Skip to content
×
PRO
Pro Members Get Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
$0
TODAY
$69.00/month when billed monthly.
$32.50/month when billed annually.
7 day free trial. Cancel anytime
Already a Pro Member? Sign in here
Pick markets, find deals, analyze and manage properties. Try BiggerPockets PRO.
x
All Forum Categories
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

All Forum Posts by: Wendell De Guzman

Wendell De Guzman has started 284 posts and replied 2096 times.

Post: How I Am Buying 20+ Houses No Money Down - Week 1

Wendell De GuzmanPosted
  • Investor
  • Chicago, IL
  • Posts 2,188
  • Votes 1,911
Originally posted by @Zane Belden:

@Wendell De Guzman Thanks so much for sharing this. Great insights and I'm excited to see how things turn out. 

I'm rooting for you!

 Thanks for rooting for me. Hope the plan works.

Post: How I Am Buying 20+ Houses No Money Down - Week 1

Wendell De GuzmanPosted
  • Investor
  • Chicago, IL
  • Posts 2,188
  • Votes 1,911
Originally posted by @Jeff Scholen:

Under the first scenario, If were the seller, I would expect some repayment of financing on the sale of a home. I cant image he would let you transfer the debt of one house to the next until you were down to 6 houses at greater than 80% loan to value. My 2 cents. 

 Jeff, that's exactly what were able to negotiate. My acquisition guy on it is really good :-)

Post: How I Am Buying 20+ Houses No Money Down - Week 1

Wendell De GuzmanPosted
  • Investor
  • Chicago, IL
  • Posts 2,188
  • Votes 1,911
Originally posted by @Jeff B.:

You must be wholesaling as you're selling 14 before you buy the 20.

Your plan imo is a crap shoot, as all it takes is two or three resales to fall thru and you will not be able to close on all 20.

Best wishes.

 That's why - if you read more closely: I am lining up financing to buy and take down the whole package. Then I will sell the 14 or whatever I need so the remaining houses will have the super sweet financing.

Originally posted by @Adriel Hsu:

My First Deal and the 12 Deadly Mistakes I Made

The quick and dirty numbers:

Purchase Price: $17,307

Purchase Closing Costs: $2000

Rehab Costs: $80,748

  • Roof: $6538
  • Foundation: $3000
  • Handyman Labor: $19,284
  • Dumpster: $4378
  • Electrical: $4790
  • Plumbing: $6720
  • HVAC: $6200
  • Materials: $23,700
  • Granite (Materials & Install): $1363
  • Landscaping: $605
  • Project Management: $4000
  • Miscellaneous: $170

Loan Interest Costs: $4435

  • Friend 1: $1500
  • Friend 2: $1500
  • Unsecured Bank Loan: $667
  • Aunt: $500
  • Parents: $263

Holding Costs: $300

  • Water Bill: $41
  • Electricity Bill: $54
  • Electricity Bill: $64
  • Water Bill: $39
  • Water Bill: $58
  • Water Bill: $44

Total Costs: $104,787

Appraised Value: $131,000

Cash Out Refinance Amount (80% LTV): $104,800

Closing Costs: $5547

  • Property Taxes: $838
  • Appraisal Fee: $625
  • Survey: $595
  • Credit Report: $17
  • Flood Certification: $14
  • Bank Points (1 point): $1048
  • Business Checking Account: $30
  • Title Closing Fees: $1352
  • Title Tax Certificate: $44
  • Texas Policy Guaranty Fee: $3
  • Attorney Doc Prep Fee: $755
  • Government Recording Charges: $196
  • Government Record UCC: $30

Total Cash Invested: $5534

Rent: $1305 per month

Mortgage: $597 per month

Taxes: $142 per month

Insurance: $124 per month

Vacancy: 8% = $105 per month

Repairs & Capex: 15% = $195 per month

Property Management (Self-managing but wanted to account for it): 10% = $130 per month

Cash Flow: A whopping $12


Exit Strategy?:
I’m basically breaking even with this deal if I keep it as a buy and hold. I’m not sure what my exit strategy should be at this point. 

