How I Began My Investing Journey

Where it all began…

When I was young my dad got a wild hair and decided to become a real estate agent, it was only wild because not many people that we knew at all were in the real estate industry. My father had no connections with the real estate market that we are in, but he jumped in with both feet and gave it his all to get licensed. I still remember to this day the elation on his face when he passed his exam in order to become a realtor. He had put in lots of time studying and learning at a local office in our town where they taught classes. Once my dad started his career as a realtor I was young, but I was around that environment quite a bit and as I got older I was always interested in the industry. I believe that this was the thing that gave me first insight as to how powerful of a tool real estate can be.

A bit of background…

To better understand this story and my reasoning for this first transaction it is important to know a bit of the back story. It was summer of 2009, I was 19 years old. I had just wrapped up my time at a local community college and I was on to bigger and better things. I am from Alabama so naturally I wanted to attend the University of Alabama in Tuscaloosa, Alabama. I had several friends who were heading down for the fall semester in just a few short months. I then began like all other college students checking out the campus, figuring out my major, and what classes were needed in order to get the degree that I wanted. Naturally, as a college student one of the most important aspects of the college experience is where am I going to live? I didn’t have the luxury of just driving to campus and each day and living at home because my home town was about two hours drive each way so that option was off the table. So what was I going to do? Stay in a dorm? Rent a house close to campus? I was racking my brain as to what was best. As many parents of college students understand along with college students themselves, University housing whether renting or staying in a dorm IS NOT CHEAP! For some reason the thought of paying thousands of dollars a year for housing just didn’t seem right to me, so I thought why not just buy a house close to the University and rent out the other rooms to friends to reduce or all together eliminate my housing expense? You are probably thinking as I was, great idea! Well, only one problem, I was 19 years old and had no savings what so ever. I was just working a part time job making next to nothing, but I was extremely determined to make this work.

How can I afford this…

During this time in Alabama we were in the midst like most areas of the country of a housing crash, cheap houses were everywhere! In this case timing really worked out in my favor. I began fervently searching foreclosures in the area close to the University, I had my dad on the job as well searching for something, anything at a reasonable price nearby that I could purchase in order to make this whole crazy idea I had become a reality. Then we found it, a cute ranch style home just minutes from campus, it was listed as a HUD foreclosure at the whopping price of $32,000. I know most of you are thinking, wow, I wish I could find a house for that price but remember that during this time these types of houses were everywhere because most everyone was afraid to buy because of the housing downturn. I knew this fact and played it to my favor, I had my dad put in an offer on the home for $18,000! I took advantage of the fact that the home had been on the market for quite a long while and didn’t seem to have any bites on it at all. We soon got a response from HUD and they made me a counter offer, I believe to the best of my knowledge that it was around $20,000. I was elated. But, the house needed some repairs so I pressed my luck. I returned a counter offer of $18,722, I will never forget this number because within about 24 hours of that counter offer we received an email from HUD letting us know that they ACCEPTED MY OFFER! I can remember how excited I was to see that email, it was one of the most exciting times of my life. But, just one tiny problem. I HAD NO MONEY! My parents were not liquid enough to give me the money, we were in a recession after all. No matter, I was determined to find a way.

It was like a movie I was playing in my head as I walked into my first local bank. Wow I imagined them saying as I sat down across from the loan officer, here is a kid real estate prodigy! Lets get him a loan immediately! Well, the reality was far from what I had imagined. I spilled my idea and the fact that I now had my first home under contract to the loan officer proudly, then naturally they wanted to know my income, my savings, so on and so forth. But, I thought to myself, this is going to work out! I’m going to rent out the rooms to pay for the mortgage I’m going to… My dreams were quickly crushed, momentarily I might add by the loan officers comments and frankly laughter at the fact that I was asking to borrow this money during this moment in history with a part time job, no savings and no experience. I walked out of the bank feeling low with my head down, only to be told the same thing by bank after bank. The only thing I had left was my unrelenting drive to purchase this house and turn this crazy dream I had into reality.

Option B…

After many soul crushing blows from local financial institutions, I had a plan. This was my last ditch effort to pull this deal together and make it work. I picked up the phone and called my grandfather asking if I could come talk to him immediately. Like it was yesterday I remember him telling me he was mowing and would call me when he was done so I could come and talk with him, that seemed like an eternity but finally he was done and I headed to his house. I rushed to his house and quickly explained this crazy idea to him, I spoke with passion about the idea and how it was all going to work out. Ill pay you back I said, I pay you back with interest! Then, he said the words that I think most all kids dread, I was a kid after all, Let me think about it. My heart sank, but I quickly regained composure because he didn’t say flat out no after all, there was still hope! I left his house a bit later not know how this was going to end, would he say yes? would he say no? would he say I was crazy? So I went back to my parents home and waited.

A few hours after returning home, the phone rang, it was my grandfather. I quickly answered, Hey! did you have time to think about it? what do you think? I quickly said. Yes he said, I spoke with your grandmother and we are going to do this for you. I cannot begin to explain how excited I was at this moment, he briefly muzzled my excitement shortly by saying Ethan, I want you to be responsible about this, were going to set you up on a payment and… I cut him off, yes, yes! Whatever we need to do I’m happy to do it. This had now become a reality for me now and suddenly not just a place to live during college but an investment. The next day me and my grandfather met again to discuss terms and my plans for the property again in more detail this time. After a lengthy discussion I left with my check in hand and on to my next step of becoming a homeowner.

Delight turned to dismay…

The purchase of the home went without a hitch, I was officially a homeowner for the first time and the ripe bold age of 19. I quickly did the minor repairs to the home with the help of my father, and promptly moved in along with some friends who were now my roommates just in time for fall semester at the University of Alabama. Things went well for the next year, the home served its purpose well and in my opinion would have continued to do so for many more years to come. Mother nature however, she had other plans. April 27, 2011 was a disastrous day for the state of Alabama along with much the southwest parts of the United States. This day will forever be ingrained in my memory, as it was the day that the investment that I had worked so hard to attain, my first investment was destroyed. A violent EF-4 tornado ravaged the town of Tuscaloosa during the afternoon of that day many lost their lives and their property. I was fortunate enough to have only lost my property during this storm as me and my roommates were thankfully at our hometown visiting during this time. I was extremely saddened by this event but at the same time thankful that no one was at the house so no one was injured.

In Closing…

Although my first investment home was destroyed I was smart enough to have bought adequate insurance to cover my investment so no need to worry, my grandfather was paid back in full. I would also note that I know not everyone listening has a direct relative that may be able to front them the money for a purchase like this and now in hindsight I would probably say that is probably not the best way to borrower money for your first deal or any deal. Nonetheless, it is truthfully how I got started and I think the real key  is having the relentless drive to make it happen no matter the circumstances. This home was a major milestone in my career, I have went on since then to flip 4 other homes and currently have 9 units that I am a partner on for buy and hold. It has been an interesting road thus far but when people ask how I got started in real estate I jokingly say, mother nature got me started.