All Forum Posts by: Robert Johnson

Anybody have an idea for refinancing a condotel with hard money? We were set to have a DSCR loan in place on this property after we bought it cash, but that is looking less ideal. Main reason being we are looking at fixing it up after the busy season (it's an Airbnb property in gatlinburg TN) and then hoping to sell in the winter time, but the DSCR has a 5% prepayment penalty. Wed be looking for about a 130k note that would get my partner some money back in his pocket plus give us 30k for renovations. Any tips appreciated!

@Jake F. Yes it really is amazing the amount of tourism dollars being spent right now! I can not wait to see what March-August next year are going to bring in. Hoping to have a couple other deals out there by then.

@Clint G. Absolutely! Let me know the next time you're down this way again.

Hello BiggerPockets!

This forum (along with all the podcasts and books) made it possible for me to start my journey into REI. I did about 18 months worth of educating myself/ procrastinating, but it has now been 3 months since I closed on my first deal. In the last 3 months I have gotten 2 more deals and I am really happy to see how they are coming along and how quickly it is working out. Here is a synopsis of my first 3 deals. Hope this helps others jump into the game!

Background on me:

I am a 25 year old man originally from East Tennessee that relocated to the Rio Grande Valley in Texas to work as a Park Ranger for the Federal Government. I am a GS 7 and my gross pay is about $45k a year. I don't have any kids, just a beautiful girlfriend and the sweetest black lab (I spoil both of them every chance I get). I bought my first property a couple years ago down here in Weslaco TX. I bought a 3 bed 2 bath SFH for $120k. This year I was able to sell it for $160K and I used my profits to make these deals happen.

Deal 1:

Property: 2 bed 2 bath condo in South Padre Island TX. Purchase Price $148k and $9k in closing costs

Strategy: Short term rental

Funding:  I went into this deal as a 50/50 partner where I brought the deal and I am doing most of the operations of the day to day running of the property and my partner brought the 25% down payment and put the mortgage in his name (Both names on Title)

Result so far: This property was bought at about 50k below market value and when it came across our desk we knew we had to jump in. We were expecting the property to produce about $30k a year in revenue and cashflow about $600 a month over the course of the year. We invested about $2500 in startup costs (Unit was bought fully furnished) to date we have brought in just over $16k in revenue since our first booking on 7/2/2021. We have been ecstatic with the results so far and we are on track to become SuperHosts in October. If we didn't make another dime off of this unit in 2021 we would still have over $4k in profits with all bills paid. 

Deal 2:

Property: 4 plex with 2 bed 1 bath 1100 sq ft units that was very run down and needed major repairs in the heart of McAllen TX Purchase price $255k total amount financed with renovation loan and closing costs $302k

Strategy: House hack Long Term rental

Funding: FHA 203K loan (3.5% down plus had to pay about 20k in Credit card and student loan debts)

Results so far: This has by far been the hardest and most time consuming deal so far. I bought it because it is 100 yards off of one the busiest streets in McAllen TX and the property has a lot of potential to appreciate. Closing on this deal took about 5 months with the 203k loan process and having to sue the sellers who breached the contract. Since closing on the property in Early August I have been rehabbing the property. The rehab was installing a new roof, 3 new HVAC units, 4 Water heaters, Replacing a missing window, remediating lead paint, rotten wood replacement, and cleaning and painting unit I moved into after having to evict a tenant that was in violation of their lease. This project is still very much in flux as I am just now finishing most of the repairs. I am now working on turning over 2 other units that were on month to month leases at well under market rents. I raised rents on those units and the tenants will be moving out over the next month. I will still have 1 inherited tenant until February paying under market rent ($600 a month), but hopefully will be making $850 a month on the other 2 units. 

