Discovered BP, Then Bought 3 Long-Distance Props In 14 Months!

[Tyler Caglia]

Background: 

I've always had an interest in owning rental property, but due to living in CA and my inexperience I had assumed it was only accessible to those with significant cash in the bank, so I figured it was something I'd pursue later in life. However, after stumbling across the Bigger Pockets Podcast one day during my morning commute, it completely changed my life. Purchased 3 out of state rentals over the next 9 months and I'm hooked! Below is a summary of the timeline and the 3 deals:

1. Education:

Listened to my first BP Podcast in October of 2018 and never stopped. I spent the next 6 months listening to BP Podcasts every chance I had, and then it all came full circle when I read "Rich Dad Poor Dad." Followed up with some books by David Greene and Brandon Turner, lots and lots of research, and then gained the confidence to take action!

2. Identify a Strategy:

Due to my location and the cost of owning property locally in the current market cycle (as well as state laws that are not landlord friendly), I was particularly interested in out-of-state rentals. Due to my funding source, I decided that using the BRRRR strategy was the most attractive method I was familiar with to purchase properties quickly and repetitively.

3. Secure Funding:

I decided to open a HELOC on my primary residence, as it had experienced forced and natural appreciation since we purchased it a few years prior. I researched lenders for many weeks until I finally found a credit union that would lend up to 100% LTV! The process was slow and I had to challenge the appraisal, but we were eventually approved for the HELOC, and it was funded in April of 2019.

4. Identify a Market:

I spent a lot of long nights researching the "perfect" market to invest in. I'm a big believer that cash flow is king, so I was looking for an accessible market with strong cash flow. I wanted properties under $100k, in need of rehab, and I wasn't too concerned with long-term appreciation. After a few months of analysis paralysis, I had a solid list of potential markets. I finally decided to just pick one, and went all-in on Columbus, OH. I spent some time analyzing neighborhood statistics, rental rates, and sale prices.

5. Find a Team:

Keeping David Greene's "Rockstars know Rockstars" quote in mind, I knew all it took was finding one member of the team to get rolling. I found my RE Agent on Zillow, as he was highly rated, had significant recent sales, and had a history of working with investors. He has been fantastic since day 1, and has guided me through this process. He had significant knowledge of the local rental market, and his experience owning his own rental properties was particularly helpful. He walks through the properties, takes videos, gives me his thoughts, we analyze the rehab, and I decide an offer price. He also introduced me to a great local lender. I also found a highly rated property manager on BP, and contacted him shortly thereafter (I didn't end up using a PM right away, as I wanted to learn property management on my own before hiring someone to do it, but I just recently hired that same PM to manage all 3 properties). I've since been introduced to an investment-minded local lender through a member on BP, and am actively working with him now to refinance a few properties. In summary: rockstars do know rockstars, and the internet is such a powerful tool that can get you in contact with the best in the business.

6. The Properties:

Property #1:

• Location: Columbus, OH
• Size: 3 BR/ 1 BA (950 SF) w/ garage
• Source: MLS (We found it day 1, deal accepted the following morning!)
• Listing Price: $65,000
• Purchase Price: $71,000 (Due to competitive market, we wanted to get it locked in fast)
• Rehab: $18,000
• Purchase Date: May 2019
• Funding Source: Cash (HELOC) was used for purchase and rehab
  
• Occupancy Status: Vacant
• Appraised ARV: $107,000 (Refinanced to 30 YR fixed at 75% LTV after 6 month seasoning)
• Post-Refinance Monthly Mortgage, Taxes, Insurance: $620
• Current Monthly Rent: $1,150
• Monthly Cash Flow (not accounting for vacancy, PM, or maintenance): $530
• Lessons Learned: HELOC = same as cash. Buying a property with cash is so much easier than using a lender. Everything was signed using Docusign (notary not required), we closed quick, closing costs were minimal. However, be sure to check with your bank for wiring instructions ahead of time so you are prepared. My bank is located out of town, and I realized the day before scheduled closing that if you can't visit a local branch they require a wet-signed letter mailed for any wire transfers over $1,000. I had to overnight a letter to them and we still had to delay closing one day. The whole process was very frustrating. Also, 6 month seasoning prior to refinancing is a killer!

