Closed 5 Houses Today! :)

[Devan Mcclish]

When it rains, it pours in this game of real estate! Below are the numbers. They are brief, let me know if you guys have any questions!!!! 

So I bought 4 rentals in a rough area, and one rehab.

4 Rentals:

3 of the rentals were from the same seller on the same street. The other rental was on a street 3 streets over from the other 3. These are low class areas (D+, C-). I bought them for present cash flow and future potential. They are a 1 mile from broadway, and parts of the area have nashville skyline views. The area is also sandwiched between two of the most expensive areas of nashville. I like the present values and future growth but not banking on the future growth.

1. How I found it - direct mail!!!!! he called me and told me to email an offer. He had 3 houses on the same street and wanted to sell them all! What a great day for me! First time a seller told me to email him an offer, but he's an older guy, so in writing means more to him

2. Numbers -

• purchase - 175,000 (43,750 a house)
• closing - 4,000
• Insurance - 650 a month
• taxes - 700 a year (approx)
• Rent - 1,900 for the three houses the guy sold us, the separate house will rent for 1,000 a month so ======  2,900 a month (16.6% rule LOL)
• repairs - ZERO, three were rented already and one is rent ready right now 
• utilities - ZERO, tenants pay
• lawncare - ZERO, tenants pay

3. How I financed it - I partnered with a local investor 50/50 on this deal. I fronted my half of the money via a line of credit on my quad I mentioned on podcast 180. He brought 50% of the money to closing as well. These houses are all worth 70k as they sit, we will refinance into one blanket loan at 80% LTV which would be 224,000 but we will only take out 190,000 max to keep the note down, and repay all expenses here. I went to a local bank for a refi. They have no seasoning period. DON"T ACCEPT A BANK THAT HAS A SEASONING PERIOD.

4. Plan for these rentals - We will hold these rentals for at least 2 years. After then we are hoping to demolish them and rebuild SFH's back. We have not figured out the exit strategy whether to sell or Air BnB, but either route makes sense for us. The lesson here is to buy right and you have endless possibilities with a house. We are actually keeping the seller as the property manager of the properties. He knows the tenants, has a good relationship with them, and we do not want to disrupt that with the tenants. I also like how he runs his business.

THE REHAB

1. How I found it - direct mail. I have bought from him before and he sent me another deal (reputation is everything). I actually had this deal wholesaled but the buyer backed out 2 days before closing (don't do this. I have already told 10 people about this buyer. there is no room for people like this in our business). I did collect his 2,000 non refundable earnest money check though :) (WHOLESALERS - always ask for at least this much to protect yourself in the deal)

2. Numbers - 

• purchase - 90,000
• closing - ZERO (took the guy's earnest money for this)
• Rehab - either 25,000 or 50,000: So I could either put 25,000 in the foundation, roof, siding, and windows and sell for 160k or full gut for 50,000 and sell for 210,000 (I WOULD LIKE YOUR OPINION)
• Closing sale - 14,000 - 16,000
• Holding - 5,000 (utilites, taxes, hard money if I choose to go this route)
• Sale price - 160,000 or 210,000 (haven't figured this out yet)
• Projected profit - 25,000 to 40,000 (again haven't figured this out yet

3. Financing - I paid cash for this. I had no other option. I didn't want to terminate and ruin my relationship with the seller. I have a hard money lender that is going to give me 50k on this deal for the rehab and cash back potentially! I usually don't like doing this, but you have to do what you have to do

4. Lessons Learned - I did this but just to reiterate.... Always ask for a non refundable deposit of earnest money. This is the first time I have dealt with this, but it happens. It's not always peaches and cream in this business. I know now that I will never sell to these buyers again. But I will have the last laugh since I will profit on the deal myself ;)

I am sure I missed something so ask questions!