Why You Need To Network With Other Real Estate Investors With Andrew Postell

Do you want to succeed as a real estate investor? You need to network. Sam Wilson’s guest in this episode is Andrew Postell, a single-family real estate investor who is ranked as one of the top lenders in the US. Andrew shares with Sam how it’s best to talk to other real estate investors and learn from them. Better yet, do smarter and better! Sam and Andrew also discuss financing, single-family investing, and more. If you want to learn more about real estate investing, this episode’s for you. Tune in!

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Why You Need To Network With Other Real Estate Investors With Andrew Postell

Andrew Postell is a single-family real estate investor. He resides in Dallas, Texas, and is ranked as one of the top lenders in the US. Andrew, welcome to the show.

Thanks for having me.

Andrew, we got to talk about a few things that you are involved in. I ask the same questions to everybody who came on the show, which is where did you start? Where are you now? How did you get there? With the caveat, can you do it quickly?

I started on $30,000 homes in Florida. I am at $200,000 rental homes in Texas now. The journey took me many years to get here. That’s the summation of it.

I’ve recorded 360 episodes at this point, maybe 370, and that has to be the most succinct answer I have ever received. I like that. It sounds like we’re going to get right down to business. Talk to us about that journey. What are some things that you have learned? What are some things you’ve done right and wrong? What would you do differently? All of that.

When I got started, there were no podcasts. The internet was barely a thing. I knew I wanted to get into real estate. I went to the library, looked at a book, and it was already eight years old. It was already outdated. I had to do it. I took everything that I had and put it into one property. I do not recommend for most people to do that, but I started very small. The property I bought was a $7,000 home. It needed $23,000 to renovate it. Afterward, it was worth $30,000.

If I’m doing it by the book, that’s not anything you’ve ever do. I would do it all over again because that’s how I learned. After that one, I did another $30,000 and another. I kept doing it, and it took me a while in the beginning to get it. The lesson here is that I can network with other real estate investors worldwide and learn about what they’re doing and be smarter and better at it. It’s a little bit more accessible now than it used to be. That’s what I always preach. Talk to other real estate investors, so you can learn from them. You’re still going to make some mistakes, but limit them as best you can.

What gave you the courage to continue buying $30,000 homes and not making any spread on it? Were you holding those for long-term rentals?

Real estate is forgiving. Even though I “overpaid,” I feel like I overpaid. You’re not supposed to buy a business asset at market value or over-market value. No business can operate like that, but real estate is forgiving. All I had to do was hold it to rent it, and it would make money. I could sell it at any time. I could have sold it right then, got my money back, or sold it in ten years later and got my money back plus some. I knew that even though I didn’t make it correct the first few times, I would get it. Now, I’m doing very fortunate where I’m at.

Network with other real estate investors worldwide to learn about what they’re doing and be smarter and better at it.

Talk to us about how you were able to finance those because most people starting out might have $30,000 in the bank, but that might be all they have. People that are starting in real estate don’t typically get into it flush with cash, or they wouldn’t be going into it. How did you finance it?

The very first property I ever purchased was my own primary home. I rented out the rooms. We call it sometimes house hacking. I bought my primary home with a zero down payment program. The first-time homebuyer, that one was a $50,000 home. Over time, I moved away. I rented it. I sold it for $80,000. I got about $30,000 out of it. I used that $30,000 to buy my first renovation project, my first rehab project.

I did not use financing. If you’re doing $30,000 homes, financing is hard to get at that level. It might even be impossible depending on your market and what you got going on. The second home I did was another $30,000 home. I had to go to a private person to get it. I had experience under me when I went to that person. That’s why they gave me money to do it. That’s how I got started. It was hard, and that’s how I got financing at the beginning. The first-time homebuyer grant gave me my first primary home. The second home, all cash. The third home, private financing.

You had to sell your first primary so that you could scrape together enough to go out and buy another rental property. Where did you live at that point in time?

At this point in time, I am in New York. My properties are in Florida. When you live in New York City, a parking space is not $30,000. They sell parking spaces up there for $150,000. Investing in New York City at that income level that I had at the time, there was no option and choice. I had to do it out of state. Luckily, I had a good network in Florida that I could trust. Even though some markets might’ve been more profitable for me, I had a trustworthy network in Florida that I relied on. Sometimes I never saw my properties, but my network kept me and my renters in a good place. Without them, I could not have made it.

Talk to us about that network. Maybe on the timing of when to build it, how you went about vetting that network. It’s a rare thing where you can get that many people because you would’ve needed a broker, somebody looking at properties, rehab person, property manager, and there’s a lot of moving pieces there to manage from New York City.

You might be surprised about how many people you already know in your network. You might have never asked who an insurance person is, or if a real estate agent, or a loan officer. You might already have these people in your network, but we haven’t asked yet. My primary home at the time, that $50,000 home, was a Florida home. I did live in Florida for a short time. The network that I had was already there from me living in that state. My career took me to New York. Through natural attrition, I already had that network there.

At this point, you’re flipping houses. You’re making okay money at it. Your career takes you to New York. Are you still working in your career, or have you transitioned out of that and doing solely real estate?

