Well, hello there. It's been some time since I've been actively posting, so I thought I'd drop-in and update y'all on my experiences over the last two years.
First, man I'm exhausted. But also exhilarated! Seeing the culmination of so much work and effort and learning, learning, learning is truly the reward of life as a part-time REI.
I moved from Seattle, WA to Tampa, FL in June 2014. The Seattle housing market was (and continues to be) very strong and I used the capital from that sale to begin my REI adventures. My goal was to be a long-term buy-and-hold investor (using the BRRRR strategy) of multi-family and single family properties (no condos or townhouses). I'd also take advantage of opportunistic fix-and-flips (at least one per year) to build capital for additional long-term acquisitions.
This will be a LONG POST so I think I'll break it up into multiple parts over the next few days.
PROJECT #1: My first project was a 6/4 duplex in Tampa that was REO, vacant for three years, which (on the surface) seemed to need only an extensive interior reno. Prices at that time were very low (and have since skyrocketed) and I purchased it for $44,900. Yes, a 6/4 duplex, 2200 sqft, in a decent neighborhood, close to shopping, transit, and highways for $44,900 that had walls, a decent roof and a nice front and backyard.
How did I do this? Focus and speed. I had multiple alerts setup on Redfin, Zillow, and HomeSnap. Within one hour of receiving the new listing alert from Redfin, I had a tour with the selling agent and within an hour after that, I had a full-price, all cash, no contingencies, no inspection offer to the agent. Mine was the first offer received. Unusual for an REO, there wasn't the typical 10-day offer period where the bank collects offers and then on the eleventh day comes back asking for a final round of "highest and best" offers. I got lucky since this bank (H&R Block) just accepted the first full price offer they received, which was mine! YAY!!
After closing, I began searching for a General Contractor and started on some basic demo (removing old appliances, cabinets, toilets, rugs, etc.). After several weeks of interviewing and receiving bids from contractors, I select one. This turned-out to be a terrible choice. Yes, he was unlicensed, but he seemed to have experience and was eager to build his business (had only completed a few renos before mine). He was the husband of the woman who ran the daycare where my son went to school so I knew he was well-established in the area, was young and eager, professional (in communication, bid, and company appearance) and very personable.
OK-- looking back at my post so far, I'm realizing fully describing everything that occurred on that project would take a VERY long post. So, I'm going to abridge with a list:
- The original reno budget was $35K. The final reno budget ballooned to $80K.
- I acquired two Personal Lines of Credit (PLOC). I'd strongly encourage any investor to explore this option. These are unsecured loans, basically like a big credit card (at a low interest rate). I used my own cash to buy the property and then used the PLOC to fund the renovation.
- The GC stopped showing up after three months. Everything was normal as far as I could tell. Met with him on a Friday afternoon to go over the next day's work and that was it. He was totally unreachable after that. Like he had fallen off the earth. I had paid ahead by about $5K and also paid for materials which were never delivered or installed. All tolled, he disappeared with about $10K. (there's a very long story here, but whew...not getting into it.) Lesson, buy materials and have them on site. Try not to pay ahead, and if necessary, keep it to a minimum.
- For the next three months, I worked every 2-3 hours every night after work and 8-10 hours per day on the weekends to ensure this project got completed. I would NOT let it fail. I would NEVER let this bad situation deter me. I'm just not built for GIVING UP.
- I hired and fired more trades guy than I can count. At first I felt bad about it, but by the end of the reno, I became a much better negotiator, communicator, and would not accept any excuses for work that did not meet my expectations. By the end of the reno, if I didn't like what I saw after the first few hours, I paid them for their work that day and showed them the door. Done. Next!! Never be intimidated or let yourself be coerced into work or a quality of work, you're uncomfortable with. Remain firm and fair. Part of the initial investment for a newbie REI (especially since I was new to Tampa) is going through a bunch of trades guys. You'll be over-charged. You'll have to pay for work two or three times until it gets done right. They're all nice in the beginning. They'll tell you how bad the other guy's work was done. They'll all tell you how much experience they have. Most of it is complete ********. It's an expensive education and just a process of elimination you have to go through. But, once you find a few good guys, NEVER let them go!! ;) Pay them well. Let them know how much you appreciate their work and, as much as possible, keep finding work for them to do. They'll also know other good trades guys and then you'll be on your way.
- Although the project began as a buy-and-hold, by the end of the reno I had sunk too much money in it and needed to get out or I wouldn't be able to acquire additional properties for six months or more . So, I did a For Sale By Owner (FSBO) for the first time. That was a bit nerve-wracking, but the key lesson I learned was that the TITLE AGENCY does 90% of the work. Find a GREAT title agency!! My job was to market and show the property, which I'm good at. Within one month, I nearly a full-price offer and, in spite of all the problems, still made a profit of $30K.
Well, OK-- that's just a bit about Project #1. I still have to talk about (and not in as much detail) about Projects 2, 3, & 4.
So, in two years, I've successfully completed two FLIPS and currently have two long-term HOLD rentals with paying tenants in place. Cash flow is excellent on both rentals, $500 on one and $600 on the other. Tenants are excellent. I've learned a TREMENDOUS amount over the last two years, and there's SO MUCH more to learn...and that's what makes being a newbie REI absolutely and completely engrossing, frustrating, and rewarding (personally and financially).
Happy REI-ing...
Mark...