Here are the numbers:

Income: Rent (September to February): $2300 per month

Expenses: Mortgage: $2250 Water and trash: $200 Capex: $150 Maintenance: $150 Vacancy: $100 per month

Profit/Loss: -$550 per month while living on property cashflow will go to $550 after all units are rented and I move out 

Deal 3:

Property: 2 bed 1 bath condo in Port Isabel TX. Purchase price $155k and $7k closing costs

Strategy: Short term rental

Funding: Seller financed note at 10% over 20 years with $20k down and Closing costs rolled in. Total financed: $142k

Results so far: This is my latest deal and I don't have any numbers for renting as I just closed this week. I bought this property because it has the potential to be marketed to both small families that can't afford to stay on South Padre Island, and fisherman/boaters who can use the properties attached boat slip and lift, and because it has a high probability of appreciating. I have estimated that this property should make about $36k per year in revenue off of Airbnb and VRBO. My short term goal with this property is to get it into an LLC and refinance it with a bank to lower the mortgage amount (May look at a private lender if anybody on here would be interested).

Tell me what yall think. This has been a very fun 3 months (really 6 since I went under contract), but it has been exhausting. Can't wait to keep making deals and get out of the rat race!

Thanks for all the feedback! Yea it's kind of a juice vs squeeze debate on the STR. I could also just market it as a small furnished LTR if I found the right clients (travel nurses, business travelers). The point about it changing from a residential to a commercial property is definitely the biggest concern I have. I will probably be looking to refinance the mortgage into a conventional note before I make this change as after it's refinanced I don't think I will be looking to do anything with the property for 10+ years. Thanks again for all the feed back and pointing out things I hadn't thought about!

Hey BP,

I just bought a 4 plex last month with an FHA 203k loan last month. While I have been fixing up the property I've started to really think about converting a old brick storage building into a possible ADU and running some short term rentals out of it. Im estimating it would cost about 20k to do the renovation, but it's a very small space (160sq ft). I would estimate I would rent it out for about $30 a night on the low end. What are your guys thoughts?

Anybody have experience with dealing with a seller that refuses to sign final closing docs on a property and going through the legal process in TX. Back story: I have a 4 plex under contract for an FHA 203k loan that we have been working on for about 4 months now and I have about $5k in the deal for contractors, appraisals, inspections etc. I signed and wired my cash to close on Friday last week. Seller was supposed to sign on Saturday Loan was to fund on Monday. Seller is a Mexican National and as such is required to let IRS hold 15% of sales price for any tax problems until next tax year. Seller lied about signing and we are at Wednesday with my credit report going out of date tomorrow. Any advice would be appreciated. I feel like all the work on the 203k was enough for this, and it's super deflating to have the rug pulled from me right at the 1 yard line.

@Boone Tyson you hit the mail on the head on what I am doing! Found a remote hud inspector out of Dallas and my lender is letting me run the project with just subcontractors. It’s a hectic process, but it’s been fun so far!

@Nicholas Covington that is kind of what I was figuring was it would be at least a year unless I have a qualifying reason for having to get out of that property. I don’t think I will want to be doing another one within a year unless I get relocated for work. Thanks for the feedback!

@Jake F. Thanks man. It was an on market deal, but I am just happy to have the deal. We will see what happens in the market in the next 6 months to a year. I appreciate the insight!

@Jake F. Sure thing! So first off I would say I went for an on market deal for this search because I had a really good offer on my SFH in weslaco. On market deal right now (especially for owner occupied with tenants on month to month lease) seem to have jumped up to the 280k-320k mark for 4 plexs in the McAllen/Edinburg/Pharr areas. When I was looking last year these average properties seemed much more common in the 250k mark, but those aren't on the market right now.

The property I have under contract is in a very nice location and has very large 2/1 units. The work I need to do is a roof replacement, replace 3 out of the 4 AC units, replace all 4 water heaters, some electrical requiring, and some pretty substantial landscaping and hazard tree removal.

Currently this property is the worst house on the block and there seems to be a lot of revitalization in the area. So I am hopeful that I will have an above average property in a good location that will appreciate it up. If it doesn't I'm not all that concerned because the property will still cash flow, but I would like to get out of the mortgage insurance premium that comes with the FHA and have the option to go pick up another deal on an FHA house hack.