Semi-seasoned investor in Chattanooga, TN

[Jake Kellerhals]

Hello bigger pockets! My name is Jake, I'm located in NW GA/ Chattanooga, TN. I'm 32, married and have 2 children, ages 8 and 4. As of one year ago I am a licensed real estate agent, and I just recently quit my day job to work on real estate full time.

I began investing in real estate about 6 years ago when I couldn't sell my first house and decided to keep it and rent it out. A short time later I purchased a duplex using owner financing, and thus I was introduced to the world of alternative financing. I still have both of these properties today and they cash flow pretty well.

My real estate investing really took off a year and half ago, in the beginning of 2012. I had a friend that had been discussing investing in real estate with me for some time, and we both came up with enough money to purchase a nice triplex that had gone into foreclosure. We had enough money to purchase it and then have a small reserve fund, but that was it. I had met another guy about 6 months before this and he and I immediately hit it off. We had been bouncing business ideas off one another for some time, so I decided to pitch the idea to him of joining or real estate venture. He agreed, and with his funds we figured we could afford to close on the triplex and then purchase a duplex to go with it. We all agreed that we wouldn't touch the cash flow, just keep it in the account to go towards our next purchase.

This is where the story gets interesting (I promise!). One partner had worked for a guy that had sold his business recently. He happened to mention what we were doing, and this former-boss was very interested. He didn't want to invest his money in the stock market, didn't want to keep it in a CD, and didn't want to manage real estate, although he knew it was a great place to put his money. He proposed writing mortgages for us if we could find below-market deals that he felt comfortable with. He would write 15 year FIXED notes and only require us to put 10% down! We happened to find a builder that had over-leveraged himself and was losing a bunch of duplexes that he had built only 8 years earlier. Each unit was a 3/2 with about 1100 sqft, and the rents were $575 per unit. We were able to negotiate the price down to $66k, which meant we only had to put $6k down per duplex. We bought 8 of them and realized over 50% return on our cash the first year, not including the principal payments!

About 6 months ago we flipped our first house, a textbook deal that we bought for 61k, put 17k into and then sold in 2 weeks for 114k. Our mortgage-guy did 100% loan on the purchase price, we put up the rehab money and managed the project and he took a $5,000 "pre-payment penelty" on the note. We took those profits and purchased 8 more units that cash flow about $1,500 per month and put about $7k in the bank.

We currently have 27 units, cash flow $5k-$6k per month and are finishing our second flip this weekend. Our third flip is under contract and we will get started on it the first of September.

I came across BP from the podcast, I've loved listening to them as I drive around town! Keep up the good work, and I can't wait to learn from everyone here!