How to Get Started in Real Estate Even if You Have Nothing

Mike Hambright: Welcome to the FlipNerd.com podcast. This is your host, Mike Hambright. On this show, I’ll introduce you to VIPs in the real estate investing industry, as well as other interesting entrepreneurs whose stories and experiences can help you take your business to the next level. We have three new shows each week, which are available in the iTunes store or by visiting FlipNerd.com. So without further ado, let’s get started.
Hey. It’s Mike Hambright with FlipNerd.com. Welcome back for another VIP interview, where I interview some of the most successful real estate investing experts and entrepreneurs in the industry to help you learn and grow.
Today, I’m joined by David Krulac, who’s the author of the book, “How I Started With Nothing and Made Over $12 Million.” He’s bought over 800 houses and truly started with nothing. He has a great story to share on how to get started if you’re new and how to ramp up your business if you’re looking to take it to the next level.
Interestingly enough, David has done this all with no staff, which is largely unheard of. So it’s a great story. We look forward to hearing more from David in just a moment. Before we get started though, let’s take a moment to recognize our features sponsors.

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We’d also like to thank National Real Estate Insurance Group, the nation’s leading provider of insurance to the residential real estate investor market. From individual properties to large scale investors, National Real Estate Insurance Group is ready to serve you.

Please note, the views and opinions expressed by the individuals in this program do not necessarily reflect those of FlipNerd.com or any of its partners, advertisers or affiliates. Please consult professionals before making any investment or tax decisions as real estate investing can be risky.

Hey, David. Welcome to the show.

David Krulac: Hey. Thank you for having me, Mike.

Mike Hambright: Yeah.

David Krulac: It’s awesome.

Mike Hambright: I’m glad you’re on it. I want to hear more about your story. Before we get started though, for those that aren’t familiar with you, maybe don’t know you well enough yet, why don’t you tell us a little bit about your background and kind of how you got into real estate investing?

David Krulac: A friend of mine had gotten into real estate, and I saw that he was doing well with it. So it was attractive to me. I had a low entry-level paying job, and I didn’t have any savings, but I still was looking for real estate. I would tell everybody that I knew that I was looking to buy some real estate. I looked at a whole bunch of properties, and I couldn’t find anything. Typically the things that I liked, I couldn’t afford, and the things I could afford, I didn’t like.

Mike Hambright: Yeah.

David Krulac: A coworker of mine told me about a house on his street that was being auctioned off by the State Highway Department. The Highway Department had bought the property and a couple other ones to expand an interchange off a big four-lane, limited-access highway. The interchange was going to empty right into this subdivision, and the people who lived there protested. They got the state to redesign the interchange, so that it skirted around the perimeter of the subdivision rather than going through the middle of it. They ended up with some extra houses that they didn’t need.

Mike Hambright: Okay.

David Krulac: They rented them for seven years at really below-market rent.

Mike Hambright: Yeah.

David Krulac: Then to sell them, they needed to pass a bill through the state legislature, and it had to be signed by the governor in order to sell these excess properties, is what they . . .

Mike Hambright: Wow. That’s interesting.

David Krulac: So it’s kind of a different way of buying real estate. That was the first time that I ever bought real estate. It was the first time I ever went to an auction.

Mike Hambright: Yeah.

David Krulac: So I didn’t know what to expect. I went and looked at the property. It was poorly advertised. It was on a street that ended in a cul-de-sac. There was a sign on the front of the property, but there wasn’t much traffic on that street to see the sign.

Mike Hambright: Right.

David Krulac: Then they had an ad in the newspaper, and it had the legal description, you know the meats and bonds, [inaudible 00:04:55] going 100 feet and all that.

Mike Hambright: Yeah.

David Krulac: It said it had thereupon a dwelling, but it didn’t describe the house, and it didn’t have any pictures of the house. So the advertisement wasn’t really effective in getting people to go take a look at the property.

Mike Hambright: And this was the state selling it. Right?

David Krulac: It was the state selling it.

Mike Hambright: Yeah, so they . . . Not great marketers, it sounds like.

