All Forum Posts by: Richardd Barran

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $105,000
Cash invested: $65,000
Sale price: $245,000

Screw Analysis Paralysis. This was it. I'm taking action!
Narrator's voice "And this is when I realized I screwed up"

We would run into some obstacles that would require additional work that could push the project over budget and cause delays in closing the deal. Luckily, this was a problem I was prepared for. We told our contractor that our budget was 55k, but our real budget is 65k for emergencies and situations like this. We call this our "oh ****" budget. And boy, did it come in handy.

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

This is a great way to build capital. Our end game is STR's and this is a great way to afford them!

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

MLS, escalation clause, inspection contingency.

How did you finance this deal?

Private Money, 70% ARV

How did you add value to the deal?

I took action on the deal we found on MLS, walked it, and put in an offer at a time when people were buying way above the asking price. We created a sense of urgency by adding an escalation clause but within a short time window of response.

What was the outcome?

In the end, we lost about $4500 after paying our lender contractor and realtor, but we gained more knowledge with that flip than I did with $120,000 worth of student loan debt. And honestly. This was the best $4500 I ever spent and would not change it for the world. The wealth of knowledge is immeasurable.

Lessons learned? Challenges?

1. We learned how to create a draw system for contractors to eliminate the possibility of theft, rehab due diligence, and create accountability to make sure our contractors our happy and paid on time.
2. TRUST YOUR GUT. We should have fired our contractor the first time something was 'off".
3. You can find great work through referrals of other RE investors. At this point, I do not hire anyone without vetting them first from personal experience with my peers and networking.

As an investor, a great realtor that REALLY understands this side of our world is so rare and valuable. It's hard to find them, even in smaller areas like where I live, because the realtors who usually understand it, practice it themselves. They flip/brrrr/STR/rent their own properties making them another form of competition.

That’s not a bad thing though. It makes them seasoned and experienced allowing them to give you better service.

It is hard to find a realtor who would pass up a great deal they can use for themselves, but hey. They’re out there. Sometimes they don’t have the time, the capital or even the patience, allowing us to swoop in and help out.  

Whenever you find someone like that, treat them like gold. If your realtors find you a great flip, let them list it at 6% so that they can keep finding you great deals repeatedly, pay them for gas and food if you’re investing remotely and they check on the properties for you and take pictures for progress updates, etc. 

This is a great point, and I really want to emphasize this as well. 

As far as hard money goes, my meetup is how I met my mentor and my HML, who is now my PML. With lenders, shop around. I am loyal to my one, so I do not have too much knowledge on nationwide-based HML, but if I were starting out new and had to earn trust, I would actually use a credit union and see what products they have for distressed properties.

Now let's talk about contractors.

Hiring contractors requires a sword and shield...metaphorically. or hell, literally if you feel cool enough lol.

Investor meetings help with finding out who shows up to work, sure. But more importantly, those meetings will reveal who you should stay away from. And honestly, that is a key factor that is not talked about enough. There are contractors who do crappy jobs, we get it. But there are also GC's/handymen out there who deliberately cut corners, hire the wrong people, or worse, will steal from you. And believe me, those people can hide behind all the LLC's they want, but they cannot hide their name and face from the people that worked with them in the past and got burned.

This defense is your shield

That being said, great contractors to investors are like rare pokemon cards you don't want to share or let go of. So don't expect anything too soon until you gain trust and can offer value. You can find great contractors in two ways that I use to this day

1.
◉ Go on Zillow/realtor/redfin etc
◉ go to filters
◉ type in remodel on the keyword
◉ look through the listings of renovations that matches your pursuits
◉ call the listing agent and ask for information on the remodeler, and offer the agent a listing if you can use that person and make a killer flip
◉ call the remodeler and establish a good relationship
◉ learn your numbers 

This is how I found the GC I have now. I love his work, he's honest, he's fair and the timeline is always in point.

