How I got started…
Born September 10th, 1982 in Tashkent, Uzbekistan. Immigrated with my family to United States in 1994 settling in Sacramento at the age of 12. Have always been into technology and computers so naturally I started making some money by doing tech support for people and businesses. I was also learning to build websites and do some programming.
Straight out of highshool back in 2000 I got salaried position at Sevant.com. They were trying to become a Geek-Squad type of company where they send out techs to your home to help with your computer. I was the lead tech making 30k/yr. Not bad for that time location (Sacramento) and being only 18.
I got my first media exposure at this company. I appeared on Good Day Sacramento several times with Doug Brauner to do a tech segment and answer live tech support questions. This was part of promoting the company’s services. Too bad the company went out of business about a year later.
After that, in 2001 I tried to do some consulting and freelance website design work. I build my own simple Content Management System (CMS) from scratch in PHP/MySQL to empower my clients to update their own websites. I coupled that with my own hosting service and got my first taste of residual income. I figured once I outsouce the whole operation that residual income would become passive income. I was on track!
Unfortunately, the hosting / website design business wasn’t taking off like I hoped and I was getting into debt. My problem is I was so fascinated with building my CMS that I neglected marketing and wasn’t bringing in any new customers. Basically my lack of business experience showed. I knew it was time to go back to a W2 job.
I got a $35k/yr job at S.M.A.R.T. Association doing web dev work back in 2002. It allowed my to qualify to buy my first piece of real estate. A 100k condo that needed some light rehab.
The agent I used showed me how to structure a 5K cash-back at close for repairs. So I think the purchase price was 105 or something like that. I used all of the money for repairs (carpet, paint, new appliances, etc).
Believe it or not the ENTIRE transaction was as clean as they come. Used a 100% financing government-backed first-time-buyer loan. Cashback was fully disclosed to all parties and lenders were OK with that stuff back in the day.
I sold the condo a year later after trying to rent it out the last 2 months because I quit my job and my business website design business wasn’t taking off like I thought. I made about $30-35K profit. Mostly due to the hot CA market.
The profit was used to pay down some of my debt, get a new vehicle and put into savings for the next venture.
After selling the condo I took a mini vacation for about 6 months to figure out what I’m going to do next. That’s when I started reading more RE investing books to see how I can do this again. Around this time I met my wife and we got married about a year later in 2004. (Before I got married I had a short stint at Res-Com Environmental doing some web work. I think that was a 30k/yr W2. I was still doing the web business on the side.)
Then came the 50K/year programmer job was at Pride Industries. I got that job shortly after I got married because my web business wasn’t going anywhere and we were back in debt. The money from the condo sale ran out because we needed money for the wedding and we kind of lived without any income for 6 months (in Lake Tahoe!) after getting married. I thought I would kick my web business in high-gear so we can live off that but that never happened like I wanted.
The Pride Industries W2 job was good because it got us back on our feet but we were still carrying 15-20K or so debt. Part of it was a time-share thingy I bought into impulsively. I think it was like 10K with $250/month payments but we weren’t using it that much.
Then we saw a late night infomercial by Russ Whitney about how “you TOO can be rich in real estate investing”. So we went to the “free” one-night seminar where they sold us a weekend “bootcamp” at which they sold us a package of “advanced bootcamps” and next we know we’re another $15k in debt. So about 30K of debt at this point.
As you can see I was VERY motivated to succeed in real estate investing to wipe off our debt. Like I said before, buying real estate investing education on credit cards is not always smart because it puts too much pressure on you to perform and you make stupid mistakes like I did.
So off I went buying houses, starting with October 2005 Calla Way house which I should have just put under contract and “wholesaled” to another investor for a quick 5-10K assignment fee without actually buying it. That’s how they told us to start out.
But what do I do? I TRY to wholesale it but nobody was buying it from me because I had it under contract for too high of a price and the market was already starting to adjust so everybody was cautions.
