I love telling people that I have been a Brandon Turner copycat when it comes to my real estate investing career. While our backgrounds in finding real estate are a bit different, our stories are quite similar because I followed what Brandon coined the “stack method.”
The stack method is self-explanatory: First, you buy one property, then two, four, six, and eight more, but you start small and scale up gradually over time. In the hopes that you can avoid (or at least laugh at) some of the mistakes I made, here is how I utilized the stack method and my biggest failures along the way.
Property 1: SFR: Too Cheap to Pay Rent, so a Live-In-Flip
My first purchase was driven by a mix of a scarcity mindset and a desire to be frugal. I found a promising house in a solid neighborhood, but it was priced way above what I was willing to pay. Luckily, that same house eventually went up for auction online, and after several clicks, unsure of what I was doing and scared to death, I ended up the winning bidder.
Little did I know that being a homeowner trumped the higher investor bids. Plus, I was able to use conventional financing, where typically cash is required at auctions.
During the renovation process, I took on tasks like ripping up old pink carpets and attempting to sand the hardwood floors myself. It turned out to be a tedious, frustrating experience. I also made the mistake of renovating the kitchen and taking down a load-bearing wall while still living on the property. To top it all off, I decided to redo the roof without permits, only to discover a constant drip into the screened porch when it rained.
So, what are the two morals of this story?
- If you haven’t done something before (AKA buying a house through an online auction), talk to someone who has done it before.
- Doing everything yourself is not the best approach. It is mentally and physically exhausting.
Property 2: Two-Unit and Vacant Lot: Dead Broke to Developer