is creating a brand, a website, or even a business around what they're building. And I've learned this myself. Whether it's real estate, building a brand, launching a side business, or creating something online, the hardest part is usually just getting started before you feel fully ready.

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13:31Tony:Shopify also has AI tools that help write product descriptions, page headlines, and even improve product photography. And instead of juggling five different platforms, Shopify puts everything in one place from payments to inventory to analytics. Plus Shopify helps you market your business with easy email and social media campaigns. So you can actually reach customers. It's time to turn those what ifs into with Shopify today. Sign up for your$1 per month trial today at shopify.com slash rookie. Go to shopify.com slash rookie. That's shopify.com slash rookie. Okay, welcome back. So Tony and I are going through our first deals and we went and walked the property and made our offers.

14:18Tony:So now we're going through the due diligence phase. Tony, I did an inspection on my first property. Did you do an inspection?

14:27Ashley:Absolutely, 1 ,000%. And I feel that every rookie should do the same thing. It's like 200, 300 bucks.

14:33Tony:Especially now at the market, you can. It was really hard to do a couple of years ago, but now you can add an inspection. I just put an offer in on a property yesterday. And we usually, when I'm doing an offer, I'm taking out the inspection, like especially if it's a big rehab and I already know everything I need to do and it's going to cost a lot. But I also like usually say that I will like clean out the house so you can like leave whatever you want. And I took that out of the offer. I'm like, you know what? I don't need to add that in anymore.

15:05Ashley:And that's the benefit of the market that we're in right now. But obviously your offer is going to kind of flow with where we are in the market cycle, right? and sometimes are more competitive and other times are maybe not as. I did do a full inspection and we didn't get to the financing part. We'll touch on the financing in a little bit. But my financing did have this piece where they were funding the rehab as well. And as part of that, they wanted a full scope of work before they would actually fund the loan. So I had to get from a general contractor a full scope of work, the entire bid. And then that was part of my due diligence period as well, was having not only the inspection, but also I believe I had two general contractors go walk the property, give me their scopes of work along with their bids to give me a full sense of what needed to be done.

15:51Tony:With my inspection, I got the inspector referred to me by my agent and I stayed there the whole time to like see what he was doing and learn. And then I just remember afterwards giving me this binder with pages and it was just like, here's the roof. And literally it like wrote out like here's what we look for on the roof like on the sheet template so he was literally going through and filling out templates and following it list by list so after that I actually didn't use inspectors for a while because I literally would take that binder and I would go through the property with my handyman and be like okay let's go through and I you know I was such a you know savvy investor trying to save so much money that I was like I'm not paying $400 for an inspection.

16:40Tony:I'm going to do this myself. And it paid off in the long run. Like I learned a lot and things like that. Yeah. There's some things that definitely got missed. And I had an inspection on my lake house a couple of years ago and just seeing the difference of like, even just like technology and like different things that they have to do an inspection. I'm like, okay, this is way worth the$500 now or whatever it costs. But we ended up getting a couple things that needed to be replaced. Like the furnace was no longer working in the upstairs unit. So we actually got a quote to do one of the Mitsubishi split units in there.

17:19Tony:So the tenant could have AC also. And there was a couple other like little electric things and stuff like that. And I think it ended up being around like$5 ,000 of repairs that needed to be made on the property.