All Forum Posts by: Jeff C.

@Jeff C. Thanks for your honest feedback.  

I do run a meetup in Mesa, Arizona where around 200 - 300 different people have come through from experienced investors to brand new newbies.  Some of them get interested in our model and others like more the straight rentals or flipping or the commercial side of real estate.  Some lend to us and we put them in on our WhatsApp group and do lunches with them and make ourselves available to them to analyze deals with them. But I wouldn't say I am a guru in real estate investing.  I have been to guru courses and paid seminars and expensive year-long trainings.  We don't do that.  We just give private money lenders a return on their money and let them learn as much as they are interested in learning from us.  

But to be honest with you.  Several of our properties do get infinite returns because we were able to get all of our money out of the property at the refinance by just following the model that has been explained on BiggerPockets for the last several years.

I have had various feedback from praise to criticism on the model I use as I invest in real estate. I base a lot of my model on the opportunity I wish I had at the beginning of my real estate investing career and partially on what I did have. Anyway here it is and I would like to hear any and all feedback from those who wish to comment.

I buy houses that are below the medium price point for the area. I want my "all in" to be at 75% or lower of what the ARV will be (including purchase, rehab, carrying costs and hard money costs) and my "all in" needs to be at 145k or less that I can rent out for up to $1300 a month. Then I refinance and suck as much of my capital out of the property as possible (your basic BRRRR strategy). Then I lease option the property where the tenant/buyer gives me $3900 for the option to purchase the property within the specified time frame (usually either 3, 4, or 5 years depending on when I want the proceeds from the sale). The tenant buyer pays a premium rent for the right to buy the property and they take care of most of the repairs so the management of the property is pretty light compared to a straight rental. Following this strategy usually produces 3 times the profit of a regular flip and nets about 50k - 60k in profit over a 3-5 year period of time per property.

In order to do this and scale this model, I usually purchase a property with hard money and then I refinance it into a 20-year commercial loan or portfolio loan. In order to fund the rehabs, I use private money from individuals who want to learn the process of lease optioning a property. These private money lenders will lend me anywhere between 10k and upwards of 40k for a rehab. I then include them on my investor/private money lender WhatsApp group and I show them the process of acquiring properties, managing the rehabs, advertising for tenant buyers, managing the properties, etc. And I share with them all of my contacts and my paperwork. And I make myself available for calls and questions through the process. The private money lenders earn 8% - 10% APR on their money while it is invested and they get to learn throughout the process.

I personally would have loved to have had someone provide this opportunity for me when I was starting out where I could learn the process by watching an experienced investor buy cash flowing properties. And all I needed to do to learn the process and get access to the investor was to fund one of his rehabs. And then I would get my money back plus interest. That would have been awesome for me.

The criticism that I get from some people when I explain my model is they say, “that’s it? You mean I fund the rehab and we don’t split the profits?” If I fund the rehab then I want half the profits.” Even though I found the property, coordinated the hard money, and have established crews to do the work, I have the successful track record, and I have my assistant manage the whole process.

Tell me what you think of my model. Do you think I am being helpful to people or that I am taking advantage of people?

I was recently reminded of a post @Arianne L. did on her success in real estate and when I went to that post again I saw how many people had been affected by it, so inspiring! Then I just happened to look at how many times I had posted on BP and I was at 999 posts since I joined. Well, what could be better for my 1,000 post than to tell my story and hopefully inspire some people to think bigger than they are right now and go for it!

4 years ago I decided to really take real estate investing seriously and try and build a real business around it. I had been a weekend warrior landlord for a few years and flipped 1 house the year before when I committed to taking this leap. I had a full time job flying for the Navy at the time and thought it would be a good idea to start building a business. Essentially, it wasn't long before I had 2 full time jobs! I was actually on the BP podcast shortly after I started getting serious about REI that you can check out here if you want some more details. I think it will be funny for me to go back and listen to that episode now to see how far I have come since then, we always look at what the next milestone is and rarely do we take time to look back and appreciate how far we have come.

