Lex Levinrad has been investing in real estate since 2003, and has purchased, rehabbed, wholesaled, fixed, flipped and rented over 1,000 single family homes. Lex with his team at Lex Real Estate Group, buy, wholesale, fix and flip around 15 to 20 houses a month. Lex has been a landlord for 18 years and manages a large portfolio of single family and multi family rental properties in multiple Cities and Counties.
Lex is the founder and CEO of the Distressed Real Estate Institute™, which trains new real estate investors how to buy, rent, wholesale, and fix and flip properties. The Distressed Real Estate Institute™ specializes in teaching new investors how to invest in foreclosures, short sales, bank owned properties and how to buy homes directly from motivated sellers. Lex has trained thousands of students from all over the world how to make money in real estate by wholesaling, fixing, flipping and buying and holding real estate with the Distressed Real Estate Institute™ Training and Coaching Programs. Over 5,000 students have successfully completed our Real Estate Bird Dog Partnership Program Training.
Lex is an internationally recognized motivational and real estate speaker, and has shared the stage with some of the world’s biggest speakers. He has authored 7 books about investing in real estate including best sellers “Millions in Real Estate with No Cash and No Credit”, and “Wholesaling Bank Owned Properties”. Lex has been featured on the front page of both the Miami Herald and the Sun Sentinel, and has also been featured on Fox News Radio, ABC, CBS, NBC, The Huffington Post, The Real Deal, Mortgage Daily News, Yahoo Real Estate, Real Estate Professional Magazine, and Real Estate Wealth Magazine. Lex writes articles about real estate investing for many real estate magazines, online publications and real estate websites.
Lex is the host of the popular “Investing in Real Estate with Lex Levinrad” podcast which has more than 3.5 million downloads. Lex has been interviewed on many other real estate radio shows including Fox News Radio and the Financial Survival Network. Lex is also the founder of the Distressed Real Estate Investors Association™ which is one of the largest real estate investment clubs in the U.S. with over 10,000 online members. Lex is a licensed Realtor® with Charles Rutenberg Realty. Lex lives with his family in Boca Raton, Florida.
MY STORY OF HOW I GOT STARTED INVESTING IN REAL ESTATE
I have purchased and sold more than $100 million dollars’ worth of single family homes. That might sound impressive, but once upon a time I was a new real estate investor like you, sitting in a real estate seminar taking notes from the “guru” in the front of the room. I share my story with you not to brag, but to impress upon you what is possible with real estate, and how investing in real estate may change your life. Thousands of my student’s lives have been changed, since attending my real estate training programs. I have personally trained over 6,000 students. Many of these students have gone on to become way more successful than I could have ever imagined. When I first started teaching others how to invest in real estate, I never realized the extent of the impact that I would be having on other people’s lives and their financial situation. I was (and still am), very lucky to have found my true calling, my purpose, and what I was meant to do with my life. My purpose is to effectuate change in other people’s lives. And I take that very seriously.
I have multiple students that are now multi millionaire’s that have net worth’s of more than 5 million dollars. I have hundreds of students that have added at least $500,000 or more to their net worth since attending my real estate training programs. And many of my students are now full time wholesalers and real estate investors who have quit their jobs to focus on investing in real estate and flipping houses for a living. Some of my students have gone on to become successful home builders building hundreds of new homes a year (and becoming multi millionaires in the process). One of my students makes over $2 million dollars a year wholesaling houses. And quite a few of my students are now real estate coaches themselves. Real Estate can make you very wealthy. Real Estate can change your life. When you are investing in real estate, anything is possible. So keep that in mind as you read about my story on how I got started below.
When I first started out, most of the houses that I purchased were fixer upper homes in need of major repair. Many were hurricane damaged houses from Hurricane Frances. Many of these houses cost me less than $50,000 to purchase. I have paid as little as $4,000 for a Single Family 3 bedroom 1 bathroom home that was hurricane damaged. I purchased many houses for $25,000 to $35,000, repaired them and kept them as rentals. Most of the houses that I have purchased, fixed, rented and flipped required a lot of repairs to make them ready to rent or ready to sell. They were considered “major rehabs”. I don’t necessarily recommend that you start out this way, but for me I got my start from the Hurricane Damaged houses, and that was what was available to buy at the time.
When I first got started, I did one deal at a time. I suggest that you do the same. I want you to learn the BRRR Method, which means you buy a house, repair it, rent it, refinance it, and then move on to the next house. I would buy a house, fix it, rent it out and then move on to another house. This is a very easy way to amass a portfolio of rental properties if you have a job and you have decent credit. I was not a handy person when I started out and I am still not. But I know how to write checks and pay contractors, sub contractors and handymen. I know how much materials cost and how much to pay in labor and that is what matters to you as a real estate investor. So if you don’t have any experience with repairs and you don’t consider yourself to be “handy” don’t let that scare you away from buying fixer uppers.