2.
◉ Hang out at Lowes and Home Depot at 6-7am and find out who's showing up for work. This is how I met my specialists, like my plumber
◉ Ask the pro desks who they prefer, go to another Lowes or Home Depot, and listen for repeating names. 

This offense of your sword

Hey Jon!

First of all, CONGRATS! 

What a beautiful decision you made. I am hoping for the best for you and your pursuits. REI is so awesome, I swear. No matter what age, ethnicity, handicap, or circumstance we find ourselves in, REI is so versatile and able to provide freedom at any level for anybody.

You have a lot of great advice on here already, but one strategy I would consider is short-term rentals. It does take a lot of work compared to a long-term rental. But depending on your personality, your skillset, and your motivation, it might be worth it to explore. Not only is it good to diversify your portfolio, but STR's can satisfy all five of your goals, especially if you can leverage vacation home loans for 10% down. Eventually, you can transition to DSCR loans when you reach your loan limits, but by then, you should have enough cash flow to purchase a property every other month if you wanted to (depending on what market you buy in!).

You can self-manage and achieve this goal faster using the methods Avery Carl taught us about, or you can hire a PM, for a more passive route, but that would take a little longer.

Some great resources that have helped me learn about this stuff:

https://store.biggerpockets.co...

https://www.youtube.com/c/Robu...

https://www.youtube.com/c/TheR...

 Gotcha.  

Your deal will depend a lot on your journey, your time, your requirements, and your pursuits. 

If you are going to get a 7-10% cap rate that includes PM, it's mostly passive despite the renting by room, and you have the 23k to spare, I think it's a good deal, especially if the property is in a good area.

However, I am willing to bet that renting the room can be quite a hassle if you don't have any experience with finding qualified tenants and screening them properly. If you don't have a PM and the house is in a rough area, I would not put myself through this stress. 

And if you DO want that stress, I'd buy an STR and focus on leveraging software. If you are going to have to answer calls at 12 am for lost keys and broken toilets, you might as well get more cash flow from the same asset.

Are those 2 rented rooms, short, long, or middle-term rent rates? What will be your cap rate?

you have some great advice on here. 

If you ever have the time and want more resources that you can listen to while driving or working out, I HIGHLY suggest any content from the Short Term Shop. 

The water is good. If you're far from water, Lakes are good. If you're far from Lakes, Disney is good. If you are far from it all, Check out Gulf Shoes in Alabama! Being from Jersey, wherever you decide, it's going to be a life-changing decision for the best as long as you buy right! Grats on your future success!

If you haven't already, read the book Short Term Rentals, Long Term Wealth. 

It depends on the strategy! 

We used a conventional 3% down for our house hack. We are Airbnb'ing our studio basement. 

We use our private lender for flips. We are flipping homes for the capital needed for our STR portfolio. Our lender lends out 70% of the ARV and collects one giant balloon payment at the end after our property sells, which saves us the stress of monthly interest payments and points.

We will use Secondary Home/Vacation Home loans and DSCR loans for our STR's. As mentioned above, we need to flip homes because starting STR's is not cheap, especially if it's not turnkey. Furnishing a unit with the preparation of the Enemy Method (shoutout @Avery Carl. badass book!!!) around East TN can run 15-25/sqft. 

.... when the day comes when we have good cash flowing 10 STR units, we will officially stop flipping, unless it's for fun money lol.
We will primarily be using DSCR loans because 10 units should be enough to buy more properties if we ever want. My fiance and I talked and our exit strategy is not focused on empire running. We just want to travel, work out, eat healthily and be low-key lol.

Hey Mike! There are two local real estate meetups here in the Johnson City area. In the last meeting, we had one of our favorite lenders give a presentation on his criteria and standards for the assets he lends for. I highly suggest you add both groups to your Facebook and start connecting :) I'll keep a lookout for ya and we can grow together :) 

 I LOVE this. 

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