David Krulac: I think the ad was probably written by somebody in the Attorney General’s office, maybe even by an attorney. They wanted to make sure that they legally covered all their bases with the advertisement, but they didn’t present it from a point of view of somebody who was in advertising.

Mike Hambright: Right.

David Krulac: You could tell that the ad was written by somebody who was from a legal perspective rather than an advertising perspective. So I went to the auction, and there was some bidding to start. Then the bidding kind of slowed down, and it was only myself and somebody who I recognized as a real estate broker. I figured that he was not going to buy this house to live in, that he was going to either flip it or rent it.

Mike Hambright: Yeah.

David Krulac: You needed to have 10% down that day in order to transaction the auction, and I only had $2500. So my bid limit was $25,000. We got up to $25,000. I bid $25,000, and the broker bids $25,500. At an auction, you don’t have a lot of time to think about what you’re going to do. You have to make a kind of split-second decision. So I kind of threw caution to the wind, and I bid $26,000, which exceeds my deposit money that I had with me, which was all borrowed, by the way.
The broker bids $26,500, and I bid $27,000. For some reason, the broker stopped. So I got the house, which was the good news. The bad news was I didn’t have the $200 extra for the deposit. I had to borrow that from a friend of mine. I literally had no money in the bank. I had no extra $200. So I got the money together, signed the contract. The contract said that we’re going to settle on this house in 30 days.
I was renting an apartment. I gave notice at my apartment that I’d be moving out within 45 days, which would give me an extra two weeks. I really didn’t have anything to move. I had very little furniture. I was living in a small one-bedroom apartment. So 30 days comes and passes, and we haven’t settled yet.
So I called up the deputy attorney general who’s handling this sale, and I said, “I’m kind of in a dilemma here. They’ve already re-rented my apartment, and we haven’t settled on the house. I thought we were going to settle in 30 days because that’s what the contract said.” My first real estate deal. What did I know?

Mike Hambright: Right.

David Krulac: I said to him, “Would there be a possibility that I could move into the house?” It was vacant. He said, “Oh, no. We can’t do that.” He said, “We don’t have any insurance on the property.” I said, “Well, I have insurance.” I said, “I was figuring that we’re going to settle in 30 days. So I got an insurance policy effective for the 30th day for me to move in.” He said, “Well, if you show us proof of insurance, we’ll give you the keys.”
So I talked to the insurance agent. I got the binder. I took it over to the state capitol to the attorney general’s office. I gave him a copy of my insurance policy, and they gave me the keys. In that whole discussion, we never discussed rent.

Mike Hambright: Yeah.

David Krulac: I didn’t bring it up. He didn’t bring it up.

Mike Hambright: Yeah.

David Krulac: I figured we’re going to settle within a few days, and it wouldn’t make any difference. Well, there was a little title problem, in that a small sliver of the back of the property was taken for the interchange. So the metes and bounds had to be revised to reflect that there was slightly smaller land going with the sale.
Well, apparently that took them a long time to take care of. I moved in. They took care of paying the sewer and the trash. They’d already contracted for somebody to cut the grass. This was during the summer. So I moved in, and I got free rent. I got free sewer and trash, and I got free lawn service.

Mike Hambright: And this was the start of your real estate career.

David Krulac: This is.

Mike Hambright: So what year was this, David?

David Krulac: This was in 1975.

Mike Hambright: Okay.

David Krulac: I ended up living there for six months free . . .

Mike Hambright: Okay.

David Krulac: . . . before we actually settled. I said, “This real estate. This is great stuff.”

Mike Hambright: Yeah.

David Krulac: You can buy a house and live there for free.

Mike Hambright: Yeah, there you go. There you go.

David Krulac: So that was the beginning of my real estate career. I decided that real estate was a good investment. My initial reason for getting into investment real estate was to supplement retirement from my job. I slowly moved forward to buy additional properties. The second property I bought was a three-unit apartment building. I got that by word of mouth too.
My now wife . . . Somebody that worked with her . . . Their grandmother had died and owned this apartment building, and we were able to work out a deal. It wasn’t listed for sale. They didn’t even have a sign on the property.
So the first two properties I got were from word of mouth, telling people that I was interested in buying real estate. I’d recommend that as a tip to anybody. If you’re getting started in real estate, make sure that you tell everybody that you’re interested in buying real estate.