You don’t have to do the repairs. In fact, even if you are a handy person I would recommend that you don’t do the repairs and have someone else do it. The reason is because you can make a lot more money per hour “finding houses” than you can working on houses. As an investor, you just need to know how to write a check to the guy (or lady) that does the repair work on your house. Each rehab that I did, I learned more about construction, labor costs and material costs. Each house, and each rehab gave me more time working with general contractors and learning how to hire sub-contractors myself.
MY FIRST HOUSE
The first house that I purchased to renovate looked like it was literally falling apart. The asking price was $50,000. The house had been damaged by Hurricane Francis in 2004 and the roof was severely damaged by the hurricane and the house had water damage and mold. The owner was living in a FEMA trailer supplied by the government since the area was declared a disaster zone. So this guy could not live in his house but he was still responsible for making the mortgage payments.
so how did I find this house? My mentor Ben found it from a wholesaler. The wholesaler put out a $2 bandit sign that said “we buy houses for cash”. And the owner of this hurricane damaged property called the number on the bandit sign. The wholesaler flipped the house to my mentor Ben for a profit. Ben then flipped the house to me.
I learned my first lesson. The moral of the story is that if I did not have a mentor, I would not have found this house. So find a mentor. You NEED a mentor.
This is what the house looked like (yes it was pretty bad)
So let me backtrack a little. When I first started out, I knew I needed to learn from someone who had experience investing in real estate. I also had no money and my credit sucked. I found someone who was looking for a bird dog (deal finder). His name was Ben, and he became my mentor. It wasn’t like I asked him “hey can you be my mentor”. But he knew a lot and I knew nothing. So when he spoke I listened. Working as a deal finder for him, I would make $5,000 for every house that I found that he ended up buying. But the houses had to meet certain parameters. We were looking for $100,000 houses that we could buy for around $60,000. I highly recommend to you that if you are new in real estate that you start out like I did as a “bird dog”. I worked as a “bird dog” for two years for the guy who became my real estate mentor (Ben) and his partner Alan. I had been working for almost 2 years for Ben and his partner BEFORE I purchased my first property (for myself). Prior to buying my first house (the one above) I only got paid a finder’s fees every time I located a property for them. This is a great way to learn since there is no risk. All you have to do is learn how to find deals. I encourage you to learn like I did, by being a bird dog deal locator for another investor. This is the basis of our Partnership Program and also the basis of how I modeled our training. I teach people based on how I learned. If you can learn how to find houses and partner with someone who can buy the houses that you find then that is a win win situation for both you and the investor. It’s like wholesaling but only having one cash buyer. So you need a buyer with deep pockets that has the resources to buy every deal that you bring to them that meets their parameters. Someone like me. This is the main reason why our Partnership Program is so popular. When you start out you don’t have cash buyers and you don’t know how to find deals. Once you know how to find deals on a consistent basis then you should work on building up your buyer’s list. Over a period of time you will have many cash buyers. At this point you should be learning how to scale and grow your business so that you can buy more houses and sell more houses. This is also the point where you should consider quitting your job if you have not already done so.
So back to my story of how I got started. After two years of locating deals for Ben and his partner I wanted to buy a rental property for myself. I was looking for a property with equity when I came across this deal. As I mentioned above, I didn’t even find the house. My mentor Ben found it, and he suggested to me that I buy the house as my first rental property. I want to point out to you the importance of him bringing the house to me. Would I have purchased it if he never showed it to me? That is the value of a mentor. He may have made some money flipping the house to me but really he brought me the deal on a platter. All I had to do was say yes.
When I looked at the house I thought that he had lost his mind or was joking with me. The house was in terrible shape and had a lot of water damage and mold from the hurricane. I could not figure out how I was going to make any money from this hurricane damaged house that looked like it was falling apart. That was my second lesson. You see as a new investor you are going to automatically avoid the houses with major damages and go after the houses that look like they are in great shape. But you don’t find great deals that way. The houses that you buy at 30 cents on the dollar (like this one) are the ones that have major damage.
