$200k in six months - long distance RE challenge

$200k in six months - long distance RE challenge

Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes

I day traded currency futures in a past life and always kept an online journal to keep me accountable, share what I was doing with the community and have a little bit of fun.  

Even 10+ years later, I enjoy reading back over it, reliving the sweaty palm wins, the heart sinking losses and more importantly, seeing the evolution of my mentality and how I dealt with the highs and lows of risk, wins and losses.

With that said, I've set a challenge for myself to make $200k in equity over a six month period, June-Dec 2018, investing in a market that I know well but am not physically located in.

Details are below - enjoy.


Goals


1) Buy (5) single family properties in 2018 and get them refinanced into long term mortgages

2) Purchase under market and achieve a minimum of $40k in equity per property after all repairs are completed

3) Cashflow $250-400/mo after expenses & debt service per property

Funding

1) A single line of credit established on an existing single family property

2) Private money from existing private money lenders that I've worked with over the years

3) New lines of credit that I'm currently in the process of setting up on existing properties - probably will not be established until late August

Background

I work in oil & gas and I’m currently on assignment in Mexico and will be here for another 10 months. The area I’m focused on is Southeast Texas, where I know the market, rents are strong and rising, housing supply is limited and there is major industrial capital expenditure committed to the area over the next 10 years.

I'm an experienced investor, having built my portfolio almost entirely while abroad and avoiding turnkey companies.  I focus on building quality teams, finding decent opportunities and most certainly over-communicating. 

The Team

1) Project coordinator – my boots on the ground. This is our first project together but we’ve built a relationship over the last few months and he’s an active investor in the area. 

2) Various contractors, some that I’ve worked with before, others only via reference. Despite not being in a HCOL, contractor prices tend to be higher in Southeast Texas due to labor demand in the area. A high school graduate that wants to work 60-70 hours a week can make $80k+ and those with further aspirations can make much more in supervision. So trying to find a decent contractor at a reasonable rate is difficult. Hurricane Harvey has further compounded this problem as rates have skyrocketed.

3)  Agent - young, hungry, willing to write a lot of offers.

Let's get started!

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Most Popular Reply

Sean H.Pro Member
Flipper/Rehabber · Pittsburgh, PA · Member since 2010 · 224 posts · 75 votes
8y

Great job so far. It looks like you may have set your goal a little low if you have two deals and over 60% of the way to your goal and it's not even August!

How are you compensating your boots on the ground? 

See this reply in the discussion

229 Replies

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  • Member since 2019 · 5 posts · 2 votes
    7y

    Fascinating journal to read @Sam B! Thanks for making this available. Hope you enjoy your time with us in Maine. 

  • Seabrook/Galveston · Member since 2018 · 274 posts · 178 votes
    7y

    I’ve been struggling to get time for my 2 with work, and I’m only 35-45 minutes away. I’m still amazed you can do all this as far away as you are. 

    By the way, why did you pick this area?  Clearly distance wasn’t going to be an issue as much as you travel. Was it just because your familiar with the area?

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    Thanks @Eric Holman  It's damn cold up here!

    @Bruce C.  Thanks, Happy NY, I hope all is well on your end and moving forward with your properties.  Yes, I was familiar with the area and the gross rents vs purchase price often exceed 1.2% + major capex on-going and upcoming for the next few years.  

  • Rental Property Investor · Houston, TX · Member since 2018 · 174 posts · 100 votes
    7y

    I am sure this has been asked before but I can't scroll 7 pages right now. What lender is facilitating cashout refi loans on ARV so quickly?. Is this a commercial loan? Balloon?

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    @Ryan Johnson  Commercial, 5 yr fixed, 25 yr am.  I was getting prime when I started, now paying prime + 1/2.  I'm happy to send you details and/or a personal introduction.

  • Campbell, CA · Member since 2017 · 8 posts · 4 votes
    7y

    Thanks for the detailed journal! Truly inspiring for us newbies. 

    I'm curious, how much time does managing all these projects take up? Few hours per week since you have the team in place?

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    @Alex Sanciangco  Thank you.

    I would say a few hours a week now, yes.  A little more intensive on the first one as the team was still getting together.  Now that everyone knows the drill, it goes pretty quick with little input from me.

    When I do get to spend a couple days in the area, I'm a little more involved but I would say that's still pretty minimal.

