First Long Distance BRRRR

[Amie Gray]

Hi BP! 

My husband and I are in are 50s. We are looking forward to retirement but concerned about our ability to weather the stock market swings over the next 25 years and maybe more. We have two kids; our son is just about to finish college and he's very excited about real estate. Last October, his excitement led us to dig into Rich Dad, Poor Dad -- Long Distance Real Estate Investing -- and countless other books, articles, podcasts, forum posts, etc. We live in Silicon Valley California and it's lovely. We have grown up with traditional W2 jobs and we are not expecting any inheritance. Through years of 50+ hour weeks, lots of travel, and raising 2 kids, we actually managed to save money, most of it invested in the market. With our limited knowledge, a sketch of a plan, and about $500k in cash, we decided Florida (our future home state) was a good place to start. Our goal is to have 15 houses by the end of 2019.

Between January and March of 2019, we bought 2 homes in St. Petersburg and 6 homes in Jacksonville. They are grouped into an LLC structure. Although we strayed a little bit over our budget, by July 2019 all but one was renovated and rented. That one house that still isn't renovated 8 months later -- many lessons learned about general contractors and prepayments. Ugh!

In April, we started looking for non-recourse refinancing options. While we have been successful business people during our careers, that didn't help much with real estate investing. Banks wanted us to put up personal collateral, guarantees and like, to reduce their risk. I get that, but it wasn't want we wanted. My husband did a lot of calling and calling, until we found a lender. 

Meanwhile, the rented units had stabilization issues. Even after the renovations, we replaced multiple A/C units, we complied when tenants asked for small items like a doorbell and back porch light, we sent one tenant to a hotel on a Sunday night because the septic tank was backing up - yuck! 

Lessons learned: 1. we are very thankful to our dutiful property managers and local real estate agents that care, 2. we need to set up additional funds (which was a LoC) for the few months following move-in to see what happens when someone is living in a house we thought was completely A-Okay, 3. we need a better renovation construction plan / checklist / punch list inspection process. 

Rents in aggregate are just over 1% of our all in costs for this tranche, so we felt confident that we would have the cash flow to sustain a loan. After $20k(!!!) of refi legal fees and more, we closed the loan last Friday and cashed out 75% of our capital after all fees, plus prepaid taxes and insurance. 

We are already moving on the second tranche. We have one house ready to rent in New Port Richey, FL, and under contract for a house in Jacksonville, and moving the last unfinished house from Jacksonville into the second tranche since it wasn't part of the first refi. Looking to buy 2-3 more homes in the next few weeks in the New Port Richey / Tampa Bay area, so we can kick off the refi on the second tranche asap! 

It's been tough getting this business off the ground, including legal, bookkeeping, acquisitions, creating the team, managing through problems, and keeping cash in the right places. But now, the first of the month has a whole new feeling! 

Happy to answer any questions. Look forward to meeting folks at the Bigger Pockets Conference in a few weeks! I would love to get to know more people in the community. 

Best, 

Amie