All Forum Posts by: Greg Houts

Hi Ryan, I'm currently renting it for $1750/month, with a 3% increase upon lease renewal.

Investment Info:

Single-family residence buy & hold investment in Newnan.

Purchase price: $180,000
Cash invested: $45,000

This was my first "real" rental property and was purchased while living out of the country. They say that the first property is often the hardest. Ironically, this one has been the easiest. Newnan is booming, so the 40% ARV appreciation is just icing on the cake! Once I finished the first deal, there was no turning back.

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

I've lived and worked a full-time IT job in Bermuda for the past seven years. I knew that there had to be a better way to invest in my future aside from trading time for money, paying insane taxes (even with a non-resident discount) and praying the stock market doesn't implode my 401(k) and IRA. I was an unintentional landlord in 2014, renting my Atlanta condo before moving to Bermuda. I grabbed the BP out-of-state (country) investing book and gave it a shot (as a proper business).

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

I was working with several wholesalers and agents trying to find something in the Atlanta area under $200k that didn't require a major rehab. After analyzing 15-20 properties, I discovered Newnan and found my agent through Zillow. She and her husband are both agents and investors, and she took my project on like it was her own. We stuck with MLS. This one came up, I did a FaceTime walk-though during a work conference lunch break, made a cash offer and held firm on price.

How did you finance this deal?

I bought the house all-cash and paid the initial rehab/repair in cash. Once I had a tenant in place and the deed "seasoned" for six months, I was able to refinance. Initial cash-out refi was done in 2019 with a 5/1 ARM through a portfolio lender (property was in a LLC). I recently refinanced into my personal name and locked in a fixed-rate 30-yr. It was scary to sink that much cash into a deal up-front. Cashing out the post-rehab equity, while having a cash-flowing asset, was a great feeling.

How did you add value to the deal?

The property had five grown men living in it before I bought it. None of them took care of the place and the interior was pretty horrifying (like a frat house for middle-aged men). It was an eyesore compared to the newer houses on the block, but it had great bones. I completely remodeled the interior, repainted the exterior and fixed up the yard so that it added value to the surrounding houses. The ARV immediately increased neighboring property values.

What was the outcome?

I've since rented it out to young families, helping build their credit as they save(d) for their own houses. I'm a responsible and caring landlord, which has seemingly paid off.

Lessons learned? Challenges?

Long-distance investing can be done but it's not without challenges. The house was in worse condition than the initial FaceTime call indicated, so the rehab budget increased. I've also had to replace the hot water heater and HVAC with tenants in-place. Given the age of the original units, I should have budgeted these capex repairs up-front and immediately taken the depreciation. Another mistake was initially financing within the LLC and paying closing costs twice to lock in a fixed rate.

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

Yes. Katherine Wible in Newnan, GA, is one of the best agents that I have ever worked with. She put me in touch with her contractor network, which has been invaluable when managing this house from a different country.

Investment Info:

Single-family residence buy & hold investment in Newnan.

Purchase price: $180,000
Cash invested: $45,000

This was my first rental property. It was purchased via MLS through my amazing realtor in Newnan, GA. The house required mainly cosmetic repairs, including extensive sheetrock fixes, a remodeled kitchen, updated bathrooms, a fresh paint job and landscaping. Luckily, tenants have always paid on-time and taken care of the house. I was able to increase rent with a tenant change and refinanced into a low, fixed-rate 30-yr mortgage with approx. $650/mo cash flow before reserves. They say that the first property is often the hardest. Ironically, this one has been the easiest. Newnan is booming, so the 40% ARV appreciation is just icing on the cake!

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

I've lived and worked a full-time IT job in Bermuda for the past seven years. I knew that there had to be a better way to invest in my future aside from trading time for money, paying insane taxes (even with a non-resident discount) and praying the stock market doesn't implode my 401(k) and IRA. I was an unintentional landlord in 2014, renting my Atlanta condo before moving to Bermuda. I grabbed the BP out-of-state investing book, figured a different country counted, and gave it a shot.

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

I was working with several wholesalers and agents trying to find something in the Atlanta area under $200k that didn't require a major rehab. After analyzing 15-20 Atlanta properties, I discovered Newnan and found my agent through Zillow. She and her husband are both agents and investors, and she took my project on like it was her own. We stuck with MLS. This one came up, I did a FaceTime walk-though during a work conference break, made a cash offer and held firm on price.

How did you finance this deal?

