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”. 

[Felipe Goncalves]

This is inspiring. Keep up the great work!

[Peter Tverdov]

What is your setup with your private lender who keeps giving you funds for a down payment that you reimburse after you refi? I assume family of some kind? What are terms? Do they place a lien on the property or JV with you and when you refi you pay back their investment plus interest?

[Ryan Detig]

@Peter Tverdov Mostly family. I had my dad set up a HELOC on his house and have borrowed from that as well. They make it really easy. Me and my dad have a joint bank account. When I need money I send him a promissory note and he deposits money into our joint account (we live 1000 miles apart). With other lenders I just make a phone call and they put a check in the mail. Usually I borrow at 6%-10% interest with no points. If I have a situation where I only need money for a month or 2 then I will just do a fixed $ amount instead of a fixed % amount so that it is worth their time and effort.

[Peter Tverdov]

Originally posted by @Ryan Detig:

@Peter Tverdov Mostly family. I had my dad set up a HELOC on his house and have borrowed from that as well. They make it really easy. Me and my dad have a joint bank account. When I need money I send him a promissory note and he deposits money into our joint account (we live 1000 miles apart). With other lenders I just make a phone call and they put a check in the mail. Usually I borrow at 6%-10% interest with no points. If I have a situation where I only need money for a month or 2 then I will just do a fixed $ amount instead of a fixed % amount so that it is worth their time and effort.

Would love to know what private lenders will lend 6-12 months at 6-10%. I have a few people I have met that are willing to do it but some want liens, I want non-lienable. Would be happy to get a PM if you're willing to share the contacts.

Furthermore, when using these guys for a private loan, are they loaning you the deposit for a HML? Or are they loaning you the full purchase price? What percentage of ARV are you buying these properties with this private money?

[Ryan Detig]

@Peter Tverdov My situation is much less formal than you are talking. It is more of the situation where I make a phone call and say "Hey family member, I have a great deal and need $XXXXX" and they say "cool I can loan than much" and they put a check in the mail. I have not used the traditional HML, they have loaned the full amount. To be honest I think it would be very very difficult to find a stranger to loan with a lien. I currently have 30 years worth of relationship with the people I am borrowing money from which is why it is as easy as it is.

[Phillip Le]

What a great success story !! Keep up the good work. I myself just purchased a flip and fix SFH at a local auction, now just waiting for closing date to start the rehab process. Do you have any tips or suggestions after your 1st flip which you made 10k? And would you consider to do more fix and flip in the future or just sticking with rental business? Thanks ahead for any advice.

[Bob Razler]

Hello @Ryan Detig !  Congrats!  Great work!

[Ryan Detig]

@Phillip Le  Knowing what I know now, I would have made sure to have a home inspector come out and do a pre listing inspection 1-2 weeks before putting it on the market.  That would have given me time to fix any issues so that the buyers inspection would not be an issue.  It also shows potential buyers that you are not trying to sandbag or hid anything.  Also make sure you visit the property often during construction to keep your GC honest.  Good luck and I hope it goes great for you. 

[Phillip Le]

Ryan Detig Thanks for the tip. I see that you just hired GC to do all the works. I planned to work on the house myself, and hire contractors as I go. I feel that way, it would be a good learning experience. Do you any any fix and flip currently in the works?

[Ryan Detig]

@Phillip Le If you have some experience doing the work yourself can be a good way to make extra on a flip.  I would just make sure your look at your hourly rate.  If you are currently between jobs then you are making 0 per hour so doing the work yourself.  If you have a great job making $50/ hour i would say that hiring someone who works for $20-35 per hours is better because it is less than your $50 per hour job.  I currently have 2 flips going on right now.  One is 100% done and under contract and the other will be done in 2 weeks. 

[Phillip Le]

@Ryan Detig I currently have a job (for 5 years) where I'm making just around $22/hr, and I'm planning make the transition to this full-time so that is why I want to do this myself. I just have a little bit of experience, but I'm willing to learn as I go. If I have a job making $50/hr, no doubt I will hire a GC but I just have an average job. Anyhow, how much are you typically looking for a flip? I read somewhere in the forum where it says it should be around 10% of the all in cash (purchase+rehab+closing+etc) to consider a good flip. What rule of thumb do you use? 

[Ryan Detig]

@Phillip Le On your first flip assuming you are going to do most of the work I would be happy making $22/ hr of the time spent working. Contracting everything out, I would be happy to just not loose money. Currently I try to budget for 25K-30k profit. That is buying around the 50k mark, put in 30-50k and selling for 120-160k. Obviously if I were to buy at 200k and put 100k in and sell for profit I would want a much larger profit. Usually a good rule of thumb is your purchase price should be (ARV * 70%) - (repair, holding, closing costs).

[Phillip Le]

Ryan Detig Thanks for the suggestion and help, hopefully I will able to post and share my success story few weeks later.

[Todd Dexheimer]

Great job