Duplex then Single Family rent/flip led 2 another in Wichita KS

[Shane H.]

I've been active in RE investing since 2006, however until the past 4-5 years have not had the laser focus I've needed.  I let the lack of liquid capital hold me back and just not getting out there as much as I should.  Bigger pockets has probably helped me in that area.

1st investment - 2006 - duplex - still have today - probably didnt buy that one low enough but it's been a learning process the whole way and knock on wood - haven't lost money.  However the education has been invaluable, as well it allowed me to purchase my most recent success in 2014.  (I could have still done better on it but am happy with what I achieved/learned)

Short story - redeemed a property that was in foreclosure with a substantial amount of equity in a great area of Wichita - a friend knew the person in the foreclosure so 3 of us got together and pooled our capital - my share coming from cash created by the duplex that had accumulated over the years.  (I knew going in one friend was not going to contribute anything but capital then ride our coat tails for the investment payoff, however went ahead and did the deal knowing I wouldnt have it without including him {he was the connection to the person we redeemed the property from} - we are still friends - I've just laid down the law if he invests with me again - he's putting in majority of the capital and we will talk about equity splits - he wants to invest with me again and agrees to changing the setup)

Bought the house for $60k - invested appx $40k including holding costs - taxes, ins, utilities permits etc, (purchased August 2014 - finished rehab beg March 2015 - tenants moved in May 1 2015 - rented for $1495/mo.  We rehabbed this house down to changing out the doors/trim work - some photos can be found on my facebook page below.  Tenants decided they were not renewing the lease (college students) - put on the market beginning of March for sale by owner - Signed a contract today for full ask price of $150k - Offer did come from a buyer rep'd by a buyers agent so I will be paying 3% sales commission and did agree to $4500 in a seller closing credit with the agreement they were buying as is and nothing nit picky the inspector finds I will be addressing.  Set to close in the middle of May.  I also had a potential offer to re-rent on the table from 4 more college students however I will keep that on the back burner - I've established a relationship with them and my goal now will be to find a house that will suit them/they can rent out.  I priced it a tad higher on a PSF basis than other houses in the area, however was priced about right judging by the amount of calls I received in the month it was on the market.

All partners in this deal (myself and 2 others) just over doubled our capital contributions of appx 10-14k each -- I think when it's said and done we'll walk away with around $14-16k each in profit.  

Couple takeaways from this deal - I should have structured the equity splits differently - this was my first major rehab so I guess me being too fair agreed to take an equal share of equity along with everyone else - I did get to collect monthly management fees (only charged $90) so that did help a little and I put in a couple grand less capital...however next deal I will be putting in a smaller chunk or getting  a larger share of the profit for the work I put in and my financing relationships etc.  We financed this all through our own funds/local bank.  So provided closing goes well...will have rented for 12 mos - with a few expenses here and there for a couple minor maintenance items easily missed (water heater - & garage door opener failing) then netted appx $41k more than we had in the house after fees.  Not too shabby for Wichita.

This leads me to my next success in the wings. One of the tenants that lived in the house liked how I treated them as a landlord and planned to move in with 4 other students after her lease was up. She had asked me 3 times if I had a 5 bedroom or found one to buy - the 3rd time sending me a link to a house I had seen on MLS before. Ended up looking at it - had the potential tenants look at the house and they liked it - they all agreed to sign a lease contingent on my buying the house delivering it to them appx May 1. Put a contract on the house - listed for $155k - wanted to purchase for $132 but seller wouldnt budge off of $140k - I think I'm a tad high on purchase but figured with $1750/mo in rent for 5 tenants I wont let the $5-7k throw the deal. House is very dated, (an older couple built it in 1991 and passed on - passing it on to their daughter) -- however house has been well taken care of. Needs just cosmetic updating whenever we decide to rehab - figure if we spent $10-15k on it we'll have a darn nice house. 5 bdrm 3 bath. (Also in a great location) Tenants will move in as is and love the place. We just need to do a few pro active maintenance items before they move in but dont anticipate spending more than $2k if a fraction of that.

So plan on this one is to rent for 13 mos (term they wanted on the lease) for 1750/mo - use cash generated from rents (I collect mgmt fee as well) to rehab if we decide to at the end of their lease, or do minor fixup - rent out, or try to rent as is again to more college students.  Fixed up should be worth $160-170k based on comps in present market.  Financing using my Line of Credit on the duplex and another partnership (this partner has a lot more to offer and is more hungry so excited to work with him).  Bank asking for 20% down - will finance the rest on 20 yr am.  

Now back to the 4 who wanted to rent my house I just sold.  Will see if I can approach them with the same deal and find another house for them.  I think they will be disappointed they cant live in the one we just sold since we had it fixed up pretty nice, but they received a nice referral from the other tenants presently living in the house about me so the possibility exists to pick up another house there.

A lot of this was made possible by the fact (going back to the duplex I purchase in 2006) that I have been able to set up a line of credit on my equity I have in the property with a local bank.  It took me a while to get to this equity position - and I'm sure years ago had I focused enough I could have figured out my capital situation in other ways, but am happy to move forward now.

Next project in the pipeline is building a new construction duplex.  Should be finalizing a deal for 2 lots in a local development.  I found it about 4 months ago before the developer started pushing to move the lots - we had lunch with him Friday and found out a month ago 2 other big duplex builders (these guys have built LOTS of duplexes over the years) - bought a big chunk of the lots left - so I was sold on my intuition this is a good place to go.  My partner and I will be the builders.

Hopefully soon will have a diary of a duplex build thread going.  Sorry for being long winded - have been pretty happy about things lately and am hoping the little bit of success I've had lately will breed more.  Felt like I've been spinning my wheels for a # of years and even so recently but a couple good things have happened the past 2-3 weeks.