All Forum Posts by: Corey Smith

Hey Seattle BP community!

This isn't necessarily Investment related, but definitely involves Real Estate, and I know I can find some great info asking about it here.

My wife and I are looking for our next home for us and our family. We're looking to find a property that has some land (5 acres+, ideally), but still within 60-75min drive of Seattle. We're thinking somewhere in the general area of around North Bend, down to Enumclaw/Buckley (Hobart, Maple Valley, Covington, Black Diamond, ares of that nature). But we're also open to North (like Carnation, Duvall, Preston, Etc.).

We're looking to either rehab something that is already on the land, or to POSSIBLY build our own on the land.

We're looking for Agents, GCs, and Lenders who specialize in fixers and/or land development so that we can get our ducks in a row. We're also looking at trying to use a 203k or Fannie Mae Homestyle loan to get this done, so experience with that would be helpful!

If you work in this arena, or know someone who does, feel free to respond here or drop me a message.

Thanks!

Corey

@Jason Cory I definitely know what you mean by B/C areas can afford to move. Our formerly-primary rental outside of Atlanta is in a nice middle class type neighborhood that was brand new (about 1800 houses total) neighborhood, and in the 9 years we've been renting it, we've had a no tenant ever reup, and this is a well-kept house in a well-kept, HOA-run community. It's 2600sq ft, and the turnover costs kill us.

Also, I had been sold on the Section 8 piece a little ways back. I remember the first time our PM in ATL approached us about Section 8, we shot it down because all we had heard is negative. But now that I know better, I'm good with it. Matter of fact half of the doors I bought turnkey are Section 8. And the money's there on-time, every time.

Overall, I can definitely see where you are coming from. 

@Caleb Heimsoth I mentioned in an earlier post that I've come to the realization that selling the ones I have would be a bonehead move at this point. Mainly due to your points.

And again, I meant it was boring in the fact that I felt like I wanted to be more involved the whole time. Plus there were delays in a couple of the rehabs, which caused it to feel longer. I didn't go the Turnkey route because I was looking for something boring. I went the Turnkey route because I wasn't comfortable enough investing out of state on my own yet. And having someone there (the provider and a marketer in the AL cases)  to help me with it. Now that they are closed and performing, I couldn't care less if they are boring haha.

I definitely understand the capital required to hit my goals. And I know my timeline is ambitious (maybe even too ambitious), but it's what I'm aiming towards. However, I'm not planning to get there on SFR alone. That's just my gateway drug, so to say.

I appreciate the input!

One other option for short-term cash that I have I've been considering is taking advantage of the Direct Deposit Balance Transfers available on the handful of Credit Cards that we have. Thanks to overindulgence in our early-20s, and the resulting paying off of these cards over the last few years, we have about $120K in available balances.

By doing the direct deposit balance transfers, the money is put directly into our bank account, with a transfer fee of 3%-5% and 0% interest for anywhere from 11-18 months. This is essentially what we used to get our cars and student loans paid off much earlier than we were supposed to. 

This route is obviously much cheaper than going the Hard Money route. But payments can get kind of heavy, because we'd end up making payments of 1%-1.5% of the balances. Meaning if we took the $120K out, we could be looking at $1800/mo worth of payments. But the silver lining is, those payments are just going towards paying it back, and NOT interest. Since the 3%-5% fee is charged up front. And we could handle the $1800/mo while we were working through the project(s).

Anyone have experience doing this? What I don't know about this method is how bad it would hurt our chances to get a mortgage on the property once we've bought it (cash), rehabbed, and tenanted it. DTI could become an issue at that point. But would a lender factor in that you would be paying off the credit cards after closing the loan? Or can that be made part of the closing, maybe?

@Lauren Keen Aumond My immediate goal is to clear $6/mo in after-expense income from investing. The $6K number comes from the amount we live off each month (wife and I, plus three under the age of 8). 

The second tier is to reach $8K/mo which would match my W2 income, with a $72K cash reserve (a year's worth of living expenses as a security blanket). At this point, my goal would be to leave my current career, and spend all my working time on REI.

I have longer term goals as well, once I get to that point, but that is where I'm at right now.

When I first set these goals a couple of years back, I wanted to hit the first goal by my 40th birthday (turned 37 in March). I still have my sights set on that. Which is why I'm re-evaluating how to get there. Like I said originally, I'm like you and looking to BRRRR my next deals. But I don't know if borrowing $100K from family is feasible. Definitely not via my parents. But I'm on the same mindset as you ... to get $100K, or so, and try to go the BRRRR route as many time, and as fast as I can.

I get the part about properties not needing to be pretty. It's not me living there, after all. And cash flow has been my main target.

My response was more to the idea that the area doesn't really matter, and that as long as you keep the property up, the tenant will stay. I don't have any sub-$50K types of properties in my portfolio, so I'm honestly just going off what I've heard/read, and nothing first-hand. But when I hear $30K-$40K properties (and I do understand that this price range is relative to Birmingham, and it would be a higher point in other markets, I'd imagine?), I think of all the times I've heard others say that this is where turnover is high, crime as well, etc. etc. 

In these $30K-$40K properties that you invest in, is that not a problem for you? I'd imagine this has a lot to do with knowing a market down to the street-to-street level, so that you can be in the blue-collar, working class types of neighborhoods vs. "war zones", right? That's what would make me nervous about investing across the country. At least until I found someone that I had complete trust in, to guide where I make my purchases.

