All Forum Posts by: Beau Watson

Update!!

This year we have put over $8k into one of the units. Another $1200 in tree work. Another $600 in misc improvements. This month we will be refinancing into a conventional 30yr loan at 3.625%. This refinance will allow me to take cash out at $18k.

Quick summary. 

Purchased for $105k

Down payment/closing cost $37k

Maintenance/rehab $11k 

Appraised for $141k

Cash out refinance $18k

Owe $106k

Gross yearly rents $22k 

Not bad for my first deal! I just need a few more of these! 

@Rumen Mladenov

I see it from the other side. Truly, let’s all keep in mind you are unaware of how I grew up and where I came from. As I said, I am VERY CLEAR. How many applicants have already come in. I coach these potential tenants about picking the earliest times slot. I coach them to NOT put in an app if they haven’t seen it. I coach them to not waste their money if they have other properties they like as well if I have numerous apps in. At the end of the day everyone is going to make their own choices. No matter the advice or honesty I lay out in front of them.

Let me ask this question..... and this is to anyone. How do management companies make their money? Just off the monthly % from the property owner? Do they mark up move-in inspections? Do they add a % to work orders?

Let me go a step further.... how do general contractors make their money? Is it only labor? Or do they add a % to the material cost when buying?

Evening everyone,

As I read through this whole thread quite a few thoughts come up.

First and foremost, there is quite a few different opinions and @Cameron Riley was taking them very professionally from everyone. Kudos to you sir for taking all the opinions in even when some of them seem to be negative towards you.

Second, it would be my opinion to do a mix of a lot of these ideas. The beauty of a forum like this is to get all the different opinions and use what works for you in your business at the stage you are in.

Third, let me tell you how I have done it recently (Sept) with my C class duplex.

We roll out the marketing as would anyone. As interested parties connect with me whether it is via text, call or email, I immediately ask them to text me their email. Nightly I send an informational email out to all interested parties (I keep a generic version of this in my drafts so it is easy to copy and paste). This email has info about pets, security deposit, verbiage about checking the surrounding community, criteria to qualify, link to my website where the application is and lastly a date and time slots for an open house. They are usually 45mins apart and when I speak with a potential tenant I am honest about it being first come first serve and they should pick the earliest time slot available. I also advise them to come see the place first before filling out an app. I spend a full day at the home and I am very honest with each potential applicant that it is first come first serve. If they ask how many showing before them. I’ll tell them. If they ask how many applicants. I’ll tell them. I will take applications for 48hrs after open house, not because I cut it off but because I want a tentant so I jump on doing the work to get someone to sign the lease. This last round I got 9 applicants at $40 a piece. I did get 2 applications before they even saw the place. 1 showed up and was in the first three. The other didn’t show (why would I refund that) I did a BG and credit check on the first three that met qualifications. 2nd person ultimately got it.

Now for all of those that are saying the app fee should be refunded. First of all, app fees to me do not solely include BG and credit check. But my time. My monthly fee for the software that does it. The time it took to learn. The time I spend at the open house and getting ready for it. So let’s break down the math. I brought in $360 total in application fees. I spend $60 on BG and credit checks. This leaves $300. I spend $45 a month for my management software. I spent 1hr driving to my rental. 1hr cleaning and staging. Another 6hrs showing the home. Drove home 1hr. Add it all up times two because my wife came and helped...9hrs x 2 people = 18 labor hours. $300/18hrs = $16.66 an hour.

Now to those saying I or anyone should refund that money doesn’t break down there life in terms of time. I do. So this is why I charge what I do. I know it is ethical because I am VERY open and clear about what stage they are in if they ask. We can all make more money but what you can’t get back is your time. So if I am going to spend my time and my wife’s. I make sure it is worth our time.

I appreciate all the difference of opinions on this thread and again kudos for all the constructive criticism and how professionally everyone is receiving it!

@Jackson Clement

You can absolutely use a hard money loan. Just make sure to read and reread all of their mortgage agreement with you. Prepayment penalties etc.

@Arthur McCormack

I am with the others, you seem to have a personal connection with the tenant if he is paying you cash in hand. You just need to remind him in person to his face what is in the lease he signed. Also maybe help them come up with a different solution to paying you. Later due date? Earlier due date before the car? Reminders sent out at 10 days and 5 days that rent will be due soon. Ultimately sounds like they will need to go sooner rather than later but you can try a few of these items in the meantime.

I would look into rentec direct. Their property management software has been awesome for me! Keeps track of everything professionally and at an arms length. Been using it for almost a year now with 5 units.

@Kevin Lanphear

Kevin,

I am in the Alpharetta area looking for a partner to do a few SFH BRRRR deals. Have good vendor/contractors. Need a partner that has some funds and is willing to jump in with me!

We should get coffee and talk about how to keep our money washing in some BRRRR deals in early 2021!

Thank you sir!!

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Covington.

Purchase price: $108,000
Cash invested: $37,000

Small 1400sq ft duplex in Covington, GA
Light cheap renovations done a couple of years ago.
Inherited tenant on one side.
HVAC replaced already

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

I knew my money was better used in a real piece of property rather than sitting in a mutual fund. I was interested in a duplex because I always want some money coming in, a SFH doesn't give you that. I couldn't afford anything bigger. Smaller was not an option

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

Wholesale company. New Western. I used the 1% person rule and stuck by it while negotiating

How did you finance this deal?

Hard money loan. 7.55% interest rate. 25% down.

How did you add value to the deal?

After inherited tenant moved out we are currently in the process of renovating that one side of the duplex. Small bit of landscaping and a big portion of adding value was knowing the market rents, marketing the property correctly, screening for good tenants and charging appropriate rents.

What was the outcome?

Not fully done yet. We will be looking to refinance out of the hard money once this renovation adds value. After that and bringing rents from $575 to $875 on the renovated side we should see a cash on cash return of around 18%!!

Lessons learned? Challenges?

Wont make money right away. Be ready for that. Tenants are gross after they have lived there for 3 years with no inspections. Be ready to kill roaches.

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

I have a good contractor I will absolutely be bragging about his job when we are done

@Anthony Dooley what lenders do you like for a duplex refinance out of a hard money loan that is under an LLC?

What format is this meet-up? Mostly networking and grabbing a few beers? Guest speakers?

I am also new to the REI world and bought my first duplex last week. Would love to connect with more like minded individuals in my area.