All Forum Posts by: Aaron Millis

Investment Info:

Single-family residence buy & hold investment in Auburn.

Purchase price: $127,000
Cash invested: $22,000

4 bed 4 bath rental in Auburn AL
Purchase Price: $127,000 Current Value: $167,000 Rent: $1700 ($425 per room)
Loan: Conventional 15% down Total Cash Invested: $23,000

What made you interested in investing in this type of deal?

After reading BP's Book on rental property investing and listening to a good amount of podcasts I knew that I wanted to go the buy and hold route. This property stood out to me mainly because of the purchase vs rent ratio.

How did you find this deal and how did you negotiate it?

After trying and failing numerous other ways to get one of these homes- I walked into the office of one of the more popular realtors in the area. I knew he had a lot of rentals himself and was probably very well connected. I was right. The same day he found a seller and I offered him exactly what he was asking. The property appraised for exactly what I bought it for. So really I didn't negotiate at all because I thought the numbers worked for me and time was a factor. I was right:)

How did you finance this deal?

As a single e-4 in the military I managed to save up about 30K over time. Almost all of that went towards my down payment and the rest I held for reserves in case something big broke. I used a conventional loan 15% down with 4.375% interest rate. Also I just used a local bank. I tried using a big name lender initially but that turned out to be a headache and cause problems.

How did you add value to the deal?

I replaced the carpet in the bedrooms with a luxury vinyl flooring from a local surplus warehouse store. Most of these homes in my area have carpet in the bedroom and I know a lot of people, approx 18-30 years old, prefer hard surface flooring. I know this because I asked 100+ strangers around town what kind of flooring they preferred in their room.

However 99% of the value add on this property was just "Right place right time". The value of this home increased about 40K in 1 year.

What was the outcome?

The outcome was/is great. The money I put into this deal tripled in 1 year. I have a cash flowing rental in a hot market. I'm currently renting to amazing tenants that I have had 0 problems with so far.

Lessons learned? Challenges?

I've learned that LOCATION is about as important as everyone has made it out to be. There are a lot of factors that play into this deal being such a great one for me... but the 1 thing that trumps all is location.

Vacancy was and is the scariest thing to me as a landlord. My #1 goal was to have a property that likely never be vacant, and would always be in demand. I feel like I have found that here buying a property within 5 minutes of a major university that pulls students from all around.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

If you are new and looking for a rental in Auburn AL I would recommend Kurt Hayley.

He/his family is big in the Real Estate world here and most people know who they are. I have heard all kinds of positive/negative things from people around this town about his family as professionals. I don't know any of them but him so make your own decisions. But I will say Kurt is great. Very well connected, very professional, and very trustworthy!

@Steve Emling

Hey Steve,

I don’t know how common this is, because I don’t think I have ever seen another investor say they are doing it... but I just use VENMO to collect rent.

If you’re not familiar with it, it’s just another app to send money you can get on your phone just like pay pal and cash app. Really take your choice. The most obvious reason I like it is that it’s convenient and I don’t have to move a muscle to get paid. But I’m also renting to college students in a college town. Us Millennials love being on our phones so i figured why not just use Venmo and it’s worked great so far. You can request and send money and they have a spot where you can write the “reason” for payment. They don’t charge you anything and the money hits like a day or 2 later! I’m loving it.

Hi BP!

Maybe an odd question, I'm not sure but... I'm in the process now of buying a property with leverage using a bank. This will be my second investment home and I know that according to how banks view my DTI that I will pretty much be at my max for lending from banks. I am fine with this, however... lets say I have a flip opportunity I've come across right now in the middle of buying this house that will max out my DTI. If I have an investor that's willing to finance the purchase for me(with cash) would that affect my current purchase or my DTI or anything like that? Would that in any way be a red flag to my lender or the seller/selling agent? Or would it not really be a factor since I'm purchasing it with cash? Thanks

@Eddie Knoell

Hi Eddie,

I sadly don’t have the best news for you... I’d been looking for a decent contractor that is simply reliable around Montgomery and I could not find a single local licensed contractor that I would trust. Started working with 2 different guys that were crap. They stopped messaging/emailing me. They were very slow and not cooperative about getting me bids. And majority of the contractors listed on Google don’t do residential work just commercial.

I actually had to go all the way to Auburn to find someone decent. I havent actually used him yet because my remodel isn’t scheduled yet but so far he’s been great. Very quick to respond and trustworthy.

His man is David White, he’s a home builder in Auburn Al. If you google that I’m sure you’ll find him.

As far as the crap contractors I mentioned before.. they don’t have businesses online so there is nowhere to leave a bad review... but if you come across Mike Henry a contractor in Montgomery- walk away. He left me hanging completely and almost ruined my deal.. not to mention he took me to a property he’s working on for an out of state investor- a flip property- and one of his workers was smoking a cigarette inside the newly remodeled kitchen that would be listed for sale soon. I repeat smoking inside!

If you find any decent contractors around Montgomery please let me know!

@Mary Mitchell Sarcasm

@Dassi Lazar I give them a place to stay

@Aaron K. I'm asking if all of the taxes you were deferring will still be due at the end of that scenario. Or would they just be eaten up by the 2 year residence rule?

Hi BP,

So I know that the jist of the 1041 exchange is that you can keep deferring your capital gains tax when selling properties and buying new ones. I also know I've heard that if you live in a property for 2 of the last 5 years that you don't have to pay any capital gains tax up to 250K if you're single 500K married.

My question: Is it possible to combine the two? So you buy a few properties doing the 1031 exchange each time until you trade up to 4 plex that you fix up on the beach. You live in that 4 plex for 2 years and then sell for a 250K gain. Do you get to keep all of that? Thanks.

@Dustin Woodley Sorry I somehow skipped over your reply. I am doing a reno loan for a property in Montgomery right now and I need a GC that can handle HVAC-water heater- drywall for the ceiling- and install 2 French doors. Those are the main things. I’ve called 100 people in Montgomery. Most don’t do residential, and the couple I’ve found aren’t good so far.

Hi BP, I am thinking of getting my real estate license sometime next year and was wondering if any veterans out there know if you can use any sort of GI Bill/other benefits to pay for the costs associated with getting your license? Thanks