Finally Became a Long Distance Real Estate Investor in 2017!

[Chivas Miho]

Aloha BP! So I finally closed on my first rental property on Friday, December 22 after nearly 15 months of educating myself with content from books, YouTube videos and podcasts. The property is a small multi-family 4-unit in Jackson, Michigan near the major hospital and I purchased it as a long distance real estate investor nearly 4,400 miles away from Honolulu, HI (just in time for David Greene's new book). It was originally listed at $79,900 and we closed with a "cash offer" at $60,000 in 2 weeks (seemed like it took a long time while I was in the middle of the process but looking back it's lightning quick compared to my primary residence which took 45 days). I say "cash offer" because the majority of the funds were a combination of HELOC and personal lines of credit funding sources, no traditional lender. After all expenses and vacancies, capex and repairs I'm projecting to cash flow $380/mo at roughly 25% ROI.

How did I do it? Well, unknowingly to me at the time, the process started 2 years ago when I converted my primary residence's traditional mortgage into a HELOC and no longer carried any typical mortgage which gave me an additional $15k of buying power. My initial focus was how to pay off my primary mortgage in less than 30 years by cutting back on the interest paid. Months later, I realized that financial institutions couldn't see the inquiries on my credit report within a small window of time so after I had requested my local bank increase my separate Personal Line of Credit (PLOC) from $10k to $50k, I knew I was on to something. Especially when it was as easy as "Hey, I was wondering if I could increase my PLOC to the maximum?" and getting approved within a couple of days. I had immediately went to the 4 other major local banks in my area and obtained the following PLOC amounts: $25k, $25k, and $20k before finally getting denied on the last one. I held $120k in separate unsecured PLOCs and another $15k in my own HELOC to start my investment journey. My strategy was to make discounted cash offers on the MLS (newbies gotta start somewhere).

Fast forward (after months of failed attempts in my own ridiculously expensive market and in the Houston, TX area just before Hurricane Harvey) I landed upon the City of Jackson, Michigan where my coworker was originally from. I've never been to Michigan but knew I needed to start investing if I was to hit my goal of owning a rental property in 2017. Besides affordability, the City seemed to be making major infrastructure improvements to revitalize the town so I felt some comfort knowing the City was also investing in themselves to be successful. I found a Realtor online and built up a quick trusting relationship even though we've never met in person (or even talked over the phone for that matter). From there, we ran into hiccups on several properties, but he was the buyer's agent on a property that went under contract just before I had a chance to make an offer. What drew me to this property was both that it was a multi-family property and that it was in a location that appeared to be a good neighborhood (according to my coworker anyway). I repeatedly told him I was interested and to let me know if the deal fell through. About a month later, he sent me a notice that the deal fell apart and I had first crack at it. We put together an offer immediately and sent it over that night which was accepted the next day. Within the next two weeks, I consolidated all my PLOC funds to my HELOC and wired the funds to the title company for closing. While small piecemeal funding sources may be less convenient than a single source, it has allowed me to act with SPEED. I recommend everyone to open an unsecured PLOC to have emergency funds available or hold until the right property comes along.

The property manager (recommended by the realtor) is now going through and transitioning tenants to new leases and working on minor repairs to the vacant units.  Going forward, I plan to refinance the property into a traditional mortgage and pull the cash back out to pay back the LOCs and repeat the process again.  This was a great experience and the perfect Christmas present to myself!  Going through this process once, I know I can repeat it again with greater growth in 2018.   

If anyone is investing in the same area, feel free to share your story or message me direct, I'd like to expand my network in 2018.  Thanks for reading and Happy Holidays!