8 Deals In My First 8 Months !

[Ryan Detig]

8 Deals in my First 8 months- YOU CAN DO THIS!!!

Hey BiggerPockets, I wanted to use my first post here on Biggerpockets to summarize my first 8 months in this fun, crazy, stressful, and exciting game we call real estate investing. To give a little bit of a background, I am 30 years old, have a wife and 2 kids, I work minimum 48 hrs a week, and I moved to Southeast Texas for work in March of 2016 from Orange County, CA. While in CA I did not think about real estate investing at all because of how crazy expensive housing was. After I found out I was going to move to Southeast Tx, I started doing research on rentals to find a place to stay. Right away I noticed that houses were renting for way more than the mortgage would be. This is what got me started down this real estate investing path.

After writing this and realizing it is really long, I wanted to provide a summary near the top to give people an idea of some of the items talked about below as I am not naïve enough to think that everyone will be as excited to read this as I was to write it. The below summarizes some strategies and investment types I have used during my first 8 deals.

-Flipping

-BRRRR

-Buy and Hold

-Hard Money Loans

-Wholesaling

-Borrowing from Family

-FSBO Purchase

-SFR Purchase

-Multi-family Purchase

The 1st Deal Purchased 12-22-16: After moving, I spent the first 6-8 months researching the rental market in the area and learning all I could from Biggerpockets. I knew that I needed to make sure I did not get stuck in analysis paralysis so on 12-22-16 I jumped in and purchased my first flip property. It was a 4 bedroom 2 bath foreclosure in a neighborhood with a good school district. Today it is completed and under contract to close in 2 weeks. Below are my numbers:

Purchase price: $ 55,000

Closing Costs: $887.00

Holding Costs (interest and utilities and insurance): $8,200

Remodel costs: $79,550

Sales Price: $170,000

Commission/Closing: $ 15,300

Net Profit: $11,063

Before and After Photos

Now while most people will not even consider doing a flip for a 10k profit, I consider myself lucky that my first flip did not lose me money and that I was able to get paid for an extremely value education.

The 2nd Deal Purchased 3-17-17: While in the middle of completing the flip, I was introduced to a wholesaler, @James Gallen, through 1 of the 2 local REIA I attend. He had three properties available at the time and I ended up purchasing two of them. I was able to find a small local bank that would loan 80% LTV based on the tax assessors value even if the purchase price was less than 80% of the value. This was great because that means at time of closing, I could walk away from the title company with a property and a check.

The lender I used was a commercial lender so in May I started an LLC. I closed on the first property middle of May 2017 with cash because the seller needed a quick close. I then completed the BRRRR strategy on that property, got it rented within 4 weeks, and was able to pull almost all of my money out of the property. Rough numbers for this property:

Loan Amount: $63000

Cash Out of pocket: $7200

Rent: $950

PTI:$ 590

Maintenance/cap ex: $ 115

Vacancy: $95

Property Management (Myself currently): $90

Cashflow: $60/month

ROI: 10% using a property management company and a 26% return when doing my own management.

The 3rd Deal Purchased 5-2-17: The second deal from my wholesaler was not a time sensitive situation and I was able to wait the 20-35 days to do a normal close with my lender. Again at time of closing I was able to walk out of the title company with a check for $4600. This property had a current renter in it with no lease. I was able to get him to sign a month to month lease. He left a couple weeks ago and we are in the process of showing the property to get it rented. Rough numbers on this property:

Loan amount: $58,000

Cash Out of pocket: $-4,600

Rent: $850

PTI:$ 540

Maintenance/cap ex: $ 100

Vacancy: $85

Property Management (Myself currently): $85

Cashflow: $40/month

ROI: Because I actually invested no money it is not possible to calculate ROI.

When analyzing both these purchases, I looked at the properties together to help calculate the ROI. Assuming I used the $4600 I received from the 3rd deal to help offset the $7000 I spent to rehab the 2nd deal, the ROI on both properties is around 45% using management and 130% if I manage them, which I currently am.

The 4th Deal Purchased 6-2-17: The realtor I am using to sell my first flip gave me a call on 5-26 saying she had a great flip opportunity but it needed to close within a week. She had a property that was on the market for around 20 days for a sales price of 100k. Many people were interested but some rotten wood on the exterior turned off many lenders. The seller was in a bind and was going to lose the house they were going to move to unless this property sold. They were willing to sell for as low as 55k if I could close in 7 days. After making a few phone calls to family I got a check in the mail and closed 7 days later. One note on my ability to make a phone call and get money. I had already borrowed money from this person to purchase my 2nd deal and had paid it back when the BRRRR was complete so I had built up trust. This project is about 7 days from completion and being put on the market. Below are the rough expected numbers.

