How creative financing can help you buy your first home.
Interview 5 in this series is with Micki McNie. Micki has a great and unusual story about her journey into real estate. Most people I have interviewed started years into their careers, wanted out of the rat race, and wished they had started sooner. Micki on the other hand started with her first home, HER FIRST HOME. Micki told me, “ I became self-educated, read Rich Dad Poor Dad, and thought to myself that sounds like a good idea, I want to be a person who does that.” And that is exactly what she did.
It is never too late to start your journey. Real estate investing is an awesome investment that allows you to become financially free and retire early. It is not a get rich quick scheme and it is not easy to do. Real estate investing takes time, flexibility, and ambition to make it work well. The sooner you get started, the easier it will be and the better off you will be later in life.
What are your long-term investing goals?
I want my passive income to cover my basic living expenses, own my home, and allow me to continue my pleasure pursuits. I can then free up my head space and think creatively about what I truly want to do. I want to help my family, feel taken care of, and be generous to the people that I care about.
How did you get involved in real estate investing?
I was in a position where I no longer wanted to rent but I didn’t have enough money to get funding for a house at the time. I knew a friend who had money sitting in the back, not making very much in interest so I asked him if he would buy the house for me. The terms were that I would refinance it after a year and he agreed. He privately financed my first purchase with creative financing, something I didn’t even know about at that time. I just was trying to meet my own goals. Once I was doing really well in my career, getting out of debt, and saving money, I then had to figure out what was next for me. For me, the next step was to buy a second property. I found a studio which I loved and decided I wanted to live there. Knowing I wanted to keep both properties, I figured out a way to leverage my first property to buy the second one. I bought the studio and it was kind of scary for me, knowing that both places were my responsibility. It worked out really well though, I was able to AirBnB my studio suite for the amount of money it would take to pay both mortgages. My second property cash flowed to the point where real estate was covering all of my living expenses and that was great place to be.
How did you start becoming a private money lender?
I started with passive investing, my friends and I invested in a syndication together. Together we invested the 50k minimum investment so that we get our foot in the door. It was the first syndication for my friends as well so it was a great opportunity for us to invest in a syndication for a smaller amount. Once I started to save more capital, I moved into starting my own projects and private lending. I started my own flipping projects and I had taken private money for those renovation projects. After a few of those, I decided that I wanted to be on the other side of the agreement. I started attending meetups, talking and meeting with people, and joining in investment clubs. This is where I met people who needed money. People who need private money lenders are willing to pay ridiculous returns because they need the project more than the people lending need the money. I wanted the 20% return over 6 months, I couldn’t get those returns in other investments.
How many deals have you passively invested in and what has been your experience thus far?
I have passively invested in 6 deals and the deals ranged from lending money to a friend to flipping a house. People want to think that they thought about all the risks, but something can always come up. Know who you are going into business with and be very clear about how you operate. Mare sure you know what your expectations are and make sure your partner(s) are on the same page as you. For me, if I put together an agreement, I fully intend to keep my responsibilities. When you tell someone, you are looking out for your investors, you have to believe it and live that.
When you are getting to know someone before going into business with them, there are a lot of awkward conversations you need to have. If you cannot have those conversations at that point, then you won’t be able to have them effectively in the future. I now always ask, “what is your relationship with money?” If the person cannot answer, I cannot do business with them. How you answer determines how the person treats their money and how they treat other people’s money. Always remember that at the end of the day if losing the money will put you out on the street, you shouldn’t be investing.
What were some of your challenges in the beginning?
Fear of pulling the trigger, for me that is the fear of not being knowledgeable enough to make an informed decision on a good deal. What I did to combat that was educate myself. Aside from reading and listening to podcasts, I took myself on a driving tour, I drove out to the Midwest and all I did was meet up with other BiggerPocket Members. We talked about what they were doing in real estate and walked through their neighborhood and discussed their properties and strategies. For me, walking through the neighborhood was so crucial to understand what was happening. I was learning how much it would cost to flip a house in that area. I could get the vibe of what was happening in that area and I knew what different repairs would cost. That helped a lot and that started the foundation of working in a partnership. Someone I met while doing this, sent me a deal months later, and I had the confidence to buy it because I knew that area.
What was the greatest lesson you learned while investing in real estate?
My personal victory, knowing I am not a victim of my circumstances. I don’t have to trade my time for someone else to pay me a wage that I don’t think is satisfactory. I can go out and make my own money, meet my own needs, and go beyond that as well. The power of knowing you can take are of yourself and be in charge of your financial situation.
What bit of advice do you have for newbies getting into real state investing?
Don’t ever say I can’t, I can’t do or this I can’t do that… especially because you don’t have money. The thing to do is to ask yourself, where do I start? Some questions to ask yourself to figure that out are: How much money do I have, what is my comfort level, what do I currently know, and what do I need to learn? All good questions to start from and all based off of client feedback that I have received. Getting creative is the greatest way to start in real estate. You CAN do this, tell yourself that. At the very least, set up a Redfin alert in your market and watch how it fluctuates. You are building the knowledge to notice opportunities. There is always a place to start from and it’s just finding out what works best for you.