When I saw the house and had to make the decision to buy it or not buy it I thought about backing out. I was scared and afraid. I was nervous and I started trying to figure out a way to back out. I was getting cold feet. I can guarantee you that when you get close to buying your first house, your first instinct is going to be to want to back out. It’s normal. That’s your fear that is stopping you. Don’t let it. Don’t listen to that fear. Don’t let that fear stop you. If you don’t have fear when you buy your first house then you are probably paying way too much for house (probably because it doesn’t need much work). If you know the After Repair Value (ARV) and you know how much it will cost to repair the house (Repair Estimate) then it is a very simple formula to plug in the numbers and calculate your Maximum Offer Price or the most you are willing to pay to buy that house. It doesn’t matter if you are wholesaling, fixing and flipping or keeping the property as a rental. You can use my Rehab Property Calculator to run this calculation. However in order to do this you will need to know the After Repair Value (ARV) and you will need to know the Repair Estimate. I teach both of these at my Wholesaling Real Estate Boot Camp. If you run the numbers and the deal is a good wholesale deal at a great price then you need to have the courage to act on that knowledge and overcome that fear. This is hard to do if you don’t have the tools (for example if you don’t know how to calculate ARV or repairs).
So going back to my first rental property. I trusted Ben, and he had become my friend. I overcame the initial fear and cynicism of thinking “why doesn’t he buy it”. That is a very common thought for new investors. And it is what stops you from moving forward. I like Ben, I knew him well and more importantly I trusted him. decided that if he thought it was a good deal then I was going to overcome my inner fears and move forward with the deal. It’s kind of like holding your breathe and jumping into the pool when the water is cold. But don’t just jump blindly. Make sure you research the numbers, review the comparable sales, calculate the ARV and know your maximum offer price BEFORE you commit to buying a property. Over analyzing and not taking action is not smart. But taking action without analyzing is downright foolish. It’s your money. If you respect yourself, and you want to make sure you have as little risk of loss as possible then you should make sure you do your own analysis before you make any decision to buy anything. In other words, never rely on anyone else’s opinion as to the After Repair Value or the Repair Estimate. This is a common trick of wholesalers to sucker new naive buyers into buying a property. Make sure the person selling you the property is not overstating the ARV and understating the repairs or you will find yourself in big trouble. Ask me how I know this.
So back to my first rental. I review the comparable sales and calculated the ARV with Ben. We calculated that I could buy the house for $50,000 and would need to spend about $25,000 in repairs. The repair estimate was from his rehab crew. Lesson number three. Would I have been able to purchase this house without a rehab crew? Never under estimate the value of having a coach or mentor who is holding your hand every step of the way. This is priceless and worth way more money than the cost of our coaching program. If you screw up once you are done (probably for good). So don’t screw up. Make sure you invest in your training and education.
Ben told me that he thought that when the house was fixed up it would be worth around $120,000 (that’s the After Repair Value or ARV).
Now, I had been bird dogging deals for Ben and his partner for almost two years. So I knew how to run comparable sales, and calculate what a house is worth. I wasn’t that great at repair estimates, but I had a good general ballpark idea since their rehab crew quoted me on that. While I made good money as a deal finder for finding deals (and the education is priceless) I was ready to buy my first rental property. I wanted to own a house that I could keep as a rental. I loved the idea of someone having to pay me rent, and being able to use their rent payments to pay interest on the property.
So I overcame my inner fears and doubts and I “took the plunge” and purchased that house. What would have happened if I let “paralysis analysis” stop me from moving forward? Would I be where I am today? Make sure you are not letting fear hold YOU back.
I borrowed $50,000 from a private lender that Ben helped arrange (his partner’s dad). The deal was they would loan 50k if I could come up with the $25,000. since I did not have $25,00 I would need to borrow it (I kept that part to myself). The agreement that I made with Ben was that I was going to use his rehab crew and immediately start the $25,000 worth of repairs to the property. So I borrowed the $25,000 repair money from my best friends mom (thanks Denise) at 10% interest. And I used her money to write the checks to the contractors that were repairing the house. My total out of pocket expense on this house was zero. And important thing to note is that I didn’t find this house (Ben did), I didn’t find the lender (Ben did) and I didn’t find the rehab crew (it was their crew). The only thing I did do was persuade Denise to loan me $25,000. If I did not know Ben then how on earth would I have found the house, found the lender and found the crew? Do you see the value of having a mentor?
The purchase price was $50,000. If you add the $25,000 cost of repairs the total cost was $75,000. Remember that I borrowed all of the $75,000 (as explained above). This was a no money down deal. I had very little money at the time (about $600 in my checking account). I did not have a job (my wife worked and there was no way in hell she was giving me any money that she made for a rental property). I also had pretty bad credit. So don’t let people tell you that you cannot buy real estate with no money down. You can. I did. Read the example above again. You could buy no money down houses too. You could pretty much buy as many no money down houses as you want. The secret is learning how to do this ! You just need to find a good wholesale deal at a significant discount that you can buy for cash. This type of house will either be damaged or have a seller that is very distressed financially. Once you find a house like that then all you need is to find a private lender that will loan you the money to buy the house. It’s a good idea to have the lender BEFORE you find the house (like I did).