  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    7y

    Thanks for documenting all of this.  You've done a great job and I can't wait to see all the numbers (and photos) once the 7th one is complete.

  • Brentwood, TN · Member since 2017 · 19 posts · 7 votes
    7y

    Great work!

  • Rental Property Investor · Baltimore, MD · Member since 2014 · 408 posts · 209 votes
    7y

    @Sam B. to echo others, thanks for this; it is awesome! Good luck! Congrats! Etc.!

    In your initial post here, you said that you have a portfolio before taking on this challenge. Do you mind going into more detail about your previous experience? Thanks.

  • Member since 2018 · 36 posts · 11 votes
    7y

    What a GREAT article, or thread, it is FASCINATING!!! It is WAY better than them TV shows, because of the level of detail. Can't wait to see the 7 props totals (With cash-flow, please) The funny thing is, when you finish # 7, you will have probably 8-10 already in the works... Why stop? you are doing SO great, it is amazing to see the actual process, and all from afar.... wow. My hat is off to you. Thank you for a great post. 

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    Cool to see such a response from the community.  I've certainly made some mistakes along the way and have learned a lot - the hard way (best way).  Thanks all for posting up.

    @Theresa Harris  Thanks, I'm looking forward to having #7 finished as well.  And then take a long vacation, probably on a beach and probably with a lot of Mexican beer.

    @Chris Maurice  Thank you!

    @Simcha Davidman  Thank you.  Yes, I have an existing portfolio of single family properties in Ohio.  I built that portfolio long distance while I was working in remote British Columbia and then Indonesia.  I have a great team on the ground that helped me cut my teeth and prove the concept.  But it all started with one agent and one awesome dude I met here via BP, a plane ticket and a few days in Ohio see the area and understand what I was getting into.  

    @Eduardo Sanabria  Thanks, I appreciate the feedback.  I'll stop as I really don't need to keep growing at this point and I look forward to transitioning into debt pay down mode.

  • Investor · Katy, TX · Member since 2016 · 3 posts · 1 vote
    7y

    Following this, and thank you for keeping us updated on your journey.

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y
  • Flipper/Rehabber · sandy springs - atlanta · Member since 2019 · 16 posts · 10 votes
    7y

    Great shares of these projects.  With markets where they are, wouldn't it be wiser to flip some of these retail.  If the market crashes, you'll be underwater on these houses but rents tend to go up with the downturn so maybe that's your thinking?  It took about 6 years for values to recover in my market and it never recovered in some.  Enjoyed the shares though.  I shuddered when I saw termite tracks in the roof framing and knew there'd be a lot more.  I'm in the southeast and have had my share of that.

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    Thanks @Rick Johnson

    My personal plan includes debt paydown over the next few years, so a market crash doesn't really concern me.  

    In addition, due to the equity made, it would take a hell of a market crash to make me breakeven, much less underwater.  I'm not saying it's impossible but not reasonable and not something that I concern myself with.

    As posted earlier in the thread, this market is very recession resistant and values didn't take a large hit during 2008.

    And at the end of the day, if we really do see a serious correction, I'll start a "Buying 20 houses this year" thread and take advantage of the sale.  

    Termites be damned!  Thanks for your comments @Rick Johnson

  • Seabrook/Galveston · Member since 2018 · 274 posts · 178 votes
    7y

    Sorry if I missed it, but when you mention equity pay down period, do you mean you plan on paying more than the required P each month if funds are available, or just standard payments?

  • All Over, USA · Member since 2017 · 689 posts · 756 votes
    7y

    Great thread. Have been following along in the background for a while as I've been steadily growing my turn-key portfolio.

    So far ours have all been strictly self-funded, with our household discretionary income, and we have limited ourselves to conventional lending.

    Have wanted to get into more of a rehab model, and also start using hard money/portfolio lending, but was hesitant to do so as I was still building my team on the ground remotely from across the country.

    Luckily, everything has been stable, and it looks like I should be able to get that underway shortly. Will definitely be taking some tips/tricks from your awesome thread.

  • Investor · Los Angeles, CA · Member since 2015 · 213 posts · 162 votes
    7y

    Following.

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    @Bruce C.  I want to get most of these mortgages paid off in the next 5 years.  It's a personal decision, not a part of this challenge and not required but that's my plan.

