All Forum Posts by: Craig Drummond

@James Gates This post is out of state investing GOLD!  I'm sure your lender & David Green appreciate all of the referrals.  I'll be PM'ing you for the lender referral.  ;)  Thanks for sharing your experience as I'm sure all of your thoughtful responses took quite a bit of time.

After quite a bit of research I too landed on Huntsville to begun my OOS investing journey for all the same reasons you stated. BRRRR is VERY appealing to me; however, I had some cash saved and decided to go for a buy & hold in order to test the waters and build the team. I closed on a 4-plex in January. NOT the 4-plexes near Ascent Trail but in a nicer area of S. Huntsville. As you mentioned, MFR is difficult to come by in Huntsville. On Monday I'll be closing on a duplex in NW Huntsville that should cash flow nicely. Now that I have 2 properties and am more comfortable with the area & my team I'm definitely interested in BRRRR'ing.

Have you had any difficulty obtaining financing as your mortgage count increases?  

@Jay Kadlec  -  Hi Jay - Thanks for the comment!  I use MS Office daily for my W-2 job so that's what I'm comfortable with.  All of my analysis was done in Excel.  The final property report & before/after was PowerPoint.  

Hi @Breanne Lemons!  I was looking real hard at a fire damaged home earlier this year but after reading some of the forums on BP I decided that it was a little too risky for me so I passed.  While evaluating the property I was working with Statewide Fire Restoration and was impressed.  I was working with Peter Jones and he was very professional, knowledgeable about the process, & responsive.  I can't personally vouch for their work but they do have many decent reviews online. 

I'd love to learn more about your project!

Good luck!

Simply awesome!  Very inspiring and I loved the detail provided w/the doses of the hard realities peppered in.  Thanks for posting!

Well, my very first flip FINALLY sold!  What a journey!!!  Ultimately the project went much too long and had many cost overruns.  Fortunately for me appreciation vs. my initial estimate helped to offset much of the overrun.  My biggest challenge was managing the contractor.  He started out very motivated but as the project wore on his motivation waned.  It turned out that he really enjoys decking, framing, and rough-in but despised painting and finishing work and it showed in his work towards the end of the project.  My key areas for growth are definitely in this area.  Some ideas I have are to implement an incentive in the ICA for completing the project before the completion date.  I was thinking a 5% bonus.  Along with the incentive I will add a fee for going beyond the project completion date.  I'm not sure if that would be a flat weekly fee or a % of the project total, similar to the incentive.  I'm open to recommendations.  I've also added a few additional questions to my contractor interview sheet such as "what work do you typically enjoy?" and "what types of tasks do you dislike?"  I figured this will give me an idea as to which areas a contractor may excel in and which areas I'll need to keep a closer eye on.

The other key learning I have is specific to the process I used to create my SOW and my material list.  Because of the way I structured my Excel file it started to become difficult to track material purchases and the area of the SOW they were associated with.  I spent WAY too much time reconciling what was delivered to the home vs. what was on my material list vs. what I had planned for in my SOW.  I have already begun work on a new and improved Excel template.  :)

Thank you for all of the support and comments!  I hope that posting my experience has helped other 'newbies' better understand the process.  I thoroughly enjoyed this process and am excited for the next project (TBD)!!

Below is the final report that I've prepared that shows the final totals for the project.  

@Jessica Wygal  -  thanks!  I'm in contract (again).  This is the 3rd time.  The previous 2 fell out because they decided the drive was too much.....it is quite a drive so I knew it would take the right person.  Finger's crossed that this one sticks!  I'll be sure to post the final #s.

