All Forum Posts by: Steve K.

 If that fruity company was such a great investment, why did they sell and buy real estate? Just askin' ;-)

What about buying Apple in '98 at approximately $6 a share?  I mean if we are just picking random companies out of thin air....

Good question. At least a couple deals under their belt, or someone on the team with a couple deals experience. What returns were they projecting in those deals? What did they actually return (if they haven't exited yet, what are they on track to return and what have they been paying investors while holding)? What was their business plan? Did they execute their business plan? What is their communication with investors like?

Those would be the main questions and points. Ideally they would have more than a couple deals, but everyone has to start somewhere. I'd want to see that they exceeded, met, or got really close to meeting their projected returns in past deals. I'd like to see that they had a solid business plan going into deals, and were able to execute their plan. Obviously the biggest concern when investing with someone is "how are you going to pay me back?" To me, these are some of the most important factors in deciding if they are capable of paying me back.

Sometimes you'll find someone just starting out, but has an experienced syndicator on the team. I'd invest with them too as long as the experienced guy/gal has a solid record. They wouldn't put their name and reputation on the line for a deal they didn't believe in.

I feel obligated here to mention that I've never invested passively with anyone. But I know I will invest in a syndication and this would be my criteria, along with some other questions once they have met my standards with what I mentioned above.

In private markets, where information is scarce (or not available), I feel one should only bet on the jockey. Too many variables that an investor does not have direct of line of sight to. Hence, working with dependable, trustworthy sponsors with whom one has a solid relationship is key. 

Nonetheless, I've been seeing an arms race when it comes to revenue growth projections (to make projects look more attractive). It becomes hard to explain to folks that a project with a higher projected return isn't necessarily better because the return is just a forecast. Sometimes it's better to go with a lower, but more realistic, return. 

We'll really see who's swimming naked when the market goes through a correction. Doesn't matter what sector of RE one is in, everything is correlated.

I hope my subject line was clever enough. Hi I'm Aaron and this is my beginning story/success story. Sorry its long.

I stumbled onto bigger pockets about 2 years ago maybe. For me the real estate interest started by watching flip shows on HGTV, which I know is somewhat common from what I have heard on the podcasts. I knew a lot of it was staged for TV but I still knew there were normal people out there doing that kind of thing, so I looked deeper into it. I wanted to buy a book about flipping and RANDOMLY chose the book on flipping houses by J Scott. I'm very fortunate that its the book I chose, of course because of BiggerPockets. I enjoyed the book and it was very insightful, but because it fell under the BP umbrella I ended up coming across another book- The book on Rental Property investing by @Brandon Turner. I had never even considered being a landlord or investing in rental property before reading that book (That's probably because house flipping just sounds sexier, and there are not any hit TV shows that I know of showing a landlord dealing with a bad tenant) however after reading the book I was overwhelmed with the feeling that rental property investing is something I should get into. I have known for a good while now that I am an entrepreneur at heart, and I find great pleasure in making money in unconventional miscellaneous ways. So once I read that book it sort of felt like a light bulb turned on. Its funny because the entire book was great, but it was really 4 simple points that Brandon made that were eye opening enough for me to decide that that moment I was going to pull the trigger one day. Those would be the 4 ways you build wealth via rental property investing. Cash flow- Loan paydown- Appreciation- Tax benefits. For some reason just reading those 4 simple things just made so much sense to me that I decided I should be doing that vs flipping...

So fast forward to about a year later I bought my first house in Auburn Alabama which is where I currently live. I was in the military still at the time when I purchased it, and I was stationed about an hour away in Fort Benning. I was going to be getting out soon and I wanted to pull the trigger on buying a house sooner than later if I could help it. - Sidebar... I know from listening to pretty much every podcast that "Analysis Paralysis" is a big thing that stops people from investing. I do not know completely yet if this is a gift or a curse... but I most certainly do not have that. If anything I would be more likely to jump into a deal too soon rather than over analyze it. But I'd like to think in this case I didn't do either extreme and I did everything just fine ha.

The biggest thing for me when looking for a place was lack of vacancy. Of all the bad things that can happen to a rental property for whatever reason the one that always scared me most was the idea of not being able to rent my place out. Auburn as many of you probably know is a big SEC football college, meaning that (In theory) there will always be a plentiful amount of college kids coming to Auburn year after year looking for a place to stay. Which is where I come in.

The property I bought is a 4 bedroom 4 bathroom house/condo a few miles from the university. The goal was to live in one of the rooms and rent out the other 3, so basically a house hack. I got this place mainly because of the # of beds and baths, because in a college town your are renting the rooms not the roof. Also it is one of the only properties that did better than the 1% rule that were currently for sale around the time I was looking.

I feel like i'm rambling so i'm just going to get into all the numbers ---- For the record I think its dumb when people share their stories but don't share any of the numbers!

Purchase Price was $127,000 for 30 fixed at 4.375% interest  ---- which really sucks because I would have gotten like a 3.8% interest rate but then the election happened which made my interest go up :(  but oh well.

I was not able to use my VA loan which sucked because apparently there's an FHA and VA list of condos and townhomes that they will lend to and mine was not on it.

So I went conventional and put down 15% (just money i had saved up over time) which was about $19,500 I think. 

Closing costs were like 2-3K  sorry I dont remember specifically.

So at that point I have invested $23,000ish 

my monthly payment is about $765 for my mortgage and the HOA fee is $180 a month (killer i know)

So my total payment is about $950 a month

I bought the property for exactly what it appraised for, which I hope to never do again. 