So I think, hey, I have decent credit, maybe I can buy it myself and do the flip. So I call up a mortgage broker, tell them what I’m trying to do and they put me into a 100% financing sub-prime loan with high interest rate but no pre-payment penalty. I was cool with that since I’m just trying to flip and only will be holding it for a couple of months.
I didn’t know anything about stated income or any of that stuff, the loan app was filled out for me. I didn’t have any other real estate so they said I would be buying this house as a “primary residence”. I glanced at the app and signed it. I trusted my broker(s) to take care of me.
And they (mortgage brokers) DID take care of me in some ways because I don’t THINK they overcharged me on the fees or anything. But I feel they didn’t properly advise me about the dangers of using stated income loans, calling investment properties “owner occupied” and doing cash-back at close “under the table”.
Yeah I should have also been thinking for myself, but I was too desperate to get these deals done to get out of the bad Burdett property, pay off my real estate investing education debt and actually become a successful investor (to be successful at SOME kind of business, so far all my other business ventures failed, besides web dev I already tried a Vending business and some MLM type stuff).
While yes, I did make 30K on this first flip and wiped off all our debt, it wasn’t a great deal. I ended up buying Burdett Way from the buyer in order to make the deal work. Burdett was an even worse deal and need a lot of work.
I was acting out of desperation because I got the 30K as cash-back-at-close on the Calla Way deal and I was stressing out to try to sell it for what I bought it to realize the cash-back profit.
Otherwise the cash-back is really just a loan against the quity in that house (i bought it a little under market). I also didn’t want to make payments on Calla Way because that would put me back into debt.
Nevertheless, I felt successful because I wiped off all the debt and we were back to square one. My credit score went up because the only thing that was keeping down were the maxed out credit cards.
But now I have this Burdett property that needed $10K+ repairs and I knew I couldn’t sell it but only try to lease it or lease option it. I tried that route but couldn’t find a tenant or a tenant buyer to cover my mortgage. So I still leased it out but I was loosing over $1,000/month on it. Keep in mind I’m back to square one as far as debt goes but I also dont have any money saved up!
But I was already too deep (I thought). To do the Burdett repairs I borrowed 10K from CashCall (those guys are quick!). And I had to make a payment or two before putting tenants in there and I would be running a grand negative every month.So I felt like I was screwed unless I do more deals.
And the only way I knew how to do deal at that time was find under-valued properties, buy them with 100% financing, take some or all of the equity at the purchase, use the money to do the repairs (if needed), make a few payments and resell it, and HOPEFULLY have money left over to keep as profit.
So I went into “massive focused action” mode looking for any properties I can find across the United States. I didn’t care that it wasn’t local. I figured that would be a good reason to go and build a team in a new area, especially in markets that were still hot (since CA was cooling down quick).
And since I would be “getting paid” upon purchase I figured didn’t need to worry about having no savings to do this business. Just flying it by the seat of my pants, basically. Being an optimist I figured it will all turn out Ok and the adventure spirit in me couldn’t wait to start flying around the country “doing deals”.
So I went only to these “We Buy Houses” websites (similar to Duane’s) and start buying leads of motivated sellers. The sellers fill out a form about their house, loan, asking price, etc and the information was being sold to “investors” like me.
Some places charge several hundred dollars a month and you get exclusive leads for the entire county. Other places let you buy individual leads for like $25. I even found a place that gives you UNLIMITED leads for $40/month for the entire STATE!
I was also working with some real estate agents to help me find good deals. But my favorite method was the internet leads because I am dealing directly with the seller and we can do creative stuff like cash-back at close and other things that I learned in seminars, investment clubs and other real estate professionals.
At this point I decided to quit my 50K/year job at Pride Industries and get into real estate investing full time. This is shortly after I bought Burdett, sometimes in January 2006.
The rest you already know about from this blog. I think there are a few smaller pieces of the story I haven’t told, like the New Mexico property (Sonora Ave) that I successfully flipped by doing my own auction. (The 5 Day Sale style.)
If I think of anything else I will add it.
July 25th, 2007 at 1:03 am