I bought the house all-cash and paid the initial rehab/repair in cash. Once I had a tenant in place and the deed "seasoned" for six months, I was able to refinance. Initial cash-out refi was done in 2019 with a 5/1 ARM through a portfolio lender (property was in a LLC). I recently refinanced into my personal name and locked in a fixed-rate 30-yr. Classic BRRRR?

How did you add value to the deal?

The property had five grown men living in it before I bought it, and none of them took care of the place. It was an eyesore compared to the newer houses on the block, but it had great bones. I completely remodeled the interior, repainted the exterior and fixed up the yard so that it added value to the surrounding houses. The ARV immediately increased neighboring property values.

What was the outcome?

I've since rented it out to young families, helping build their credit as they save(d) for their own houses. I'm a responsible and caring landlord, which has seemingly paid off.

Lessons learned? Challenges?

Long-distance investing can be done but it's not without challenges. The house was in worse condition than the initial FaceTime call indicated, so the rehab budget increased. I've also had to replace the hot water heater and HVAC with tenants in-place. Given the age of the original units, I should have budgeted these capex repairs up-front and immediately taken the depreciation. Another mistake was initially financing within the LLC and paying closing costs twice to lock in a fixed rate.

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

Yes. Katherine Wible in Newnan, GA, is one of the best agents that I have ever worked with. She put me in touch with her contractor network, which has been invaluable when managing this house from a different country.

1. A friendship founded on business is better than a business founded on friendship. - John D. Rockefeller
2. Don't try to eat the entire elephant at once - Unknown

These two quotes pretty well articulate my biggest mistake(s) to-date. I successfully completed my first BRRRR while living out-of-country. My local investor-agent and her contractor treated my property as-if it was their own and the entire process, from initial video call walking the house to finding amazing tenants, was done in three months. I was stoked and ready for more. I had the cash, but I lived 1000 miles away in the middle of an ocean. So I decided that "boots on the ground" was a natural progression forward.

I hastily entered into a three-way partnership. I brought the cash and strategy, and the others brought construction experience and a local team. The partner I knew the least owned a construction company and a landscaping company. There is a vast difference between using someone as a contractor vs forming a business partnership! The "third partner" also talked me into granting checkbook access (umm, yeah...I actually did that). We never laid the ground rules for how the operations would work between leveraging his existing companies and his partnership stake in the shared LLC. After landing a 1920s full rehab house in urban Atlanta, he took his various landscaping and construction teams to the site and happily invoiced the partnership from his other companies, including over-the-top travel expenses ($200 steak dinners and a posh AirBnB). The money was withdrawn from the LLC account before I even saw the (one-liner) invoices. While his team completed the building and landscaping demo, the partner was charging me full-cost from his existing companies while still signed on for a 33% share of profits from the LLC.

In hindsight, I feel like the biggest fool on the planet, and it was a painful lesson to learn. Luckily, we finally got it sorted, he resigned from the LLC and we were able to move on. Be careful who you share equity with and ensure the ground rules are clearly understood by all, in writing, up-front! In the meantime...

We landed two more off-market deals in parallel with the first rehab. They looked like stellar deals on paper and we thought we did our due diligence. We had cash to run all three in parallel, based on the initial budget. The second 1920s home was bought with a Satanic ritual book and a few needles in the back room and a Bible in the front room. Whatever could go wrong? It went wrong. About $150k over budget wrong...with everything from a chimney suspended in mid-air to mold remediation and extensive termite damage (all of which could have ben avoided with better up-front diligence). That overage forced a 10.5% bridge loan on the third house, which we had to hold for nearly 12 months until cash freed up from the other two rehabs. We finally sold the third house as a flip for a $15k loss, completed and rented the "cursed" house (it's been a fun rental!) and the first one has been stuck with city planning for over a year and now has a squatter with a tent inside and a little pink plastic toilet. We decided to help out with the affordable housing crisis in the meantime until we finally get our permits cleared up.

We've since moved onto two other more successful deals and plan to ramp up even more once the Atlanta nightmare is over. Looking in the rearview, I sometimes want to bang my head on a wall. Other times, I simply laugh and know this will all be worth it in the long run. Persistence pays (insert eye rolling emoji)! I hope it made for a good story.

Best of luck to y'all!