I'm considering holding for 5 years and then selling it. This way, it is before CapEx or any serious repair costs would come into play as everything is brand new right now. If I can end up pocketing the CapEx and Property Management costs, even if it doesn't appreciate in the next 5 years, I can still walk away with a decent gain if I can sell it for the current appraised value.

It’s located in a desirable school district, but the area isn’t one to see massive appreciation or depreciation swings. I currently have it rented out on a 1.5 year lease.

What do you guys think I should do for a solid exit strategy?

Before:

After:

The detailed story:

I joined BiggerPockets at the beginning of this year, and have finally just finished up my first deal.

I had almost no money saved up, but started working a well-paying day job when I came across the deal.

From January until June, I was constantly listening to the podcasts, going to local REIA meetups, networking as much as I could, and analyzing deals and trying some direct mail.

I was connected to a wholesaler from a realtor I was with when looking at a foreclosure.  I got a property under contract at the end of June for $17,500. At closing that number somehow turned out to be $17,276.81

It was currently a 1244 sq ft, 3 bed 1 bath house that I planned on turning into a 3/2

Mistake #1: Not negotiating with the wholesaler.

  • I fell for the oldest trick in the book. He told me there were other buyers that had offered more, but I had approached him “first”. Looking back I should’ve negotiated down to around $13,000.
  • I saw the land itself was valued for $20,000 and thought I was still getting a good deal.
  • What I Learned: Always negotiate the price.

I assumed $2000 for closing costs, and he had told me it was a big rehab that basically needed to be gutted to the studs. He told me $50,000 was needed in repairs. I used $60,000 for my analysis.

My initial plan was to move in and rent out the other 2 rooms as this was the location I had been looking at moving to personally.

I had a rough idea of the area, and estimated the ARV at $105,000. A cash out re-fi of 80% LTV would put it at $84,000. I threw in an extra $10,000 for unexpected costs + holding costs + refi closing costs.

Mistake #2: Underestimating Rehab Costs

  • I read J. Scott’s book on Estimating Rehab costs, but that still didn’t help me.
  • I simply didn’t know going rates in my area for electrical, plumbing, roofing, etc.
  • What I Learned: A pretty accurate retail cost of literally every part of a rehab since this houses needed EVERYTHING changed.

So in a perfect world, I would’ve gotten a house for free + $6500.

My backup plan was to turn it into a rental if I couldn’t rent it out on individual rooms, as it is located in a very desirable school district that families want to live in.

If I couldn’t get it rented, I would just flip it.

Mistake #3: Overestimating the ARV

  • A common mistake for beginners, I overestimated the ARV.
  • I didn't have someone with access to the MLS to run accurate comps.
  • A huge number of sales in my area are done privately without any agents.
  • The county appraisal website undervalues all the properties by a huge margin.
  • I assumed the garage would be fixed up, but it had to be torn down because it had been built illegally.
  • What I Learned: Ask multiple realtors for comps. I have learned the areas and their values a lot more since then.

Mistake #4: Overestimating the Rents

  • I knew it was in a very desirable school district, but I failed to realize the importance of fenced in yards and garages around my area.
  • I initially thought I could get $1500 for it, and used that for my BRRRR Calculator calculations for CoC return
  • What I learned: Look for houses with already fenced in yards and garages, and offer appropriately if they don’t have those.

I was familiar with the street and neighborhood it was on, and drove by the property and saw there was still a bunch of junk everywhere.

I signed the contract and sent it back to him.

Mistake #5: Signing the contract before inspecting the property

  • I knew I was supposed to walk through and inspect everything with a contractor to get an accurate rehab cost.
  • I was too rushed in getting my first deal and seeing the property value below land value gave me a false sense of security.
  • Honestly, even if I did do a walk through by myself, I wouldn’t have the slightest clue of what needed to be repaired and how much it would cost. I should’ve called another local investor or an inspector out to walk it with me if I did.
  • What I Learned: Do a thorough inspection with a professional inspector or contractor

I was scared out of my mind and nervous to the point where I couldn’t sleep for the next few days after signing the contract. I was committed at this point and I felt like I didn’t know what to do despite all the podcasts and articles I’ve read.

Closing costs were $2000 to begin the title research. So I needed $20,000 cash when I had around $1500.