Property #2:

• Location: Columbus, OH
• Size: 3 BR/ 1 BA (950 SF)
• Source: MLS (VA Foreclosure)
• Listing Price: $69,500
• Purchase Price: $69,500
• Rehab: $17,000
• Purchase Date: Nov 2019
• Funding Source: Hard Money @ 12% for purchase and rehab, Cash (HELOC) used for 20% down pmt
  
• Occupancy Status: Vacant
• Appraised ARV: TBD (estimated at $110k to $115k). At 6 months, will refinance to 30 year fixed.
• Post-Refinance Monthly Mortgage, Taxes, Insurance: Estimated at $680 (this one has flood insurance)
• Current Monthly Rent: $1,125
• Projected Monthly Cash Flow (not accounting for vacancy, PM, or maintenance): $445
• Lessons Learned: Hard money is so easy to get it's scary. I decided to go with hard money in an effort to speed up the buying process, and to get a better understanding of hard money in general. This allowed me to purchase property #3 (see below) only a few months later, rather than wait the 6 month seasoning. Still debating whether it was worth the interest rate and closing costs. In working with my lender, on the next purchase I plan to have title include rehab costs in the purchase price on the HUD, so that I can attempt to use delayed financing to refinance my purchase and rehab money out sooner than 6 months. The effectiveness of this strategy is TBD, but I've heard it mentioned on the podcasts and have read about it on the forums multiple times.

Property #3:

• Location: Columbus, OH
• Size: 3 BR/ 1 BA (950 SF)
• Source: Wholesaler who knew my RE agent
• Asking Price: $80,000
• Purchase Price: $77,500 (Includes $7,500 assignment fee to wholesaler)
• Rehab: $0!
• Purchase Date: Jan 2020
• Funding Source: Hard Money @ 12%, Cash (HELOC) used for 20% down pmt
  
• Occupancy Status: Occupied (paying way below market rent)
• Appraised Value: TBD (estimated at $100k-$110k). Will refinance to 30 year fixed.
• Post-Refinance Monthly Mortgage, Taxes, Insurance: Estimated at $625
• Current Monthly Rent: In negotiation, trying to increase to $800 for now. Tenant has been there many years and I see a lot of value in keeping them, even at under-market rent due to the care they have for the property and their history of on-time payments. I believe market rent as the property sits now is closer to $1,000.
• Projected Monthly Cash Flow (not accounting for vacancy, PM, or maintenance): $175
• Lessons Learned: Taking over an occupied property was more difficult than I thought it would be. Had a hard time getting a copy of the current lease and contact info for tenants. Once I did, I found that the tenants are genuinely nice people, so I stressed out about how to tell them I had to up the rent. This, combined with them informing me that the property had some deferred maintenance, made me realize it was time to hire a property manager, as I was feeling a bit lost in this scenario, and spending too much time worrying about small items when I'd rather be buying more property. Also, when buying an occupied property make sure the tenant's safety deposit and partial month's rent (for remainder of the month of closing) are included in the HUD.

In Conclusion:

I know many investors have done much more in much less time, but if you told me a year ago I'd have 3 out of state rentals by now, I'd be shocked. It's been a great ride so far, a lot of lessons learned, and I'm so thankful for the BP community and everything I've gained from it. Hopefully this post helps someone else in the way BP has helped me. I'm now actively looking for my fourth OOS deal, have aspirations to jump into multifamily, and have been doing a lot of research on syndications for both value-add and local development. Please feel free to ask questions or private message me anytime, I'd be more than happy to help someone that's trying to start where I was a year ago. I would also appreciate any feedback or suggestions you may have.