@Marvin Ong - My timeline before taking the plunge on my first flip went something like this.  The company I work for went through a huge round of layoffs ~2 years ago.  That was a wake up call and I decided that I had to do something to help supplement my income.  I've always love the idea of real estate investing so I started reading....A LOT.  I read a lot of BP forums, articles, books, audio books for the car, etc.  It was very overwhelming at first since there are literally 100s if not 1000s of ways to go about investing in real estate.  I found myself in analysis paralysis mode.  I decided to take a step back and document very clearly & specifically my short-term and long-term goals.  This helped tremendously to give me focus.  Short-term I wanted to generate capital and longer-term cash-flow & wealth.  I looked at the options for short-term capital and flipping and wholesaling seemed to be the most feasible for me.  That's when I began researching financing for these endeavours and talked to several HMLs and then decided to try and pitch for private money and ultimately found a friend of the family who said yes.  I did that before searching for my first deal.  The deals move VERY fast so you must ensure that you have the money ready to go at a moment's notice.  It took me ~3 months of searching and evaluating properties to find my deal.   So, all-in-all it took me ~18 months from the time I decided I wanted to learn more about this to the time I landed my first deal.  This can definitely be done MUCH faster but I didn't feel pressured since I have a good paying job, maintain a low overhead lifestyle, and could afford to move at my own pace.

Now that I'm starting to see the potential in this I'm getting more excited about moving faster....much faster.  :)

Good luck!

@Marvin Ong - Here is a list of the books that I read or listened to via audio book in preparation for my journey. Some are not Real Estate related but were great for getting me into the right frame of mind. Many of these books are sold here on BP. One thing I'll point out is that many of the REI books that I've read do a great job of giving you just enough information to get you thinking on the right track but can also lack specific actionable advice. I think Brandon's book below was great about giving very specific how to advice and the book and The Real Estate Rehab Investing Bible gave VERY specific how to instructions and also provided all the excel & word templates that they use online for you to download.  I used & modified many of these in my own practice.

Rich Dad's Cashflow Quadrant - This was the book that got me incredibly motivated towards setting financial goals and real estate investing.  

The Richest Man in Babylon - Great book for getting your head straight regarding personal finances & goals

The Book on Rental Property Investing - Great all around book.  I made my offer based on the advice given here.

The Millionaire Real Estate Investor - Again, great book for getting into the frame of mind of thinking like an investor.

The Real Estate Rehab Investing Bible - GREAT book that goes through every step of the rehab process in extreme detail.  Even how to manage and group the accounting.  This one resonated with me the most and I've now been through it 3 times.  I used many of the principles in this book in my rehab.  I followed this process for creating my SOW and the contractors that bid my project were blown away with the detail provided and all said that it would make the project much smoother.  Too bad that I chose the contractor that kept forgetting to refer to the SOW!!  ;) 

Long-Distance Real Estate Investing - I'm on my 2nd listen now.  I want to take this leap in the not too distant future.

The Book on Flipping Houses - Good book with some actionable advice.  Personally I gravitated towards the Rehab Investing Bible as my guide through my flip.

The Book on Estimating Rehab Costs - Good overall book for what to look for and how to estimate the cost of repairs.  This book reads more like a checklist for the various areas of a home which is the intent of the book.  It was a good reference while I was evaluating different properties.  I found this to be the most difficult part of the process since it felt to me that the costs in California don't really align to the books I've read.  

Finding and Funding Great Deals - good book with many creative ways to find & fund deals.  Ultimately I found my deal by chance through Zillow so I have not tired the marketing and SEO strategies yet.

Ok, I apologize in advance for the long post.  My W2 job has kept me very busy lately and I have not had time to do the fun stuff, like responding to my BP post.

@Joseph M. @Chris Green  @Marvin Ong  This was how my financing journey played out.  First I called several HML (Hard Money Lenders) and got their terms being that I thought I was going to go that route.  Being I had no experience I received the "newbie" quote which typically looked like this.  70-80% financing for buy & rehab costs.  ~10% interest only amortized over 30yrs.  2-3 points and some charged additional fees of $1k-$3k.  I was told by several that the terms would improve as I got more successful flips under my belt.  Needless to say this financing was very expensive.  After researching 401k loans and private lending I figured that I had to at least try.  I put together a detailed proposal which covered the why I wanted to do this, my 1, 2, 5, and 10 year plan, the "Rehab Cycle", the due diligence process that I would follow, and most importantly to the investor how their investment is backed by a real asset, that they would be 1st deed of trust, and the 3 exit strategies that I would employ to ensure the repayment of their investment.  Those looked like this 1) rehab & sell, 2) refinance & rent 3) capital injection by myself (I gave a list of my assets & values that I would draw from - savings, stock, home equity, retirement account) & refinance to pay them back.