I called up my two best friends, and convinced them to each put in $10,000, while promising them $1500 each in profit.

I had applied for an unsecured, personal loan at a bank nearby, and was expecting to get around $60,000 as they loan up to $100,000.

I was surprised when they came back only approving me for $20,000.  I was worried and stressed on how I would come up with the rest of the funds as the rehab had already began.  At the time my parents had nothing they could lend me, but they had mentioned what I was doing when they visited my Aunt, and she wanted to loan me $30,000 interest free. I ended up convincing her to take a 5% interest.

Mistake #6: Not having the funds ready

  • Although I had no money, I could’ve found a hard money lender or looked at line of credits or loans ahead of time.
  • I always heard, as long as you have a killer deal, the money will come. I see where they are coming from, but definitely don’t believe it 100%
  • What I Learned: Definitely figure out funding first, before finding a rehab project.

Mistake #7: Promising a fixed amount of return instead of an annualized rate.

  • I ended up giving my friends an awesome deal. Having no experience, no money, and needing cash for a quick close, I offered to give them $1500 each if they loaned me $10,000 each.
  • I had their money for 5 months, so although it was a fixed return of 15%, they ended up getting an annualized return of 36%!
  • However, the good thing is that I didn’t pay any interest or loan payments during the entire rehab process. They trusted me and I will be paying them back $11500 whenever it finished, thereby reducing my holding costs during the rehab.
  • What I Learned: Don’t borrow from friends! Just kidding, but if I do again, only offer annualized returns, not fixed.

I met up with the wholesaler and walked through the property with him before closing and he had told the owners that they had to clean out the house, but of course, they didn’t.

The house has literally been a crack house for years until I purchased it. he owner used to have it as a rent house, and eventually gave it to their daughter to live in, who was unfortunately a drug addict and the place became trashed beyond belief. 

Maintenance was never kept up with on the property. There was crap everywhere and the smell that hit you the moment you walked in was enough to make my contractor walk right back out, almost about to throw up.

I know you’re supposed to buy properties in bad shape, but this was REAL bad.

Mistake #8: Not accounting for tossing out the junk in my costs

  • Extra labor and three pulls on a 40 yard roll-off dumpster was needed to haul off all the junk that was left behind in the house.
  • What I Learned – Account for hoarder houses in rehab costs

I connected with my local REIA, and there was another investor who owns his own rentals and was helping manage a rehab for someone else. We met up and he offered to be the property manager for my rehab since I had a full time job.

He brought over his contractors that he uses and did a walk through to get estimates. He had showed me the work that they had done on his houses and it was nice work. The handyman gave me a labor only bid for all the interior and exterior repairs including plumbing. The electrician gave me a quote for a complete re-wire of the house, and the foundation guy gave me a leveling quote.

Mistake #9: Not getting bids from multiple contractors

  • I didn’t get multiple bids for the handyman, leveling, roofing, and electrical contractors.
  • I did, however, shop around for HVAC and granite installation and for materials.
  • What I Learned: Always shop around.

Work began July 5th and all was going relatively smoothly.

I decided to stick with the current wiring to save costs, but eventually the electrician said he didn’t feel comfortable leaving the current wiring in, and really suggested that I rewire the whole house, which I did.

However, this change came after the handyman had already began putting up the new sheetrock. This resulted in extra labor cost to re-sheetrock and delayed my project 2 weeks as they claimed they had to wait until the electrical was done to continue sheetrocking.

Mistake #10: Not fixing things right the first time.

  • Not only did I end up paying the original bid amount for the rewire, I ended up paying more for the extra handyman labor and delayed the rehab by 2 weeks.
  • This mistake would be made again for Plumbing later on.
  • What I Learned: Always fix things right the first time.

I never knew how much design planning goes into rehabs! I’m a dude, come on, do I really need to spend hours figuring out what color grout would be the most aesthetically pleasing with my charcoal tiles?!? Do I have to get satin nickel cabinet pulls or stainless to match the appliances? I never would’ve thought I would spend so much time on Pinterest. My ex-girlfriend would’ve been proud.