Purchase: 55K

Rehab: 23k

Holding costs: 1k

Financing costs: 3k

Sales commission and closing costs: 11k

Sales price: 125k

Estimated profit: 32k

The 5th Deal Purchased 6-8-17: While I was at the 2nd deal mowing the yard getting it ready to rent, I was talking to the neighbors and they let me know that the neighbor one more house down was moving and they were not sure if they were going to sell or if they were going to rent it out. Ding, ding, ding. The lightbulb went off and I knew that the next time I saw their truck out front I was going to talk to them. Long story short, I ended up walking the house 2 days later, talking to the owner, and finding out he was interested in selling. I did not feel comfortable enough to work the deal myself so I gave the lead to the wholesaler who I purchased the other two properties from. We had an agreement that I would get first crack and an assignment fee discount for any deal that I brought to him. I knew that even if I did not buy it I would get some money through a finder’s fee agreement we had. @James Gallen was able to negotiate a great price that was around 70% of tax value. My bank approved the loan and I closed on the deal about 30 days later. Rough numbers for this rental:

Loan amount: $83,200

Cash Out of pocket: $-1,600

Rent: $1,350

PTI:$ 870

Maintenance/cap ex: $ 160

Vacancy: $135

Property Management (Myself currently): $135

Cashflow: $50/month

ROI: Because I actually invested no money it is not possible to calculate ROI.

The 6th, 7th, 8th Deal Purchased 6-15-17: During lunch one day I was looking on southeasttexas.com to see if there were any good deals. I noticed a 3 unit (4/2 house and 2/1 duplex) property for sale by owner. I immediately called her and talked to her for about 20 mins. She was selling the property because her husband wanted her to get out of the rental business because of her age (70ish). The price of the property had been recently reduced from 89K to 79K. The duplex was currently rented and she was in process of finding a tenant for the house. All three units had been rented with section 8 tenants. I met her 3 days later and walked through the property which was in great condition. I submitted a 75k offer using my own 3 page contract 5 days later. She emailed me and told me she had received another offer which was better than mine and was going to take the other person’s offer. I called her right away and let her know I would be submitting a second offer and if anything at all makes her feel uneasy with the current buyer to call me. I submitted another offer at 85k via email. She called me two days later and accepted saying the other buyer was very flaky and uneducated.

I was in uncharted waters with this property because the other 3 rental properties I purchased had all been below 80% of tax assessors value so I knew I would have to bring a small amount of money to closing. The tax assessors value was 66k on this property due to the C-class area so an appraisal would have to be done. After appraisal was complete, my bank was willing to loan 71k of the 85k purchase price. I was able to secure a private family loan for 18k (5 years @2.5% interest) to cover the difference and pay for closing costs and have some extra. Below are the rough numbers:

Loan amount: $71,000 primary, 18,000 secondary

Cash Out of pocket: $-3,500

Rent: $2,250

PTI:$ 975

Maintenance/cap ex: $ 270

Vacancy: $225

Property Management (Myself currently): $225

Cashflow: $550/month

ROI: Because I actually invested no money it is not possible to calculate ROI.

To those who have been concerned with dealing with HUD please note that after purchase I went to the housing authority office and got the paperwork, filled it out, filed it, and received most of the housing rent checks 15 days later on 7-1-17. They did miss one payment for one of the duplexes. I called them and within 15 days they had the money in my account. I have heard nightmare stores regarding housing but my experience with them has been very smooth.

This turned out to be much longer than expected. I hope that my story encourages those who are new to investing to get educated and take action. Getting educated is a very important first step but don’t make it such a big step that you never actually step off and purchase a property or do a deal. The education you will learn from actually doing a deal or purchasing a property is far more valuable than your initial “book” education. The initial “book” education should be completed before “doing” so that you mitigate the risk involved with a far more valuable education, the education associated with “DOING”. 

[Brian Stieler]

What an awesome write-up. Congrats Ryan and keep it up!

[Josh C.]

Great story. And that's one heck of a lender. I wish Indianapolis had a bank like that. I've never heard of an investor leaving closing with checks from the bank. Good work.

[Audrick Brown IV]

Wow Ryan Detig this is awesome. You rock! This story is very encouraging. I appreciate you sharing.

[Frank Grigus Jr]

Very informative write up @Ryan Detig, thanks for sharing! I have one question, is the cash flow on a few of those units too tight? What's the long term strategy when them?

[Ryan Detig]

@Frank Grigus Jr  Thanks for the feedback.  I would say yes they are tight when you take into account management fees.  Many people say they want $100 per door.  I am currently getting that on all my units now only because I am doing my own property management and repairs.    I had 4 reasons I was ok with the lower than normal cash flow  

1. I was less concerned about cash flow because I was literally getting paid at closing to own these properties.  I decided I would rather have a house I paid $0 (or got paid) for that gives me $50 a month than a house I paid $10,000 for that gives me $150 per month.

2. Appreciation was another reason I was less concerned about cash flow.  Several of the low cash flowing properties are in a good part of town with great school districts.  I don't count on appreciation which is why I made sure they were still positive cash flowing but appreciation and location were the reason I was ok with a smaller cash flow.

