From $0 Annual Rent Profit To $300,000 In 12 Months | Renpro

[Ronald Starusnak]

Hey guys, in the past few years my primary focus has been on fix & flips, new construction & remodels, and generally working on things where we made great money as a company but even with a good reputation and lot of leads coming in for construction I felt limited. We could always add more employee's & amp up the volume of work we did but I was still stressed constantly. I had this hidden force looming over my head because I knew that if I stopped hustling it would only be a few months until everything could come crashing down. 

Construction is tough and apart from saving money, there is no real retirement for us. Coming into 2019 I had just closed three town houses and a had a SFH that I closed late 2019 but hadn't touched it yet. I was still running our construction company but we really ramped up on our investments this year and I'd like to go over our portfolio of investments from 2019.

For privacy reasons I have left out the property addresses but if you're really interested I can share the locations with you guys. We buy with simple fix & flip loans, I've used Limaone a little bit and Templeview Cap. I like Limaone because they're quick and relatively organized but my credit score is under 700 so they're not offering me 75% LTV and their interest rate is 6-7% compared to some local banks who are lending at 5.1%. We do like to work with private lenders as well because it's a much quicker close and a more seamless process.

We complete 90% of the work in-house which I think is a huge key to our success. We have better quality control, better scheduling, and overall a much lower cost. The slowest part of our entire process is the refi, especially the appraisals. Appraisals are taking forever to come back and it's delaying everything. We get bad appraisers too, had an appraiser compare 3 purpose built town homes with a big house that was converted into 3 crappy units; their reasoning was all town homes were on the same deed and we lost $80,000 in value and barely received anything back on the refi. 

THE NUMBERS

We spent $1,117,320.00 on property acquisitions this year, $1,022,460 on remodeling and after refinancing this has given us $1,831,175.00 in equity. After all expenses our annual net profit before taxes will be about $278,602.00 -- We will realize our actual maintenance costs & other costs but we've been pretty conservative with our calculations. We are still filling up our properties but overall this has been a great year for us. 

THE STRATEGY

We are running full force with the BRRRR method. We are able to buy certain deals that don't make sense to other people since we're able to complete the work at a much lower cost.

THE FINANCING

We are using a mix of Hard Money & Private money. I much prefer the private money and I give our lenders a great deal. I have private lenders that fund us 100% LTC, typically three construction draws, they take 1st position mortgage and receive accrued interest at 12-15%. Interest & points are paid at the refinance. We're really close with our lenders now so we tend to give them all of the money we would receive back at the refinance. Our goal is to acquire good rentals quickly. Not to make money off of these refinances. 

I also have a good sized HELOC that I haven't had to use yet. Our lending buddies are happy with the quick turnarounds so far.

THE HOUSES

We've purchased mostly single family homes but we have a few duplexes as well and two apartment buildings. The big building we are still working on and it will take a few months to fill completely. For the larger purchases we try to raise capital to close loans but we've only done one loan over $300,000. 

I only like to buy houses with good architecture, weird houses or properties with a bunch of additions, or general poor design & placement I won't buy. I like stuff at the mid-range market. These markets are much more stable than the higher end rents, they fit my BRRRR model a lot better and it keeps my mortgage lower after the refinance. Not opposed to having debt but I don't want a loan over $150,000 if I'm only cash flowing $500/month.

Since we're not flippers we can buy in areas where houses will appraise fine but I know they won't sell. There are areas around our investment location where houses will appraise for $130,000 but would sit on the market for months and months at that price and might end up selling for $90,000. For us, since we're refinancing and we want that $130,000 appraisal; these deals are killer. A mortgage for $85,000 on a $1,300 rent property is a good return.