How I got started in real estate

By Michael Shenouda

There isn’t a month that goes by that I don’t have a coffee or beer with someone who just wants to know how to get started in real estate. My name is Michael Shenouda and I am the founder of Honore Properties, this is my story about how I bought my first building.  

In 2007, I graduated from the University of Illinois and besides getting a job I had one goal:  to buy my first piece of property.  I had taken one real estate class in college and our professor owned 3000+ units on campus; he told us the best way to start is to buy a 2-4 unit, live in one and rent out the other units.  It’s an easy way to see if you enjoy being a landlord because you are also providing a place for yourself to live at the same time. In addition, the process is not much different than buying a single-family home or condo.  The goal was to create passive income and a second income stream for myself.  

In the fall of 2007 I starting looking at 2-4 unit rental properties but prices were very expensive so I also looked at condos for rental purpose.  In 2007 prices were at an all-time peak, I wasn’t terribly focused on value though, my model was and still is to find cash flowing properties.  This was nearly impossible in 2007 especially since my only way of finding deals was through the MLS.  From 2007-2009, I looked online, underwrote, visited north of a 1,000 properties.  I was close a few times to buying but for whatever reason they did not work out.  In July of 2009, I purchased the first two flat I had seen back in 2007 but for 1/3 of the original asking price in a foreclosure sale.   

Now the nitty gritty.  I had no money, no experience, and was barely making 30k a year at the time. My first full year of working in 2008 showed an income of 22k.  I had read 50+ books on being a landlord and investing but otherwise had no idea what I was doing.  One of my friends and I decided to buy this first investment together and be roommates at the same time, making the down payment and income requirements easier.  We used a loan called a FHA 203k.  The property we bought needed rehab and this loan allowed you to put 3.5% of the total cost of acquisition and construction.  In our case, we needed a down payment of approximately $10,000.   

As I mentioned, I had zero savings and was barely able to make rent, floating out checks on the last night of the 5th hoping our landlord wouldn’t pick them up for a day or two until I was able to find some more cash.  (I am not advising this next part in anyway shape or form but just telling my story as a way to show that anything is possible.)  At that point, I took out a 1 year interest free credit card and put all my expenses on it for the few months leading up to the closing.  This allowed me to have the $5,000 needed to close on the property.  

Back then, President Obama was offering $8,000 for first time home buyers so I was able to recoup a lot of this money quickly.  Then we started to rehab the property, a lot of this was done by ourselves and our families that we dragged in to paint and help landscape.  The heavy lifting was done by a contractor we hired.  The contractor took full advantage of me, a wide eyed 24-year old that had no clue what anything cost.  Regardless, we finished the project and were able to rent the other unit to friends from college (one who later became my wife!).

After killing ourselves nights and weekends to get this done as we both still had full-time jobs, we were able to generate $500 a month in cashflow on the building.  So instead of paying $600 in monthly rent, I was able to only pay $350, saving myself that $250 every month.  On top of the $250 a month, we were paying down our loan, receiving tax breaks and hoping for future appreciation.  

I know what most people think at this point as I have heard it before.  You went through 2 years of trying to find something (nights, weekends and any free time I had) and countless hours working on this property just to save yourself $250 a month.  The answer is technically yes, but the experience was priceless.  Now that I had been through the process, built a team, met brokers, I was well poised to do more.  From there I went on to buy a couple 4 unit buildings and then started buying 6, 8, 20, 30 unit buildings.  As I learned to manage these buildings better, the value went up and I was able to leverage appreciation to refinance some equity out of our deals. That cash could then be used to buy more deals.  

After several years of doing this and having a solid track record; I am now able to raise capital and do deals as big as I want.  Honore Properties now has a portfolio of 200 units and is growing quickly.    

But remember it all started with a little 2 flat….I truly believe anyone can do this, it just takes a lot of time and effort to get started.  You don’t need to turn it into a full-time career either, you just have to get started.  No excuses!    


Honore Properties is a full service real estate company, if you are interested in buying or selling a property you can contact us at (312)-600-4501