I think the best way to lay all this out is to outline what the results are and then go back and state the lessons learned from a lot of it year to year.

Original Plan 

December 2015 – Build a business to flip 12 houses a year netting $30k per deal making me $360k a year. Retire from the Navy at 20 years and enjoy both incomes.

2016 Highlights

Hired my first person as an assistant to handle lead intake and admin support

Jan - Apr: $18k spent and no income yet

April 18: Closed my first deal and made $9,825 on a wholesale fee

May: Did another wholesale deal making $9,900

June: Closed 6 wholesale deals for a total of $55,086.21

…….

Dec (biggest month): Closed 14 deals for a total of $111,767.18

The total in 2016 was 67 deals, 12 flips and 55 wholesale deals for a total gross profit of $667k. By the month of December I had scaled up to 4 people working with me and we did $111,767.18 that month. So, we were on track to be a 7 figure business if we could keep that going!

2017 Highlights

Jan: 14 deals for a total of $105,659.66 – second month in a row!

Feb: We were up and running in a second virtual market that I had only been to once

Apr: We closed our first deal in that new market for a $15,100 assignment fee, had 6 people working for the company now and I LEFT MY FULL TIME JOB WITH THE NAVY. More about this later.

Jul: Biggest month we had ever had, closed 28 deals for a total of $190,898.89 in gross profit

The total for the year was 183 deals and $1,315,795.40 in gross profits. About 20% of them were flips and the other 80% wholesale deals.

Hired a COO to run the company in December 2017.

2018 Highlights

Jan: 8 deals closed and $19,493.61 profit (ouch!) We decided to flip a ton more in 2018 and were trying to flip 50 houses this year.

Feb: Up and running in a 3rd market. 11 deals with $57,400 profit – again we bought more of these houses!

Mar: 16 deals for $237,033.88 profit so we were back in business

Apr: Closed our first deal in new market on the 25th of this month

Aug: Best month ever to date, 25 deals for $359,875 profit

Total for the year was 187 deals and $2,351,452.59 in gross profits. Similar 80/20 ratio of wholesales to flips

2019

Goal at the start of this year was $3.5M. This post is already too long so I will do another one toward the end of the year to tell you all how we are doing! 

Image of all month to month over these 3 years (through Sep 18) so you can see the roller coaster it is!  Something happened each time to make that line go up and down, usually people issues.

This post became way too long so I will post my lessons learned below it...

@Jeff Cagle An A+ contractor shouldn’t have to pay for an “investors” work to be completed. Too many times “investors” want something for nothing and from personal experience they don’t seem to think paying a contractor on time is very important. I would never take a job without a percentage up front. 

@Jeff C. he actually wants 40% of rehab budget up front.  Since it was my first deal with him and I only had $15k, I sent him what I had.

I'm not disagreeing with you as I think that advice is generally solid, but when you find A+ contractors (which he is), I'm only slowing him down by not sending him money upfront.

I'll probably send him 50% rehab budget on my next flip using him he's that good.

Hey guys. I'm on Realtor.com looking at properties and I've come across a lot of properties that in the description say "no FHA" and I'm just wondering if anyone knows why that is. Wouldn't the seller be getting the same amount of money either way

@Jeff C. Volume pricing still does not get volume pricing! We manage near 900+ upper end SFH's - and good vendors are difficult to find and keep....especially legitimate vendors with licenses and insurance. The upper blue collar (plumbers, AC, electrical) are easier - "make ready" specialists working flooring, paint, and basics are tougher. I did see some fair pricing above quoted on round figures.

I would also point you to speed of completion as a big factor.  We have seen this MANY times from out of state investors who we get quotes for on make ready's for their rental homes where they can't believe / understand the pricing.  I saw one investor fly out here himself, illicit his family to help him with work and completed his own make ready in 90 days.  Good for him!  Except, we could have done the work here in 9 days.  

In the effort to "save" money - he cost himself atleast two month's of rental income.  I hope you are considering this during your shopping phase.  :)