I started asking around friends, family, coworkers, and pretty much anyone who would listen and ended up pitching a few folks that showed interest.

At the end of the day it was a family member who took the plunge. They said that they have actually been pitched to several times for similar investments and turned them down. The difference in my pitch was the level of organization & detail provided, thought process for how I am approaching it (thanks to several REI books for this!), and the guarantee I was offering them by showing them I could still pay them back if things went sideways on me.

The terms we agreed to was 100% financing @ 10% interest only due on close. These are REALLY incredible terms!  I was fully transparent in the presentation and showed them what the HMLs offered me.  Then I offered the terms above, showed them how much they would earn on their money and told them that this was the starting point and that all of the terms were negociable.  I was thinking we would negotiate from there but was shocked when they accepted.  

@Luke F.  The flooring I used is manufactured by Republic Flooring and is called Michigan Avenue.  I purchased it from a local Carpet One shop.  I paid $1.49 sq/ft + 0.20 sq/ft for underlayment.  My contractor installed it.

@Marvin Ong Thanks! See my financing story above. Unfortunately, given the very short turn around on this deal I did not have time to get a contractor to look at it and had to estimate the repair costs 100% on my own. This was definitely scary since there were some big issues in the master bath & decking. I triangulated my repair costs by doing research on BP (I found a repair est sheet that someone put together), I downloaded the House Flipping Spreadsheet which is helps to put together a HIGHLY detailed estimation, and then I used the output from those to come up with my best estimate and added 15% for contingency costs. As you can see in my #s I STILL underestimated the costs. Because I knew I could likely be off I was intentionally very conservative with the ARV. I read somewhere that when figuring your ARV you should consider your "sell by a week" price. The essence of the concept was what is the ARV that would sell that house in one week? Use that and then anything above will be bonus. Anyway, being my first go at this I intentionally tried to be very conservative in my ARV, timeline, holding costs, and rehab. If the #s still all worked out then I felt comfortable going for it.

Regarding how long I'm willing to hold....  I have budgeted to the end of June.  Being that I have a decent margin I feel like I have some room to move the dials a bit on price and timeline.  I think this will be needed since it is a tough location (remote) and will require the right buyer.

@Joseph Konney - thanks!  Great question.  The finding a good & reliable contractor seems like a tough nut to crack.  At least for me right now.  In my area the contractors were all very busy and booked up 3-6 months in advance.  That was the response from the handful of ~8 contractors (of the 35+ that I called) whom actually returned my call.  

I just finished a book called "Long-Distance Real Estate Investing" by David Green and he provided a good recommendation of including both positive and negative reinforcements into the ICA (independent contractor agreement).  Specifically, once a timeline is set he recommended adding a week and then asking the contractor, "is there any reason that you cannot realistically complete the project in this timeline?"  Since you added a week the answer is usually "no".  Then he recommends adding a 5% bonus if they complete the project before the end date (positive reinforcement) and a 5% penalty for each week beyond the end date (negative reinforcement).  I'm not sure how this will play in the real world but it's something I'll consider next time.

Also, I had a few learnings along the way that I implemented which helped.  I provided a VERY detailed SOW but my contractor would never look at it and as a result he was having to redo work.  I started having 2 regular meetings over the phone with him each week on Monday & Friday.  These were short 15min meetings that helped a lot to review the work to be done (Monday) and what was completed (Friday) and answer any questions about the SOW.  I wanted to avoid micromanaging and approached it more from an improving communication standpoint so that we can both move faster.

Do you have any suggestions when it comes to finding, managing, & motivating a quality GC?