Mike Hambright: Yeah. Yeah, those leads that nobody else knows about are definitely the best ones.

David Krulac: That’s right.

Mike Hambright: Yeah. Yeah.

David Krulac: It’s helped me many other times too, in buying properties that weren’t listed for sale that nobody else knew were for sale.

Mike Hambright: Sure. Sure. So David, hundreds and hundreds of houses later, when you look back at kind of getting started, what are some of the regrets you have that . . . If you look back, after you had a lot more experience and bought a lot more properties, any regrets on kind of the early days?

David Krulac: I don’t have a lot of regrets for the beginning properties I bought. I was pretty conservative in buying properties. I look back when I was writing the book. The first 11 properties I bought were all essentially 100% financed in one way or another. One of the tools . . . One of the lenders that I used a lot was a credit union.

Mike Hambright: Okay.

David Krulac: Which I still belong to. They have a $10,000 signature loan, no collateral. I’ve used that multiple times. I’ve used that for down payments. I’ve used it for rehab money. I used it, paid it back, borrowed it again, used it, paid it back. It’s real easy. All you have to do is go to the teller. It’s like withdrawing money from your own account because it’s all set up. You set it up once, and it’s like good forever.

Mike Hambright: Right.

David Krulac: They also have another line of credit that I think goes up to $75,000 or something like that.

Mike Hambright: Okay.

David Krulac: So I’ve used them a lot, borrowed first mortgage from them, second mortgage, signature loan, lines of credit from them. All those first 11 properties were 100% financed. If I didn’t have the financing, I wouldn’t have been able to buy those properties.

Mike Hambright: Yeah. So with all this experience that you have now, talk a little bit about some of the tips or advice that you give to new people who are trying to get started, how they can get the ball rolling.

David Krulac: I think lining up financing is an important thing. I think that credit unions are a real good source. I’ve borrowed money from banks too. I’ve never borrowed money, hard money. I borrowed some private money from some friends and relatives at times, but mostly the borrowing that I’ve done has been from institutions. You need to have your financing. One of the other tips that I would give somebody just starting out is not to buy a property that’s overwhelming, that needs too much work.

Mike Hambright: Okay.

David Krulac: Something that has serious problems with it that’s going to take thousands and thousands of dollars to fix or a long time to fix up. One of the properties that I bought after the first 11, I forget how . . . maybe 20 or 25th property I bought, needed a total rehab. I was doing it essentially by myself. I did have some help. My father came and helped me, and somebody else came and helped me. I worked on it through two winters.

Mike Hambright: Oh, wow.

David Krulac: It was just too long of a project to do. If I had done that as one of my first projects, I probably would have quit real estate.

Mike Hambright: Yeah.

David Krulac: It was too overwhelming and too much of a burden. We stripped all the plaster down to the studs. We took the siding off. We replaced all the windows, heating, plumbing, electrical. We did all that stuff, kitchen and baths. It was like rebuilding a whole house. It’s too much work for your first, second, third type property to get into that kind of workload.

Mike Hambright: Yeah. Yeah, and even as a veteran, you got to question whether you should be doing the work anyway. Right?

David Krulac: That’s right.

Mike Hambright: Your opportunity cost starts to become so high of doing other things.

David Krulac: Yeah, I don’t lift any hammers now or paintbrush. I haven’t lifted a paintbrush in years and years and years. I call people to do that kind of work.

Mike Hambright: Yeah.

David Krulac: We had a particularly bad winter this year. That was really cold. I was just telling somebody recently. We had three cases where we had people with no heat over the weekend. In one case, a tenant called me on a Saturday night. Their furnace wasn’t working. I had a service man there within an hour, fixing their furnace. The tenant was really thankful. Plus, they were kind of surprised that we were able to give them that kind of response time.

Mike Hambright: Yeah.