 

I am a loan officer. I did not start this way. When I was in real estate, I would do commercial insurance, but it was fine. It was a good career. I got into lending on accident.

Walk us through that. I want to hear this story.

I worked for a commercial insurance carrier in New York. They sold their division to a competitor. I was part of that. The commercial insurance company I worked for at the time, they were privately held. They gave a bunch of money to charity. I enjoyed working for them. The place they sold us to was publicly traded. They gave nothing back. It was not a fit for me. I went out to look for jobs and a little mortgage company asked me to come on board. I had no mortgage experience. They were like, “You have ten years of sales experience.”

It was a little mortgage company. I was their 120th employee. They put me on the fast track in the executive part of their company because they were so small. It was a good learning experience for me to work for a small company and help it grow. They opened branches around the country, which brought me to Texas. For that mortgage company, we opened a branch here in Dallas. I was only supposed to be here for one year.

I can relate to that story. They’re like, “It’ll be quick. Get some things organized, and then we’ll figure out where we’re going to land.” Years later, you’re like, “I’m still here.” We talked about the necessity of finding a lender you could work with and the problems that you were having on the investment side. Talk to us about that side of the journey.

As a single-family person who didn’t have much means, I’m buying $30,000 homes. For a lender, that is a losing proposition. They lose money lending money for mortgages at that level. They like to have a $100,000 loan amount minimum because that’s when they’re profitable. It was rough going in the beginning. Even the first lending company that I worked for was like, “We don’t even do investment property.” They didn’t write them at all. They only did primary homes.

Eventually, I worked for a mortgage broker who had several different lenders at its disposal. That’s where the light turned on. I could see what all the lenders did. There were some out there who were friendly to us. They were hard to find. They didn’t advertise. They didn’t have a fancy, sexy commercial on television. You had to have somebody you already knew. I knew the broker. As a real estate investor, my real estate investing friends knew me. That helped out. Me being a real estate investor taught me how to become a better investor.

Talk to us about the criteria. Was this lender still lending? You being a mortgage broker, were they lending on $30,000 homes? Were you still in that $100,000 plus price range?

Here are the four questions I tell everybody to ask your lender. This is the test. I want to ask these four questions if I’m in a 1 to 4-unit real estate investing world. Question number one, how long do you need me to be on title? The answer should be one day or less. I’ll take less. Less is a better answer. There should be no seasoning. There are plenty of lenders out there that have no seasoning requirements.

Search for smaller local lenders who are willing to help somebody like you.

Why is that important?

One of the biggest areas that we have in the single-family world where we’re renovating our house is that lenders want us to be on title for 6 months or 12 months. I want to be able to refinance it and take my money back out of that property right away to implement it on another one. The quicker I can refinance, the quicker I can find another property. I cannot wait on the lender to require me to be on title.

You’re saying this would be in an all-cash purchase situation.

Not in all-cash. Even if I’m using hard money or another acquisition loan, there are some lenders that will require me to wait.

You’re asking how long is the cash-out refi period. I understand that.

I need to be able to refinance right away. No waiting. Question two, when will you use my after-repair value? It sounds crazy, but not every lender will use the fully rehabbed value right away. Some of them will want you to wait. Question three, when will you start to use rental income to help me qualify? Some places they wanted to be on your tax returns or this and that. They need you to have experience. There are plenty of them that do not require any of that.

Question number four, what is your loan minimum? I needed it to be zero. I can’t find a great property, and it’s too small for you. “I appreciate you as a bank. You’re saying you want to go after the big dogs. That’s fine. Go for it.” That’s why we talk about using smaller local lenders that are willing to help somebody like us. There are plenty of great properties that are $60,000 that do fine. There are plenty of lenders that can work with you. You just got to find them. Those are the four questions I tell everybody to ask.

I can personally relate to the pain of question number four. In a lot of markets, people are going to go, “That’s insanity. You can’t buy a dog house for $60,000.” I wouldn’t think in some markets. Here in the Memphis market, where I’m based, a few years ago, you could do $30,000 to $50,000 purchases all day long. Maybe not anymore, but you could then.

It was a real challenge. I never did find a lender. I ended up scraping pennies and nickels together from everybody and their brother to keep moving forward. It’s like, “We can’t find loans on these houses,” but you’re telling us that it is possible. People are lending in that space. This helps you then, as a lender, propel your own investment business.

 

I got to see everybody else’s deal that came to me. “How’d you do that? Tell me more about this. Where’d you get that property from? How did you find that? Who’s your contractor?” Working in the industry, you learn real quick, and you can share it with others. It helped.

Talk to us about why you’re no longer buying. You’re in Fort Worth. Probably finding a $30,000 house now is fairly tough to do as well. Talk to us about why you’re no longer buying those lower-end properties and why you’re buying $200,000-plus properties.

In our market, $250,000 and under, the lower, the better. You can find in some parts of Texas very small inexpensive homes that rent fine. In that market, in that space, your maintenance costs are much higher. What I mean is replacing a door on a $50,000 home costs the same as replacing a door on a $200,000 home. Proportionately, my maintenance expense is lower on a higher-valued home.