Fast forward to late August, the progress was not anywhere near where I expected it to be. The handyman was working multiple projects and this was showing with the lack of progress on my home.

My project manager, handyman, and I got together for a little pow-wow and set a deadline of 3 weeks to finish everything.If he didn’t finish, I would deduct $50 a day from his pay.

This was all a verbal agreement, and the handy man left pretty angrily.

So the three weeks pass by, and the house is nowhere near complete. I’m losing my patience at this point, as summer has just ended and kids are already back in school, and the rental market is dropping off.

I told the handyman he was losing money every day now. He objected and gave me plenty of excuses.

At this point, I just wanted the house done. We came up with a new agreement, that he would finish in two weeks. If not, I would dock him $700.

There was also minor things such as adding an attic drop down ladder that he wanted to charge extra because it wasn’t part of the scope of work.

Mistake #11: Always have written scope of work contracts:

  • I never specified the exact details of what was to be done. I just had a bid to “fix up everything”. Clearly, my handy man and I had different ideas of what that meant
  • What I Learned: Write down every detailed piece of work I want done and include a deadline and consequences for not meeting that deadline

After lots of headache and yelling, I finally parted ways with a “finished product” and $12000 over budget. The only issue was, there was no water pressure for the hot water in all the faucets and shower heads, except the guest bathroom shower.

The handyman guaranteed me once the hot water heater was turned on, the pressure would come, and if not, he would come fix it.

Guess what happened next?

Yep, the hot water heater was turned on and still no pressure. And the handyman stopped answering all my calls and texts. Should’ve seen it coming a mile away.

Mistake #12: Paying all the money before everything is double checked.

  • He begged and gave excuses why he needed the money and I felt sympathetic.
  • What I Learned: Triple check their work and always withhold some payment until everything is good.

Oh, and did I mention he was didn’t have a plumbing license? Mistake #10 just happened AGAIN.

The extent of my plumbing knowledge was to look under the sinks and turn the valves in hopes it just wasn’t opened all the way. My wishful thinking was just that, as that didn’t change the water pressure at all. I eventually had to call in licensed plumbers to re-plumb the entire house including adding in all the proper waste vent systems for the sinks and washer connects to the tune of $3000.

While all the plumbing issues were going on, I had been showing the house and screening tenants. I know people are flaky, but it was bad.  God, that was a pain.  That's the first thing I'm going to hire out when I grow the business.  

I finally got the house rented, and everything finally seemed to be over. I can stop stressing out finally right?!

Nope. 11PM of Day 3 of being a landlord, I get a call from my tenant saying all the drains are backed up, and feces was coming up into the shower.  Are you freaking kidding me?!?!

I had to scramble and made a bunch of calls before a 24 hour plumber picked up and he said he would be there in an hour.The house was built in 1962, so the original sewage line was probably a clay line and it’s life cycle was coming to an end, as it took the plumber 2 hours just to clean out all the roots that were causing the backup.

I didn’t get home until 2AM.The condition of the sewage line was so bad, that I had to get it re-piped for ANOTHER $3000. At this point, I just felt defeated and that this bad deal was going to put me in the hole so far that it would kill my real estate career before it even got started. 

I was way over my budget, I was worrying on how I was going to pay back my friends and family. I could only hope and pray for a miracle appraisal, so that I wouldn’t be too deep in the hole.

I had estimated the ARV to be around $105,000, and assumed I could have everything fixed up at $80,000 all in. Now I was $104,800 all in. I was thinking I would be set back $24,000 which would kill any momentum to start picking up more deals.

On a Tuesday night, I got an email saying the appraisal was done. I apprehensively opened it, expecting the worst, but my jaw dropped when I saw the final ARV. The appraiser had put it at $131,000! 80% LTV was exactly $104,800! Talk about prayers being answered huh. Now I was only out of pocket for closing costs!

I just closed today, but was in for a shock to see the closing costs much higher than I had expected! 

Final Thoughts:

It’s currently rented out on a 1.5 year lease at $1310 a month. After mortgage, taxes, insurance, budgeting for vacancy, repairs, capex, and property management, I am only cash flowing $12 a month. I'm basically breaking even, until I can sell the property.  