Greg

@KC Conti Loads of great suggestions and shared wisdom on this thread. I've lived out-of-country for the last six years so all of my investments have been OOS. As recommended by others, start by buying and reading David Greene's book. I would say hands-down that the realtor you choose is likely the biggest factor. I have been absolutely blessed finding amazing investor-agents who treated my investments as their personal investments. Key is that they are all investors themselves and have a vested interest in my success, since they know that the better I do on one investment would bring them additional business on future investments in their area. The rest of my team has (mostly) stemmed from my agents' contacts (e.g. contractors, lenders, etc.).

While nothing can replace walking a property in-person, technology can get you pretty close. If you find a prospective property, have your agent (or representative) walk you through each property via video call, starting from the outside-in and then room by room. Check every inch of the property via video call. The amount of time an agent takes to do that is equivalent to the time it would take them to show a house in-person, so don't feel bad for painstakingly going through every detail. Record it if possible and take detailed notes. Then run your own math, both for ARV and estimating repair costs. Your agent can facilitate having contractors walk/view the house and provide estimates. Then compare your numbers with your agent's number to finalize you offer price (if it's still in play after running the math). Regarding closing, you should be able to assign limited power-of-attorney to your agent to close on your behalf (make sure the closing attorney is on board first).

Finally, with 1-5 properties and a list of contractors, you don't need to pay a full-time property manager. I pay my agents the equivalent of one months' rent to help screen tenants and show the property. They do the listing/marketing, field the calls, show the house or work with renter's agents, etc. I then make the final call based on the credit report and background checks, etc. That A) puts me at arms length for legal reasons and B) takes all of the back-and-forth off my plate. I then self-manage the rent collection and maintenance/repairs. Yes, that can make you more beholden to contractors following through and requires more oversight than someone local, but I don't see the benefit of paying a PM (and still having to "manage the manager") until I scale to 10 or more doors.

P.S. Don't forget the state tax implications by running a rental in another state. And if you plan to use an LLC then adds additional considerations, etc. Hope this helps. Feel free to ping me directly and happy to share my experiences.

@Dawn P. Love it!

My first reaction to this post was, “Dang, maybe I should have looked harder behind the walls in the two Atlanta crack houses I bought!” Maybe I missed a stack of cash between the needles and Satanic ritual book in the back room and the Bible in the front room?

Thanks for the humor everyone!

@Philip Johnson I live out of country and own a rental in Atlanta. Managing from afar isn’t an issue, but as you said, showing the property can be a challenge.

I paid my realtor one month's rent as a fee. She did all advertising/marketing via online media and MLS listing, showed it to over 20 different people, ran all of the background checks and credit reports, etc. While it may sound expensive, she filtered out the noise from the 2-3 serious, potential tenants. That made my final selection much easier and it hardly took any time from my end. She used state approved forms for the application, lease and pre-move-in inspection, so no questions about following the correct guidelines, etc.

Using a third party professional also provides a means to insulate yourself against legal issues. Some people are just nasty, and even if they’re completely unqualified, they may try to sue you for any sort of prejudice in the tenant screening process. Using a professional in-between should help mitigate that. In summary, she was worth every penny.

@Ethan Henning I'm interested buddy! @Terry Burger my business partners are in Greenville. Would be great to catch up. The more we all network, the more we accomplish for each other!

@Paul C., congrats on this deal and for taking the first step!!! Thanks for having the guts to post up the details. As mentioned above, everyone is just trying to help.

I'm just wrapping up my first BRRRR rehab down in Newnan (while living outside the US). Just taking that first step was the hardest part (the BP book on out-of-state investing is fantastic BTW). My CoCR isn't stellar. But it's a start! I would likely be mortified to post it up and see the critiques! That said, I have learned so much that the experience alone makes up for the gap between an amazing versus average return. As @Ethan Henning mentioned, it's a solid base hit and it got you into the game. I never expected to nail a homerun on the first at-bat. But it's so addictive once you get started, you'll be hunting down the next one before you know it!

Great advice from @Julie Kern. I went into mine wanting to make a starter home look like a palace. Luckily, my agent and lead contractor were nice enough to point me in a sane direction, and it's saved me thousands. Stay on top of your budget like a hawk and understand the level of home that you're rehabbing. Make sure that any enhancements you do are in-line with other properties of a similar type. Best of luck and have fun with it!

@Michael Quarles, thank you for the reply. That's great information and makes me feel much better.

Regarding the original subject of this thread, have you previously used ListSource for list generation? If so, could you please comment on how effective you found their services and the quality of the data produced?

Thanks!