David Krulac: It wasn’t me. I didn’t fix their furnace. I called somebody to come and fix their furnace. It was a regular heating company that I’ve used a lot. So they provide 24- hour service, and they know that I do a lot of business with them. They give me really good service.

Mike Hambright: Yeah. Yeah. So talk about how you went from kind of getting started in those early days, where you’re buying a house and moving into it and fixing it up and reselling it later maybe, to being able to buy hundreds of houses. How did you . . . What started to . . . What did you learn that allowed you to kind of ramp up and take it to another level?

David Krulac: I started using other alternative methods. I bought property at tax sale. I bought as many as 10 properties in one day at tax sale, and I’ve done that multiple times. It’s a unique niche. There is some competition. It’s not wide open or anything, but it’s hard to do. There’s no seller’s disclosure. There’s no home inspection. Most of the properties you don’t get to see the inside.

Mike Hambright: Right.

David Krulac: There’s a lot of limitations and liabilities. It’s definitely buyer-beware. But if you’re willing to do some work and a lot of research, like title searches and things like that, it’s a niche that there’s not as much competition as on the open market. There’s definitely not as much competition at tax sales and share sales, for example, as there are for multi-list properties or even [inaudible 00:17:24].

Mike Hambright: Right. Right. Now, I want to talk a little bit about how you’ve done all this with no staff. So a lot of real estate investors that I know, and myself, we have found that we can’t kind of move forward pat. We hit a stumbling block at more than maybe even two or three houses a month, without having somebody to help. Just talk a little bit about how you’re able to kind of pull this off without having some staff to help you out.

David Krulac: Well, as we just talked about the maintenance and physical work, I don’t do any of that.

Mike Hambright: Sure. Sure.

David Krulac: I call a plumber. I call a carpenter. I call an electrician. I call a furnace man. I even call somebody to clean the gutters. You’re not seeing me climbing up a ladder and cleaning out gutters anywhere. In fact, this year I had a bunch of ladders, extension ladders and everything. I sold all my ladders because I wasn’t using them.

Mike Hambright: Right.

David Krulac: Let somebody else use them, get the use of them. I’m sure that I’m not going to be climbing a ladder and cleaning out the gutters or doing any roof work or anything else. If there’s a roof leak, I’m calling a roofer. I have a list of people that I’ve used. Some of these people I’ve used for a long time, 10, 20, even more than that years, I’ve used some of these same people. They know that I’m good for paying them, and I pay them very promptly. They know that I’m good for volume business. So I get really good service from the people that I use.
I have had partners in various deals. I have a partner that I use at tax sale. He actually is more experienced than me. He started doing tax sale long before I did. I saw him at a tax sale, and then I’d see him at another tax sale, and I saw him at another tax sale. One day, I just went up to him, and I said, “It seems like we’re going to the same sales, and we’re bidding on properties and bidding against each other. Maybe we should think about working together.”
We don’t have any written agreement, and he still buys properties on his own, not in partnership with me, and I buy properties on my own, not in partnership with him. But we still buy properties together, and we’ve been doing that for 20 years.

Mike Hambright: Wow.

David Krulac: That’s worked out really well. He has a lot of expertise, and he has a lot of experience. He really helped me. Sometimes in partnerships, I see that there’s like two people who are kind of both newbies and both floundering. They’re really not complementary. There’s not one that has the knowledge and one that has the money. Neither has knowledge, and neither has money. That’s not really an ideal partnership.

Mike Hambright: Right. Yeah. So I guess what’s kind of enabled you to stay kind of lean, if you will, is that you tend to be buying from sources that aren’t necessarily marketing-driven. I know in my business, for example, we’re real heavy at advertising. So we have to work a lot of leads to get down to that one potential deal and lots of follow-up and lots of actual communicating with sellers and families of sellers and things like that. So you tend to be using lead sources that allow you to kind of . . . help you stay lean, I guess.

David Krulac: Yeah, a lot of the properties that we’re buying are tax sales and share sales, where we’re not really dealing with the sellers. So we’re not generating leads for that. We work the list.