    @Aaron Hunt Thanks for the comment.  It sounds like you're well on your way and are certainly ready to go non-turnkey.  As always, holler if you have any questions, happy to share whatever I know.

    @Enrique Huerta  Sounds good, thanks!

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    Update

    Property #1 Rented at $1800/mo

    Property #2 Rented at $1595/mo

    Property #3 Now rented for $1700/mo.

    Property #4 Complete except for rear french doors.

    Property #5 Scheduled to close next Friday. Rehab on this will not start until late May. Already rented back to the seller.

    Property #6 Drywall nearly finished, paint to start Monday.

    Property #7 Minor drywall repairs completed, minor roof leaks patched, paint complete, floors nearly finished. Kitchen going in next Thurs/Friday. Detailed scope of work to follow.

    Property #7 Progress Photos

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    Property #7 Scope of Work Details

    Complete interior paint inside, baseboards, new flooring throughout entire home, brand new kitchen cabinets & granite. Bathrooms - new vanities, tub/shower refresh, new flooring, new toilet. HVAC minor repairs, going to try and keep this going for a couple more years. Minor plumbing and electrical (lighting, fans). Minor roof repairs.

    Paint all-in @ 4000 (labor & materials)

    Flooring Install all-in @ 5000 (labor & materials)

    Floor Baseboard all-in @ 1200 (labor & materials)

    Kitchen Cabinets + Granite all-in @ 5300 (labor & materials)

    Kitchen Sink/Faucet all-in @ 300 (labor & materials)

    Bathroom Rehab x2 Cosmetic all-in @ 3200 (labor & materials)

    New Lighting Interior/Exterior all-in @ 2500 (labor & materials)

    Exterior Siding Repairs - minor all-in @ $2000 (labor & materials)

    Minor HVAC Repairs all-in @ $2000 (labor & materials)

    Minor Plumbing all-in @ $1800 (labor & materials)

    Minor Roofing Repairs all-in @ 700 (labor & materials)

    Misc all-in @ 2000

    TOTAL @ 30,000

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    Update

    Property #1 Rented at $1800/mo

    Property #2 Rented at $1595/mo

    Property #3 Now rented for $1700/mo.

    Property #4 Complete except for rear french doors. The refi is verbally approved, just waiting for the appraisal that should be coming next week (week of 11-Feb). A little bit of drama with the new bank and getting everything together to make them happy. This is my 2nd refi with them and it definitely has me missing the relationship I had with my first bank.

    Property #5 I signed closing papers and 2 of the 3 sellers have signed, the 3rd one is a mail away. Rehab on this will not start until late May. Already rented back to the seller.

    Property #6 Paint mostly complete, kitchen paint is just about done, just need to start reinstalling the kitchen cabinet doors and then install new hardware. Flooring should start end of this week. I feel a lot better about this property after walking it yesterday with my contractor. The opened up kitchen to the now enclosed former porch, now dining room, looks fantastic. Once we finish with the light cans, flooring, granite throughout including the huge kitchen island, the property will look great. I dropped off the vanities this morning as well as toilets, sinks, mirrors and some other misc bits and pieces.

    Went over budget a bit with my electrician. I need to replace him as he continues to go up in price and he’s pulled a couple shady moved in the past. That said, at this point, he shows up promptly and gets the job done asap, so I’ll ride it out for these last two properties. Updated photos shown below.

    Property #7 Kitchen is in, waiting on granite. Finishing up bathrooms. The paint and floors look fantastic, I think I finally nailed on the perfect grey (Repose Grey Sherwin Williams #7015 if anyone is interested). It’s light enough that it goes well with the dark floors but can also be used with lighter grey floors. I love it.

    Updated photos shown below.

    https://www.sherwin-williams.com/homeowners/products/SW7015-reposegray/7015#/7015/?s=coordinatingColors&p=PS0

    Property #6 Progress Photos

    Property #7 Progress Photos

  • Seabrook/Galveston · Member since 2018 · 274 posts · 178 votes
    7y

    The photos of your work alway look great. Very impressive. 

    What kind of shady stuff your electricians pulling?  

  • Rental Property Investor · Houston, TX · Member since 2018 · 174 posts · 100 votes
    7y

    Where are you getting your cabinets?

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