I have had the intention of buying B/C class properties that have a decent cash flow (12%-14% returns), but also have a chance at some appreciation so that a few years down the road I can start pulling out some of that equity in order to invest in more. But you make some good points, in that by buying in the lower price point areas, I could buy more rapidly but still be getting similar cash flows per property.

I've liked the idea of a portfolio loan (as you mentioned in your first response), but honestly, I feel like I have no idea where to even start with that.

@Jason Cory Thanks for sharing that post again. That's some great information, and I had never seen the appraisal piece laid out like that before. I know the three TK properties I bought were appraised based on the Sales Comp number. I was fine with that at the time, because I was planning to hold them for a while so the numbers made sense. My thought when posting this was that I'd be waiting until leases were up, then putting them up for sale, but even then I may have come out on the losing end.

As the wheels kept turning in my mind after posting this, I came to the conclusion that selling the three I have is not really an option. Mainly because they are performing, and selling them just to find a "better" deal with money doesn't make much sense, and is a step backwards from my cash flow goals.

So you are saying to avoid B/C class neighborhoods, and buy lower-maintenance properties in the lower class neighborhoods? That's pretty much the opposite from the advice I see most often on BP and elsewhere. Is that the method you follow? I'm not saying I disagree with it, I'm open to all avenues. I'm always interested in talking with anyone willing to share about the other side of a coin. 

@Brian Bradley Thanks for the feedback. You're right, I do have the long-term in mind. I say it was boring more to say that I felt like I could have been more involved, and hence been able to take the reigns on the process from the beginning (with help, of course). Which, at the end of the day, results in a better return for me, and the ability to buy more rapidly. I went turnkey because I had never bought an investment property (our other rental is our former primary), and "hand-holding" piece of it appealed to me. But like I said, as I was going through the process I was getting turned off by it for the reasons I stated.

Hell, if I had enough of my own money that I could buy the number of turnkey properties as we need to reach the goals we're reaching for, in the time frame we're trying to do it ... I'd stay in that lane. But I'm looking for a more efficient way.

I have explored using equity partners. And will do so once again when I tie down that first property on my own. So I definitely like that suggestion, too.

Thanks for the feedback, Brian.

Thanks for sharing this. Cleveland is one of the markets I'm considering buying my next properties in. So having a high-level view like this would be very helpful!

I want to bounce my situation off of any of you in the BP community that are willing to read it and give an opinion. I became interested in REI two years ago this month, when I found BP and read Rich Dad. Over the first year or so I spent the majority of my time reading books, listening to podcasts, attending a few local Investor group meetups, trying to decipher what are of REI I wanted to try my hand at first, and paying off debt in order to put myself in position to make some moves.

Fast forward to today … as of June, we'll (wife and I) have paid off $65K+ in Car/Student/credit card debts, and bought three rental properties to add to the one formerly primary residence that we've been renting out of the last 9+ years. And we're now in position to start dedicating $3K-$4K a month towards REI.

One note about the three new properties is that they were Turnkey, and purchased using a HELOC. A SFR and Duplex in Birmingham, and a SFR in Kansas City. They cash flow just under $900/mo. combined, after accounting for the HELOC payment and accounting for Vacancy, Repairs, and Management. Knowing what I know now, I likely wouldn't have gone the turnkey route. I'll explain below.

We could likely continue to buy one or two turnkey properties each year until we reached our goals, which was our original plan, but I don’t want to take that route anymore. The properties all perform fine so far, and the management companies have been pleasant to work with. But I started to get turned off of the turnkey route during the buying process last year. Here’s why:

• The process was boring, and I felt like I wanted to much more involved than I was. I basically found the property I wanted, ordered the inspection and all that, then waited for rehab to complete in order to close. Which is exactly what you should expect from a Turnkey experience.
• I feel like I left money on the table. I’m not sure what cash flows would have looked like had I done similar properties from acquisition to placing them under management, but I know I’d have more than the little-to-no equity in the properties out the gate (assuming I bought it right).
• I’ll have to wait until we have ~$20K each time I want to buy a new investment. Which is fine, but I’m looking to speed the pace up.

After having contemplated using the BRRRR strategy in the past, I recently finished @David Greene's book on Long-Distance Real Estate Investing (great read, IMO) and I am going to go full-tilt on getting the money together to do a BRRRR project on my own, out-of-state.

I’ve given all this info (and sorry that it got kind of long, thanks for getting to this point) in hopes that I can get some feedback on how to attack that.

A few options I've contemplated getting the money together for a BRRRR project:

• Save up enough money to buy a BRRRR project using financing for the initial purchase (likely end of this year).
• Save up enough to buy a BRRRR project with all cash, and hopefully unlock better buys (likely end of next year, 2019). And continue to use that capital over and over again.
• Sell the three turnkeys (which were bought essentially at FMV, and hence have little-to-no equity) to get the HELOC money back out of them. Then use that money to go buy a BRRRR project with cash. And continue to use that capital over and over again. This one may not make sense, since they are performing. But they are also holding down three of my 10 golden tickets for financing, which could be used for better (ie. Better equity position) investments.

In the grand scheme of things, the “Save up” options are just a matter of patience (which is not a strong suit of mine haha). But I’m hoping someone could give me some ideas of other ways to more rapidly acquire investment properties.

What would you do, if you were in my shoes?