• Thomas Harr began investing in real estate after trying to fix and flip and wholesale.
  • His first successful investment was a small three-bedroom house that required minor repairs. 
  • He recommends starting small and picking a house that only requires cosmetic rehabs. 

Thomas Harr, 28, began his career as a home inspector working for his dad’s company in Columbus, Ohio. He told Insider his salary at the time was about $32,000 annually. 

In 2017, Harr’s uncle also introduced him to the idea of investing in real estate after asking him if he’d like to partner on a fix and flip project. His uncle would finance the deal and Harr would find the property and live on-site to oversee and help with the rehabbing. 

He agreed to the endeavor and proceeded to find a six-bedroom, five-bathroom 3,975-square-foot single-family home in an upscale neighborhood in Columbus, Ohio. His uncle then purchased the find for $427,500, he said. 

The next 10 months would bring about endless repairs that weren’t budgeted for. By the time the property was ready to sell, it sat on the market for about eight months.

The goal was to sell the house for $800,000. Instead, it sold for $710,000, he said. Harr estimates his uncle lost over six figures on the project. 

Harr’s biggest mistake was estimating the property’s after-repair value by comparing it to other houses in the neighborhood. What he didn’t realize was that the house he picked was located on a busy main road, unlike the others that were a few blocks away on a quieter street. The layout was also non-traditional and would have required a unique buyer, he added. 

“Anytime you have, I would call it, a fiduciary duty for someone, or you have someone’s money tied up into something and you’re part of it and it doesn’t go right, I mean, it feels terrible,” Harr said. “So, it wasn’t great. Our relationship kind of faltered there at the end. And it really still hasn’t been the same with him since then, but it’s a lot of learning lessons.”

His first failed attempt didn’t stop him. Today, Harr owns 42 properties, many of which are multi-family homes that have numerous rental units within them. Of those properties, he has 50% ownership in 38 of them and full ownership of four. 

After that failure, Harr began to dabble in wholesaling, which is when you enter a contract with a home seller to purchase a property. But instead of taking ownership, you find an interested buyer and sell the contract to them for a small profit. 

In December 2018, he was attempting to wholesale a three-bedroom, one-bathroom house that had a purchase price of $53,000. But couldn’t find an end-buyer. 

His mother’s friend heard about his endeavor and offered to lend him the money so that he could fix and sell the house instead. In exchange, Harr would return the loan along with 50% of the profits, he said. 

She initially cut him a check for $60,000, with the extra $7,000 reserved for minor renovations. She later paid an additional $10,000 for unforeseen rehabbing costs. Once the house was ready, they sold the property for $130,000 and each had a take-home profit of $25,000, he said. 

It was at that point that Harr realized it was better to stick to simple and affordable houses rather than try anything fancy. In the end, money all counts the same way once it’s in your bank account, he noted. 

In May 2019, a duplex caught his attention and it would become the very first property he would keep. One of the units already had a tenant who was paying $800 a month in rent. Harr planned to move into the vacant unit while keeping the paying tenant in the other. 

His parents loaned him $6,000 for part of the down payment. He was then able to get a Federal Housing Administration loan (FHA) for the mortgage. This is a government-backed loan that is easier to qualify for and requires a smaller down payment of about 3%. His mortgage was $1,467, which he was able to cover in part from the other unit’s rental income, and by renting out two spare bedrooms from his own unit. 

“I tell a lot of people that the first 10 deals that you do, you’re not really going to see your bank account change. You’re not really going to see your life change all that much,” Harr said. “But what is going to change is your confidence and your willingness to then take more risks.” 

His top 6 beginner tips 

Start with a simple property. This means picking a standard house that doesn’t have any quirky or unique features so that it can attract a large pool of buyers. This also makes it easier to compare it to similar properties in the same neighborhood. In turn, you can determine its after-repair value with more accuracy. 

Stick to the first-time home buyer’s price range. This means the after-repair value of the home should be reasonable and affordable. Depending on the area and your budget, this will vary. For Columbus, Ohio, Harr stays below $200,000. 

Starting small is also important because you’re going to make a lot of early mistakes, he noted. This will keep you from losing large sums of money. 

Many first-time investors want the first deal to be an absolute home run, he noted. But you shouldn’t expect that. Also, if you want to scale, you need to be prepared to reinvest profits back into your business, he added. This way, you can purchase more property, hire additional people, or put automated processes in place that will help you expand. Steady growth requires consistent small wins, he said. As your experience and confidence increase, you can go for the bigger deals. 

Be sure the property has multiple exit strategies. This means there are numerous ways that the property can provide a return on investment. Harr prefers to have three exit strategies for each property: The ability to wholesale it, fix and flip it, or rent it out. 

This is important because circumstances can change. For example, high-interest rates may make a home difficult to sell right now. Therefore, you’ll need to be able to rent it for a rate above its monthly expenses. If you have to keep it and take on a mortgage, be sure the principal, interest, taxes, and insurance remain below the market rent rate for the area. 

For the above three to be successful, the home needs to be purchased below market value, or at a discount. These properties are often hard to find on the public market. Harr finds off-market deals by driving around looking for properties that show signs of distress. He then notes the address and looks up the property owner through the auditor’s county page. He’ll send the homeowner a letter asking if they’d consider selling the property. 

Oftentimes, an owner may have inherited the property or had a tenant damage the house and they want to offload it but doesn’t know how, he noted. 

Finding a slightly distressed house is also great because you need to be able to add value to the property to increase its price. Things such as a deep cleaning or adding new carpet could go a long way, he added. However, you don’t want to be in a situation where a property becomes a money pit. 

“Most people, when they go to flip, they want to start becoming a designer and just start bawling out on everything. And, throwing the nicest stuff in these houses that sometimes they don’t need,” Harr said. 

Don’t try to recreate the wheel, he said. The goal is to be competitive without breaking the bank. Renovate based on the comparables in the area, he added. Harr recommends scrolling through photos on Zillow to get an idea of the interior quality of nearby homes. For example, are the houses carpeted, or do they have hardwood floors? Are the kitchen countertops laminate or granite? Then, go with the affordable options. 

Finally, you need to leverage expert experience, even if it’ll cost you money. In the long run, it could save thousands of dollars in rehabbing costs, he noted. For example,an inspector will make sure there aren’t any major structural issues. A contractor will give you an idea of what certain repairs will cost you. 

Harr said when he was starting out, he listened to endless podcast episodes from Bigger Pockets, a real estate educational platform. But in the end, he didn’t have the expertise to be an investor or understand all the nuances that come with rehabbing a house. He had to make his own mistakes and learn things the hard way. 

“Theory is, at the end of the day, just theory. So it doesn’t tell you about emotional intelligence,” Harr said. “You need to know how to manage contractors and manage money and be able to buy a house and flip it. Over a podcast, it sounds great. It sounds easy. And that’s where a lot of people get this real estate investing game a little bit wrong. The gurus don’t tell you that this stuff is hard.”

As for the past year’s rising interest rate, Harr says there’s never going to be a perfect time to buy real estate. Many people sit on the sidelines waiting for prices to correct. But when they do, the market gets very competitive or interest rates rise. 

Even though rates are higher this year, he says he’s finding better deals that are 10% to 20% cheaper than the year before.