Mike Hambright: Yeah.

David Krulac: I’ve also bought a lot of HUD properties and DA properties and REOs. You’re not dealing with the sellers in any of those cases either.

Mike Hambright: Right.

David Krulac: I have bought stuff off the [inaudible 00:21:31] list. I know some investors say, “Oh, I never even look at the [inaudible 00:21:34] list. I don’t buy any properties off the [inaudible 00:21:37] list.” Maybe that works in certain areas. But in my area, 90% of the properties go through the [inaudible 00:21:44] list, even all the REOs and the HUDs. They all go through the [inaudible 00:21:47] list too. So if you exclude the [inaudible 00:21:49] list from your potential sources, you’re excluding 90% of the market.

Mike Hambright: Yeah. Yeah. So David, any advice for folks that have been around for a while and aren’t sure how to take their business to the next level or maybe need some tips on how to kind of grow their business a bit?

David Krulac: One of the things that I have done in the marketing area is letter solicitations. In one town where there’s 1300 houses, we ended up buying 108 properties.

Mike Hambright: Okay. You’re talking about direct mail?

David Krulac: Direct mail. There were a lot of people that didn’t live in that area, didn’t live in that town. There were people from out of state, people from out of county. We sent them letters. Sometimes, people didn’t respond to the letters for years. I’ve gotten several calls from people saying, “I was going through my mother’s stuff. She just passed away, and we saw this letter that you wrote five years ago. Are you still interested in buying this property?” I said, “I’m willing to talk about it. I’m interested in talking about it.”

Mike Hambright: Yeah.

David Krulac: So I’ve bought properties off of a letter that I sent five years ago that nobody ever responded to.

Mike Hambright: Yeah. Yeah. Maybe you could talk a little bit about . . . I know you buy from a number of different leads. I think that’s one of the things that’s important for all real estate investors, is to kind of have lots of proverbial irons in the fire, if you will, that could bring leads to them. Maybe talk about how important that is and how important it’s been for your business.

David Krulac: I think that some investors get locked into like one method, like, “I’m going to do only short sales.” Well, if the short sales dry up for a period of time, then your business dries up.

Mike Hambright: Right.

David Krulac: Or you try to force deals into short sales that really aren’t short sale type deals. By having different tools, different ways of buying property and different sources, the fluctuations of the market don’t make any difference. I’m always a buyer. I’ve been always a buyer for years and years and years. It doesn’t matter whether the economy is good or the economy is bad. The difference between when the economy is bad . . . I’m buying at lower prices than when the economy is good, but I’m a buyer all the time.

Mike Hambright: Yep.

David Krulac: Whether it’s a buyer’s market or a seller’s market, I’m a buyer.

Mike Hambright: Right.

David Krulac: So I’m always looking to buy properties. I would recommend to newbies that you always have business cards. Have your name and your address and what you do. I’ve seen people’s business cards that have some fancy name, but the name doesn’t say what they do.

Mike Hambright: Yeah.

David Krulac: It doesn’t say like, “We buy houses,” or what we’re looking for.

Mike Hambright: Right.

David Krulac: It has to have your name, your address, your phone number, your email address. All that information has to be on there. I think the presentation of your cards have to be some quality, not something that you printed at home on your own home printer. My business cards are made of a stock that’s glossy. It’s sort of like the material that playing cards are, and I always have something printed on the back. I use the front and the back. The back of my card has my resume on it. It says the things that I’ve done, the things that I’m looking for. I buy houses. I buy apartments. I buy land. I buy farm. I buy scattered lots. All that stuff is on my card.

Mike Hambright: Yeah.

David Krulac: So my card is complete, and it tells people what I’m looking for, what I’ve done, and what my experience has been. I have everything on there. I have my website. I have my email address. I have my cell phone. I have my office phone and my address. Everything is on my card.

Mike Hambright: Yeah. Yeah. That’s good. That’s good. That’s good. That’s good.

David Krulac: So my card is complete, and it has a lot of information on it. I use the front and the back. Most people don’t use the backs of their cards.

