All Forum Posts by: James Gates

Absolutely!

The repairs did come out of the HELOC as well. The HELOC is basically a credit card checkbook , so I was able to write my contractor checks from my HELOC account and they are as good as cash.

 Hey Thuy,

I found a property manager through a recommendation on Biggerpockets. I flew out to meet them when I visited the town and was impressed with their operation. They were a big help in providing information for a first time investor!

 Hey Robert,

This property is in my own name. I live in California where the franchise fee of $800 for an LLC does not make economic sense. Instead, I purchased in my own name (and got the best interest rate because of this), have great property insurance, and took extra protection by purchasing a personal umbrella liability insurance policy.

Hey Marzieh,

I found my contractor through a reference from another member I had met on Biggerpockets through the Huntsville forums. I interviewed him over the phone, and could tell right away he was a hardworking, professional, and straightforward individual. He did the inspection and sent me detailed photos and a scope of work, which furthered my confidence in him.

With regards to partnerships, some of the properties I am on title (and my silent partner is being paid a % interest agreed to in a promissory note), some we are both on Title (if we both put up 50% of purchase + rehab costs), and one of the properties my partner is on Title (they provided 100% of purchase + rehab, I have 50% equity secured through a Promissory Note). The more options you provide partners the better chance you have at growing your business. One of my partners simply wanted a 10% simple interest balloon payment on their money. Another partner wanted a percentage of the equity. Another partner wanted the asset on their taxes for depreciation purposes. Be FLEXIBLE, protect both parties, and partnerships can be a beautiful thing. We have not yet used a lawyer, but we are using one on the property we are currently under contract as the equity % situation is a bit more complicated. For most of the deals we have used a standard and professional promissory note for the state of California. 

 I have found some other properties within 20 minutes of this property, and we are in the process of closing a deal that is only a couple blocks away from this property!

I decided to put an offer in on this property for a couple of reasons. The numbers worked perfectly for a BRRRR, and with an appraisal around 100K and a projected rent around $950 (almost 1% rule), I knew it would cash-flow after we stabilized the property. This property was in a nicer area of town than some other properties I had put offers on (and had not had them accepted), so when my offer was accepted I was ecstatic!

 Hey Brian,

I found the property through a wholsaler.

I funded the purchase with a combination of savings, retirement accounts, HELOC, and partnerships. We used a traditional lender during the refinance process, 30-year fixed.

 Hey Andrew,

Great question. I spent a good amount of time looking into investor markets and deciding where to buy my first rental. From the start, I knew my one of my biggest weaknesses is I have a tendency to overanalyze a situation, and I knew if I spent a year looking into markets I never would get started.

"Better a diamond with a flaw than a pebble without." — Confucius

Perfect is the ENEMY of great. There is no perfect market. But there are a lot of great ones. Instead of spending months creating pros/cons of the top 20 rental markets, I decided to just pick 1 or 2 markets and LEARN them. Even if the market was not the #1 choice I knew it was going to be good enough to make money. As I was reflecting on the above quote I happened to be listening to a Real Estate podcast at the time that mentioned Huntsville. I began my research (including browsing the Huntsville forums on this site) and decided to focus on this city. I booked a flight, fell in love with the town, and moved on from there.

 Hey Janine! I grew up just around the corner from Anaheim. If you would like to talk Huntsville shoot me a private message!

 For this property, because it had to be sold basically the same day (and it was a holiday weekend...) I wasn't able to estimate the rehab costs as accurately as I would have liked. I knew the house was worth at least 99K, as I had a really good comp to provide that value. I trusted the relationship I had built with the wholesaler already when I had flown out to Huntsville. I basically added a 40% buffer to what I thought the rehab was going to be based on the pictures and the conversations with the wholesaler. My numbers for the Rehab turned out to be 12K, I added a 4K buffer, and then rounded that number up to 20 to be super safe. I added a 1-day inspection period to my offer (my contractor could be there on Monday), and I figured if the property was in much worse shape than advertised I could get out. Luckily for me the property was basically exactly as I thought it was going to be, and we later decided to replace the roof completely instead of repair it, which because I had built in that buffer into the offer did not make the deal a bad one for us. 

As regards to managing the rehab, my strategy was just to learn as I go. I had listened and read as much information as I could from Biggerpockets (@David Greene 's book on out of state investing is pure gold), and knew enough to avoid the major catastrophes (like paying the contractor the full payment up front.). The contractor I found was a recommendation from another BP investor, and it worked out great. I made mistakes and didn't communicate as clearly as I should have the expectations of the project (especially in regards to the timeline), but I learned from the experience and have taken this knowledge into future projects.

 Hey Chris!

The refinance cost about 3k total. This includes the lender fees, title fees, and appraisal. I went with a lender that was a recommendation from another investor and they focus almost exclusively on rental properties. They were able to get me the funds from my refinance on the 6th month + 1 day of me owning the property. Most other lenders I spoke to wouldn't even start the refinance process until the 6 month seasoning period had been completed. This lender also charges a flat fee per transaction, and does not have a minimum loan amount (I am working on pulling money out of a 30k property right now) which is a huge benefit to areas that have properties under 50k. Adding a mortgage on this property changed my cash flow by $447, but increased our ROI by literally "infinite" as we pulled all our money out of the property.