AAR: Tiny Beginnings

Welcome to our first AAR: After Action Review blog post!

After Action Review is a format used by the US Army to log lesson learned after exercises, training, missions, or events. I've made it a little more fun for the sake of the reader.

AAR BASIC FORMAT:

What was supposed to happen?

What did happen?

What do we need to sustain?

What do we need to improve?

AAR from our first deal. We've grown since then.

AAR: 1NOV2015 Ringneck

What was supposed to happen?

YES!!!! We got an off-market house under contract!!!! Woohoo!! We just started, this is amazing!!! Here are the stats: ARV $229K (resource: online marketplace); Under contract at $173K; Repairs needed make-ready at $2K; Assignment Fee $10K; Buyer makes $27K after closing costs in a neighborhood with an average of 35 DOM in the past 6 months. We will sell this puppy in 10 days. Bam! Real estate investing is awesome!!!

What did happen?

YES!!!! We got an off-market house under contract!!!! Woohoo!! We just started, this is amazing!!! Who do we know that will want this?... Weeee don't know any buyers in Houston. Hmmm.

My business partner, Corey, and I spent the next week pitching the deal to every realtor and real estate investor we could find. We ended up making contact with two different and equally important investment groups in Houston; Senna House Buyers (Owner, Sam, was featured on a BP podcast) and Charlie Kriegel Properties.

Mat and Sam at Senna House Buyers were quick to point out the nuances of the Houston market. Corey and I had made the fallacy of thinking that Houston, as a city, operates similar to Phoenix. We were so epically wrong. Houston is an relentless beast!!!

The house we just contracted to purchase is in the middle of a zip code that services the oil and gas industry. The end of 2015 brought massive layoffs to that area with few industries to fill the void. Our exit is now $176K which should get someone a 8% Cap rate on a buy-and-hold deal. 10 Days into the deal and our potential profit margin on our first deal went from $10,000 to $1,500. Still positive. We're good!

After closing costs and three months of title work, we walked away with $1,500 to share with Senna. We started pretty small, but couldn't have gotten started without reaching out to others in the community for help.

What do we need to sustain?

Continue reaching out to whomever you want to do business with.

I happened to mention to one of the investors that I'll be getting my sales agent license soon and that I was looking for a brokerage. She said I should look up Charlie Kriegel. I said who is Charlie Kriegel? She said you don't know Charlie Kriegel? I said apparently I should. She said here's his number. I called Charlie.

Turns out, Charlie runs an investor focused real estate brokerage in Houston. I met with Charlie and he was pretty much in the same position I was in, he was in the first year of building a business. He got his start with investment SFR when a hedge fund contracted him to broker hundreds of homes throughout Houston for their portfolio. Charlie also is a household name in luxury and commercial real estate in Houston. Perfect place for me to learn and grow as an investor.

Since signing on with Charlie in January, Corey and I have built our buyer's list to 200 buyers, we are averaging 3 deals per month in SFR, and we have grown relationships with investors in commercial and multi-family; two industries we want to enter.

What do we need to improve?

Our internal processes must be continually measured and improved. We need to improve property evaluation criteria and market conditions. The indicators were there; increasing number of for-sale signs, FSBO, and vacant houses. Each area has particular economic indicators that directly influence the market value of real estate.