Mike Hambright: Right. Right. Yeah. Well, David, tell us a little bit about the book that you have out.

David Krulac: This was the labor of love. I read . . .

Mike Hambright: I think most writing has to be.

David Krulac: It took me about a year. It’s been edited professionally twice. I was very particular about what I wanted the book to say and do. I’ve read maybe 300 real estate books. I’m a very avid reader. I read all the time. I’m still buying books and reading them all the time. A lot of the books, I felt, had shortcomings in them.
One of the things that . . . the shortcomings, is that there would be examples, but there wasn’t enough specifics about the examples that you could actually duplicate that example. So that was one of the things that I wanted to do about writing the book.
So in my book, I have what the source of the property was. There’s like 270 examples of properties I’ve bought in my book. Every one of the examples has what I actually paid for it, what I rented it for, what I sold it for, how I financed it, what was the source of the deal, and then a description of what I did or some other particular unique things about the property.

Mike Hambright: Yeah.

David Krulac: So I think that the book has appeal to both new people and intermediate and senior investors, and that it has enough details in it that hopefully somebody can have the benefit of the mistakes I made, as well as the good things that I did, and be able to duplicate the good things and not duplicate the bad things.

Mike Hambright: Yeah.

David Krulac: There’s deals in the book. I wrote about deals where I lost money, which is another thing I don’t see in very many books.

Mike Hambright: Yeah, those are some of the best lessons to learn from, when it wasn’t your money.

David Krulac: A lot of investors say, “Well, I never lost money in a deal.” Well, to me, that means either you haven’t done very many deals, or you’re lying.

Mike Hambright: Right. Usually the latter.

David Krulac: Yeah.

Mike Hambright: Or both.

David Krulac: Somebody I know told me that, and I know that several of the properties that they have are upside-down. Well, they haven’t lost any money because they haven’t sold them.

Mike Hambright: Yeah.

David Krulac: So yeah, that’s true. They haven’t lost any money, but they have a bunch of properties that if they sold today, they’d lose money on.

Mike Hambright: Right. Right.

David Krulac: I put in the warts, as well as the good things. I think the deals are the good, the bad, and the ugly. I hope that when people read the book that they’re able to get something out of it that helps them succeed in making their deals . . .

Mike Hambright: Okay.

David Krulac: . . . that they exclude the bad deals. I even put in deals in there where I made money, but I thought the deals weren’t worth doing.

Mike Hambright: Right.

David Krulac: There was too much risk, or it took too much time to get too small of a return or something else like that.

Mike Hambright: Sure.

David Krulac: I don’t see that in other books.

Mike Hambright: Right. Right. Yep. Well, I know your book is on Amazon. So we’ll add a link down below. Tell us the name of the book. I think you’ve got a copy there with you. Right? You want to hold it up?

David Krulac: I do. The name of the book is “How I Started With Nothing”, which is true. I did start with nothing and made $12 million in real estate part-time. The book is 342 pages. These are pictures on the cover of houses that I actually bought. There’s pictures inside the book of various houses that I bought. Not only are there houses and apartments in the books. There’s also subdivisions that I’ve done, where we’ve bought farms or woodland and subdivided them. There’s also scattered lots, where I bought individual lots that are scattered around, and the things that we did to take those and make some money out of those too.

Mike Hambright: Yeah, that’s good stuff. We’ll add a link down below the video, for anybody that’s interested in learning more. Well, David, thanks so much for joining us today. Definitely appreciate your story and appreciate you sharing your insights.

David Krulac: Thank you. It was my pleasure to be here, Mike. Thank you for asking me.

Mike Hambright: Yeah. Thanks so much. Please, stay in touch, and we’ll talk to you again soon. Okay?

David Krulac: Sure thing. Thank you.

Mike Hambright: All right. Bye, bye.

David Krulac: Bye.

Mike Hambright: Thanks for joining us on today’s FlipNerd.com podcast. To listen to more of our shows and hear from incredible guests, please access all of our podcasts in the iTunes store. You can also watch the video versions of our shows by visiting us at FlipNerd.com.