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- Starting with just $1,000 in his bank account, real estate investor Henry Washington was able to build a portfolio of 40 units in just two years time.
- In order to connect with motivated sellers, Washington leverages word-of-mouth, direct mail marketing, and Google AdWords.
- Washington will either rent or flip a property based on a specific set of criteria.
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Henry Washington is just a normal guy who lives in Arkansas.
Before he got his start in real estate, he spent most of his time building a career in information technology, data analytics, and software development. And he was pretty content with the bachelor lifestyle.
"It was just me," he said on the "BiggerPockets Real Estate Podcast." "I'd make a paycheck and then I'd spend a paycheck."
But that all changed when Washington got married.
"We had a conversation and were talking about what we wanted our future to look like - family, kids, and all that," he said. "And so in the middle of the night that night, I woke up literally in a panic."
He continued: "I had no savings. Like, none. I had $1,000 in a savings account."
Washington knew he had to make a change.
"Literally - at 2 in the morning - I started googling 'how to make extra money,' and started googling 'passive income,' and 'side hustles'" he said.
That night, Washington came across a Ted Talk where an individual touted real estate as a viable stream of passive income - and he started consuming as many real estate investing books and podcasts as he could.
"The one I picked was 'Rich Dad, Poor Dad.' I read it and was hooked from there," he said. "And decided 'Okay, well I'm going to do real-estate.'"
How Washington found success
Before Washington bought his first unit, he told everyone he knew he was a real-estate investor. He says he "wanted to put that energy out there," in order to attract sellers.
Lo and behold, he'd land his first deal from a friend that heard he was buying up properties.
Washington ran the numbers on the house up for grabs, and learned the deal was ripe for the picking. He could buy it for $115,000 (the property was worth $150,000), and could rent it for $1,100.
"I put it under contract. Then I panicked because I had no money," he said. "I had no money and didn't know how I was going to buy it, but I was just going to figure out a way."
Washington needed to come up with $20,000 to purchase the house - and he started brainstorming with a mentor for help.
During that conversation, Washington learned that he could borrow against his wife's 401(k). A few phone calls later, and he'd funded his first deal.
"I closed on the house," he said. "I kept the tenant in it. I raised his rents - and the new rent amount covered all my expenses and the loan payment back to ourselves for the 401(k)."
He added: "That house is paying us back with interest for that loan."
That first deal was just the beginning - and Washington would leverage a line of credit against that home's equity in order to flip houses or "BRRRR" (buy, rehab, rent, refinance, repeat) different properties going forward.
"While I was going through that process of buying that home, I was also starting to build a marketing campaign," he said. "I wanted to start a lead funnel."
After vigorous research, Washington sent out 1,000 postcards in a direct mail marketing campaign. The goal was simple: find motivated sellers ready to part with their properties.
Out of those 1,000 postcards, he received 50 phone calls, looked at about 10 houses, and managed to land two or three deals directly from that campaign.
"It was a good start," he said.
Today, Washington flips roughly six to 10 houses per year and has a accumulated a portfolio with 40 rental units in just two year's time. What's more, he's upped his marketing presence and now leverages a Google AdWords campaign to connect with sellers.
Deal making criteria
"For me, I look at every deal that comes in from a lenses of buy and hold first because that's what I want," he said. "If I could buy every deal and keep it as a rental forever, that's what I'd do."
As a rule of thumb, Washington decides whether he's going to rent or flip a property based on the following criteria:
Rent: Each unit needs to make over $100 after all the expenses have been paid.
Flip: Profit expectations of $15,000 to $20,000.
He puts 15% down on all his properties and leverages small regional banks for loans.
This puts Washington in an advantageous position when negotiation. He knows exactly what he can pay in either scenario, and can adjust on the fly.
"It helps me when going in with negotiations because I can have multiple options for people," he said.
"The thing I think that is a key for an entrepreneur to be successful is mindset," he concluded. "It's the power of knowing you can take nothing and turn it into something."