3.  Equity is another reason I was ok with a smaller cashflow.  All but one of the properties I have I purchased at 65%-80% of value.  This has lead to me having around 60-80k in equity.  That mixed with the fact that I could turn any of the houses in the better part of town into a flip if I had to get rid of it and make 5-15K was why I was ok with lower cash flow. 

4. Finally, my bigger picture plan was to mix good neighborhood properties with C-class properties.  I thought, and still think, that this diversifies ways for me to grow wealth.  On one hand I have low cash flowing high equity properties.  On the other hand I have no equity, no appreciation properties that cash flow very very well.  

These reasons along with having several no-cost exit strategies for each of my properties made me ok with low cash flow on some of my units.  

[Stephen Moore]

wow congrats man ! I see u are literally right down the road from me right now as well 

[Brett Snodgrass]

Fantastic! Keep up the good work!

[Michael Goodman]

I appreciate you taking the time to write this up @Ryan Detig. This is very encouraging.

[Frank Grigus Jr]

@Ryan Detig thanks for the reply!

[Chris LumLee]

Congratulations! Very inspiring.

[Aaron Gaffney]

awesome work for 8 months, esp including several different strategies were used. Keep up the good work!!!!

[Trey R.]

Nice job!  Thanks for the write up.

[Cody L.]

Way to go man.

I had the same reaction coming to houston from San Diego. Houses seemed so cheap. But rents were high (relative to price).

I thought "wait. I can rent these for MORE than my total mortgage and other costs???" So I bought some and thought "what am I missing? Why isn't everyone doing this???"

Anyway. Congrats.

[Cameron Cameron]

Great job! Would you be interested in sharing info on your lenders?

Thanks!

[TJ Hudson]

Ryan, first off - great stuff! I don't know your financial situation but it sounds like you are borrowing from family if you cant get 100% financed. What are your plans as far as having cash reserves set aside for emergencies (Capex or even vacancies that goes beyond your monthly cash flow)?

[Ryan Detig]

@Cameron Cameron The current Credit Union I use is Education's First FCU. 

@TJ Hudson I have two fall back plans regarding Cap Ex. Vacancies I am not really too worried about as I personally have a well paying regular job that could float 1 or 2 property vacancies for a couple months. I currently have a policy to have minimum 3k per property in my business account. As backup plan if something major happens I also had my father open a HELOC on his paid off property that he is willing to let me use if there was some MAJOR expense. I will try to raise that 3k number up to 5K in the next year as I am not planning on using or living off of the extra income I get from the rents.

[Dorian Jones]

Ryan Detig congrats. Keep it up

[Connor Heim]

Ryan, I love your enthusiasm and positive approach. I'm also in Texas and your lender sounds like an amazing partner. I might have to approach them for funding some of my deals. Do you have a specific person there you work with? Feel free to send the info privately if you prefer. Thanks!

[Ryan Detig]

@Connor Heim No problem.  Her name is Trudy Johnson.  She is in charge of the commercial loan department. 

[David Zheng]

This is one of the best stories I've heard on here. The amount of action you have done is insane and very admirable. Thanks for all the numbers and details too.

Really looking forward to hearing more success stories from yah!

[Will Stafford]

@Ryan Detig Do you know if she can handle loans statewide, or just the Beaumont/SETX area? 

[Ryan Detig]

@Will Stafford  I am not sure sorry. 

[Adam Widdicombe]

@Ryan Detig

Congrats! I take it you still work a W2 job as well? 

I own 3 properties and want to do more but am running into time issues. I can do some stuff at my day job(like write this post;) ) 

Do you have an advice for me moving forward...my wife is totally on board and is even willing to get her RE license if it would help. 

Thanks and CONGRATS!!

[Dave Ramirez]

I have no excuse for not doing 8 deals in 8 months. I need to get on it!!! Thanks for the post!!

[Ryan Detig]

@Adam Widdicombe I do still have a W-2 job yes.  I do some work during my lunch and when stuff is slow.  I would have a much harder time doing this if I was super busy all 10 hours at work that is for sure.  I recommend setting up systems and using them.  For example I have a google drive and have a folder for each property with the same subfolders under each folder.  I do the same thing with each property so I don't get confused were I put documents and photos.  I know that no mater what property it is, the deed is in a certain folder within the property folder and the survey and closing docs are in another.  This makes it easy to find stuff and stay organized.  I also organize my email and have a folder for each property for the same reason.  I suggest using an online system (I use tenantcloud) and do your best to get all your tenants paying online.  It will cost you $9 per month but to me it is totally worth it to not have to go to the PO box and pick up checks/money orders.  

Your wife getting her RE license might help but I think getting her on board with helping you create the systems and being on the same page with each of them will be more helpful.  Then she can help out with the day to day if she needs to when you are at work.