2017 Was a Huge Success...but not for the normal reasons

[Mary White]

This year was a big one for my family, but not because we purchased $100 million in assets, but because I haven't learned this much in a year since college. We started the year with a 1031-exchange by selling a former primary residence with plans to purchase a nice easy ready to go 4-plex. During the process I started devouring real estate books, podcasts, and any information I could get my hands on. Something about our market-value purchase didn't sit right with me. We took a lower than we wanted offer on our SF former primary, so we wouldn't lose the 4-plex and just pushed on.

Two weeks before closing, a moldy 4-plex with a busted roof in a fantastic location came up on realtor.com as a foreclosure. I flew into panic mode. This was the kind of property all the smart people were telling me to buy. We sprang into action, cashing out our retirement money and dumping my Ebay Sales inventory and threw in an offer of $95,000. They asked for best offers and I quickly calculated the absolute max we could pay and make this work. At the last minute we won for $116,500...score!

Then reality set in, if we bought both properties we'd be completely maxed out financially and couldn't even afford to start fixing up the foreclosure. We went to get a HELOC, but our DTI was too high. We pondered letting the moldy one sit empty and slowly cash flowing repairs, but there was the 4500 square foot damaged roof that was only going to cause more problems if left alone. We tried everything including switching the turn-key 4-plex to a commercial loan to keep more of our cash.

Two days before signing (after the seller had signed), we walked away from the turn-key property. It cost us $5000 and 4-months of headaches and the work was just beginning. We also didn't fully meet the terms of the 1031 exchange, so there will be financial costs there. The cash close was fast on our moldy prize and it was ours in the beginning of June. Fast forwards to December and three of four units are complete and rented. The units are fully remodeled with LVP flooring, beautiful landscaping, interior and exterior paint, and more. 

The majority of the physical labor was done by myself with some help from my kids (they love demo) and my husband on weekends. It's worth $350,000 and we're set to cash out $250,000 in about 3 months. We'll also have very little CapEx expenses for a while as everything's new.

I've Learned :

1. To not be afraid to walk away even from a good deal (sacrifice good for great) 

2. That Women are warriors - we can do construction too! 

3. To run the numbers but trust your gut

4. To ask for help when help is needed

5. To make your kids work, it's good for them (ice cream bribes go a long way)

6. To take care of your household first. If our personal debts were lower, I'd own both properties right now. 

6. To be courageous! 

We now have 10 doors (4-plex and a 6-plex) and next year I plan to more than double this number and step into mid-sized apartments. I'll step into the new world of leverage and see how high I can go. I wonder how much more I can learn in 2018...