My renters are also a little bit different at $200,000. The thing that I was very fortunate about in 2020 was none of my renters missed a single payment. To afford a $200,000 home here in Texas, you got to have a career, not an entry-level job. Entry-level jobs are the ones that always get hurt the most when the economy goes South. It’s always the same class of people. It’s frustrating. For me, being at the $200,000 home range, I was very fortunate in 2020.

Have you always stayed true to core single-family investing or have other assets caught your eye along the way?

They have, but in an ancillary way. I’ll explain. In New York City, it’s hard to invest in real estate up there. During that time, I put money into my 401(k). I put some money into some stock market. I’ll still make the case so I can buy a stock for $5. I can’t buy a house for $5. Sometimes, I have been unsure about the real estate market, and I’ve still put it in somewhere else. I’m a saver by nature. That’s one of the things that helps me in real estate. Predominantly, those ancillary things are a small percentage of what I do. Real estate takes up the vast majority.

Were there any mistakes, or were there some surprises along the way that you learned that you want to help our readers avoid?

I’ve never read a book. I’ve never partnered with anybody. This is just me. Any mistake I have made, it’s on me. All the profits that I make are also mine, too. I’ll take the best mistake I ever made. I bought a house in Florida in ’08. At the time, the market was already crashing. I thought, “We can’t go much lower than this.” I bought a townhouse for $131,000. They were selling it for $175,000. What a deal. It crashed all the way to $80,000. This is my biggest mistake. How much money did I lose on that property?

It depends on how long you held it.

It’s vital to keep lending rules and apply them to your investments.

I still own it. This is real estate. If you’re a buy and hold investor, even your worst mistake, you can eventually get out on it. Don’t make a big one. Make it small.

If you wait long enough, typically, it’ll all shake out. One of the things that we see going back to financing is that people don’t have the proper debt structure on these properties. How are you structuring your rental property debt-wise as far as the term, rate, and things like that, so you don’t get caught holding the bag?

Even on that property, I was underwater for several years. The goal there was never to sell. It was always a long-term rental. That was ’08. It was a different lending and housing time. It was a different time altogether. Now, you’re required to have equity in your property. It’s 15% minimum at some places, 20%, 25% depending.

Even if there is some type of correction, you’re going to be in a much better position than when you were back then when you borrowed 100% or 110% of the value. It’s important to keep those lending rules apply to your own investments. If you keep equity in the property, you should be good, even through the thin times.

What about rate and term?

I have a regular job. I’m a lender. My regular job allows me to get Fannie and Freddie money, which means I get all those great publicized rates you see on the internet. They’re all 30-year fixed-rate loans. Remember, this is business debt. I spread it out over time value of money. The longer I hold it, the more inflation hits, meaning the less the debt is important. If I’m borrowing below inflation, it’s almost like it’s free.

I’m spreading it out, 30 years, but fixed rate. You can find this in the commercial portfolio side, too, if you network good. You can find these types of loans everywhere on the residential loan side. When you get to like, “I’m doing warehouses and self-storage units,” those are twenty-year adjustable types of things, but on the residential side, 30-year fixed all the way.

Andrew, thank you so much for your time. I do appreciate it. I’ve learned so much from you, even though this show typically focuses on the commercial space. There are a lot of things that translate over that you’ve talked about, both from staying the course in the single-asset class and not getting distracted, finding creative ways to get your deals financed, how to take down by yourself and not bring on partners and avoid some risk. I know I asked this question already, but it’s one of my last questions. I still want to give you another crack at the question. If you were to help our readers avoid one mistake in real estate, what would it be? How would you avoid it?

The way you avoid mistakes is you learn from other people who are smarter than you. Get out there and network in your market. If you’re reading this, there is a real estate network that’s meeting. You might not have even known it. Get connected with them. Share your information. If you’ve only done 1 or 2 deals, you might be the expert for somebody else. Get out there, meet, and network with others.

 

The next question is, when it comes to investing in the world, what is one thing you’re doing now to make the world a better place?

When you were buying distressed properties, sometimes we’re getting people who are in a very challenged place and saving them in a way, like, “If the bank forecloses on you, you’re out. You don’t get anything.” If this is what you’re doing, you have an obligation to give back to your community at the same time. Whether you give back to your religious organizations or your universe, you’ve got to give back.

I’m a veteran. I do tons of veteran events around town. My wife and I have three Fs that we focus on, Friends, Family, and Furbies. If our friends come to us like, “I’m doing this charity thing,” “Friend, here’s some money.” If the charity organization is family-focused, we give a bunch of money to those. If they help care for your furry friends, we like those types of charities too.

Andrew, thank you so much for your time. If our readers want to get in touch with you or learn more about you, what is the best way to do that?

You can give me a ring. I have a phone number. My phone number is (817) 380-1913. I’m also on Facebook, BiggerPockets. I’m on Instagram too. Contact me any way you like.

Andrew, thank you again.

 

Important Links:

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About Andrew Postell

Andrew Postell is a single-family real estate investor. He resides in Dallas, Texas and is ranked as one of the top lenders in the US.