Making 2023 a re-building year

[Jim Viens]

Hey all! Long post. For the short version, skip to the bottom of the post. I've been a member here for a long time but after only doing 2 wholesale deals I had to take a hiatus to care for a sick child. Got back into the game in spring 2021. I'm a bit of a late-comer (I'm 53 now). Had a fairly large amount of capital to start with and jumped in with both feet. Needless to say I made some not-so-wise choices, but here's how the past couple of years have gone:

1. Established LLC and purchased first property in April/May 2021 for my aging in-laws to move into. Paid cash & they give us enough to cover taxes and insurance.

2. My W-2 job laid me off in June 2021 so with the capital we had I decided to go full-time in REI and use the capital and my severance pay to live off of and try to get my business off the ground.

2. Purchased first true investment rental property (again...all cash) in July 2021. It was a duplex that required full rehab (roof, siding, new retaining wall...cosmetic rehab upstairs with HVAC, kitchen, bath & deck...downstairs got cosmetics with new kitchen & bath with mini-splits for HVAC)

3. While above property was under contract, a wholesaler brought me a deal in a nearby town that I picked up and closed two days after #2 above. Needed paint, new kitchen flooring and some light electrical. Got that finished and rented out in December 2021 (have since renewed the lease through Dec 2022)

4. August 2021 purchased a burnout on 2 acre lot to flip (all cash...hope you're seeing my first mistake)

5. December 2021 purchased another flip property. Finished it by February 2022 and sold it at full asking price...but because I paid too much for it I only made about $3,000 true profit. :(

6. February 2022 purchased next flip property while the burnout is being worked on. Planned to have it finished and on the market by April or May. Contractor and supply-chain issues mounted up and it ended up not being finished until July. Put it on the market and it sat for a month with no offers...not even low-balls. Took it off the market and did more work to it. Re-listed it in November and had it under contract in 3 days...but because (a) I wasn't familiar with the nuances of the specific area in that market which let me to have an overly-optimistic ARV and (b) the market turned, I'm going to end up losing about $20k on the deal when it closes on the 20th. :( :(

7. Along the way I did finally get my self to start using hard money to conserve my capital and have a loan out on the duplex and another to finish rehab of the burnout.

Basically, I was moving so fast (due to being flush with cash) that I wasn't able to identify and correct mistakes before jumping into my next deal. Now I have 5 properties on the books (3 rentals and 2 flips) and insufficient cash to move forward. My YTD balance sheet shows $1.2M and I've got almost $400,000 in equity between all the properties, but I can't access that equity until I have 2 years of tax returns files. I'll have about $150k coming in when the most recent flip closes next week and another $250k-$300k when the burnout sells (it's 2,700 sf, 6br, 3ba on 2 acres). I'm also cashflowing about $700/mo off the rental units (after setting aside for maintenance, vacancy, etc). My business expenses (QuickBooks, CRM, etc) are around $700/mo.

I need to step back and re-asses what I'm doing and how to go forward from here. My overall strategy is to do rehab to build up chunks of capital that I'll then use to put into rentals. I'm looking for ideas on what steps I need to take to get the train back on the tracks and be profitable this year. 

[Nathan Gesner]

Quote from @Jim Viens:

I would keep studying markets and sharpening your skills. When the money comes in, you'll know what the market is doing and will hopefully be ready to jump back in. You can also use this time to analyze your current properties and see if any of them are stinkers that you would be better off selling and reinvesting in a better-producing property. And see if you can cut back on expenses to improve cash flow.

[Basit Siddiqi]

It seems like you are doing with the rentals and maybe not so well on the flips.

Why don't you just continue on rentals?
It seems like you have atleast $400,000 that you can use towards down-payments on rentals.
You can likely buy around $2,000,000 worth of real estate(maybe less if you want some cushion)
That should give you some decent monthly cash-flow if you buy some nice properties.

Best of luck