It did not need a lot of work to be rent ready- but it felt like a lot because I did it all myself. I painted all of the bedrooms and bathrooms and also removed the carpet in two of the rooms and replaced it with that luxury vinyl click lock flooring. That was an infuriating experience, and a long one, but I am very happy with how it turned out. The other two rooms already had hard surface (vinyl) flooring so now at this point the entire house is hard flooring and there is not carpet anywhere. This is how I wanted it for a few reasons. 1 Because it seems like that would be easier to keep clean. 2. It is more pet friendly, now if a cat pees on the floor it can just be cleaned up rather than dealing with carpet. 3 Most importantly to me-because its different. Like I said all of these condos are basically identical but I know that very few have hard flooring in the bedrooms because 98% have carpet. I felt like this is something that could pay off to be different than the others on. --- Also at one point before I replaced the flooring I walked up to like 100 different kids around town and asked which they would prefer in their bedroom between carpet and hard flooring and probably half said hard flooring!

So when I was looking into buying my place I was trying to see what other people were renting theirs for because all these condos/homes are identical. It seemed that most people were renting theirs for 1300-1400 and only a few were renting theirs for up to about 1600 per month (400 per room). This is something that my realtor confirmed and also the lady that was in charge of the HOA at the time. I remember asking her what the 1600 per month landlords were doing to get that much more that the others were not.. and basically her response was "They just ask for it".

So from the jump I had the idea that there were a lot of lazy or uninformed landlords in my area. I knew just from being around Auburn that having your own large bedroom, walk in closet, and full bathroom attached was a desirable thing that was worth more than people were getting. 

So crunching the numbers before buying the property I knew that if I was like those other people getting 1300-1400 per month that I would not be doing well. If it worked out that way I would have been getting minimal to zero cash flow after budgeting for maintenance repairs, Cap ex, vacancy, and Property Management. (Yes I am going to manage the property   myself now but thanks to BP again, I learned to factor in Property management because I won't always be). So all that considered- in a way I bought my property based on what I thought I could get for it and somewhat ignored the data all around me suggesting I would be getting less. I know that is probably a big no no in the investing world but I felt like my situation was a little different. It's not like I was blindly hoping that I could get more than others, I really felt like people weren't getting their properties worth and that I could do better. And it turns out I was right.

As of today I have 3 tenants that will be moving in on Jul 1 of this year. They are all female grad students that will be studying at Auburn to be doctors. So they are older than typical college kids and fingers crossed more mature haha. Each of them are on a 13 month lease for $425 per room. this means I will be getting $1275 total monthly income from them. 

To put that into perspective - I asked my neighbor what they pay in rent and she said they pay $295 per room. So I am making more for my 3 bedrooms than the landlord next door is for 4. Not that its a competition... but if it was... i win.

Ha but seriously I am very happy to see that I was not delusional in thinking I could get my desired rent. Come July I will be living basically for free since their rental income will basically offset all of my expenses. But honestly after living here alone for a year its all going to feel like cash flow since I have gotten used to just paying it all myself!

I am sure that there is a lot I left out but this is already feeling like the longest post ever, so I will wrap it up. I know that the actual hard times are ahead and I am looking forward to the experience of being an actual landlord in July, not to mention living with 3 girls for a year ha. This is probably going to be a crazy experience but I am excited about it and have no regrets so far.

But wait theres more! -- Maybe the best part of my investing story so far that I forgot to mention is that the Auburn market has been doing very well lately. I found out not too long ago that my house has gone up pretty dramatically in value. I bought it for 127K a year ago and as of now it is worth somewhere around 160K so thats cool! I am not planning on selling soon but its great to know I have that much more equity, and basically made all the money back that I invested just by doing nothing. That just takes me back to the 4 ways you build wealth through rental properties. I have always heard on podcasts that you should not necessarily invest for appreciation only, and should just view it as icing on the cake. So that's about how I am feeling right now.

Shout out to @Jody Schnurrenberger @Helen Kirk and @Jake Roland for any advice, help, or random REI conversations we had.

Sorry again for the super long post and for all the details I am sure I left out. Also here are some pics, but I am a rookie so I did not really take the BEFORE pics only the AFTER ones. But next time I'll get it right.

Being in a competitive market, I've researched out of state investing a bit and have always been gun shy due to not feeling comfortable buying property that I don't personally control and having to work with a turnkey/management company remotely. However I had some drinks with a buddy last night who has had success with a portfolio of SFH's in Indiana using a turnkey company that he trusts and our conversation got me thinking. What I don't understand is this: if the deals are good, why don't the turnkey guys keep them for themselves? What's in it for them to give up these deals to out of state investors for a smaller percentage than they'd keep if they just held the properties themselves? We're talking about $25k-$50 deals here so low barrier to entry, the sales commissions/ management fees can't be that great for the turnkey company and I'd expect a legit company to be capitalized such that they could buy and hold those properties themselves. So why offer them up to random out of staters if the deal is good? Not trying to be snarky here or ruffle any turnkey people's feathers, I'm genuinely interested in learning what each party gains from an arrangement like this and specifically what's in it for the turnkey company and why not just hold the property and keep all the profit?

Kuang H. Austin Davis

Split up in 50k increments in private placements

500k in mfh class b and c apartments
200k in self storage/mobile home park
100k in assisted living
100k in life settlements
100k in hotel or high speculative developments

Hi Steve.

How is that court repayment schedule going?

Yes, I am going to be on my pm to initiate eviction court proceedings. In addition, their slowness to take action has me thinking I may switch property management. Thank you for your contribution to your thread.

 all across the spectrum but somewhat regional with Vegas taking some major hits  PHX and GA and some other markets..

The of course you have the never ending cycle of those that buy D and C in rough areas thinking THEY can turn them around only to have the cycle repeat.. Just drive through Memphis you will see Boarded up Multi.. same with the south side of Chicago.