I made so many mistakes on this first deal that it could’ve easily ended my real estate investing career had I not gotten a lucky break from the appraisal. The thing is, however, I wouldn’t have changed a single thing about this deal. You have to just get started and fail forward before the ball gets rolling. I learned so many things from this first deal, that it’s given me the courage and inspiration that this real estate thing works!

 Adriel, if I can vote more than once for this post I would. It's great you summarized your mistakes.

I was laughing when I was reading it. Not because of the mistakes you've made - I was laughing because I've made some of those mistakes as well. 

Plumbing & water problems were a real pain in the rear end - I had a property I sold recently with a basement that has water problems not once but three consecutive times (sump failed; then the ejector pump and then there was water leak due to the sidings). Let's just say I spent MORE than you did and I am an experienced investor. So - bad things happen even to good investors. So don't kick yourself too hard for these mistakes. You will even repeat some of them (LOL) and you will make new mistakes.

One option to recoup your investment is to sell the house on a lease option basis. If the area is that desirable, you could have sold it at a higher price. Here's my post on it:

https://www.biggerpockets.com/forums/12/topics/373...

Post: How can I stop my house from being sold @ tax deed auction..

Wendell De GuzmanPosted
  • Investor
  • Chicago, IL
  • Posts 2,188
  • Votes 1,911
Originally posted by @Kendall Morgan:

Okay, wow... Where do I even start. Originally BP started as a place to help me expand my knowledge and further my career in REI. Now, I am reaching out for help regarding my OWN home.

In 2012 - I bought  my house for $60,000 cash in 32225 area in Jacksonville, FL. Being a single, and first time homeowner.. I was not aware that the initial homestead exemption that was on my property was from the previous owner and that I was supposed to re-apply after that year was over. My realtor, nor the title company informed me of any of this.. Nor was I ever informed of the procedure with paying property taxes. I guess I was just supposed to know these things, shame on public schooling for not actually teaching us these types of things that ACTUALLY matter in life. This is one of those, I-wish-I-knew-then-what-I-know-now type of situations. 

Fast forward to this year.. I've gotten into wholesaling.. I am a very fast learner, I am extremely creative, & I am very good with negotiations. With that being said, I got a HUGE deal under contract within just the first few weeks of starting my journey. However, because of probate, the deal will not be closing for several months. I have several other prospects,  but in this off-season, nobody wants to do any business until after the holidays.. And unfortunate for me, I don't have that much time.  

So, let me just get straight to the point. Upon doing some research on other properties, I searched my own house just for fun. Yeah, what I saw was not so fun. Apparently staying 2 years behind on property taxes is not okay. So 2 years ago, a bank picked up my taxes, paid them/held onto the certificate for 2 years & this year applied for a tax deed certificate. According to the Duval County Property Appraiser, my house will go up for auction as soon as January. I've gotten the run around as to an exact date. I've been told that I have to call in January to find out the date, but that it is probably  going to auction in early January. And because I never filed for homestead exemption, EVEN THOUGH this is the ONLY property that I own and I have clearly lived here the whole time, they say that by law they do not have to contact the home owner. Had it been homesteaded, they would have contacted me 2 years ago when it first happened. & now the only way to stop the process is to pay the full amount of the certificate which is $4,200. 

So, here is where I need help/advice..

Another thing public school did not teach me is the importance of credit..... So, I totally screwed my credit up before I even turned 20.. And so here I am at 28, feeling the repercussion. I have tried applying for loan after loan.. everyone is turning me down because of my credit score. My house is FREE AND CLEAR and the property value has nearly doubled so I can't understand why a credit union/bank/loan company would not want to give me a loan with my house as collateral.. but, that's not my field so, whatever! 

Now, I am considering trying for a hard money loan. I planned on renovating and selling my house in a few more years, but because of the circumstances, I am considering just doing it now so I do not lose my house over $4,200!!! 

If ANYONE can offer ANY advice... or refer anyone or ANYTHING. Please, no negative comments. I totally understand it is my responsibility & that I got myself in this situation.. I get that & don't need anyone bashing me.. Please.. I am a mother of 3, I worked very hard to get where I am now, unfortunately I just was not educated enough as a single, first time homeowner. 

Thanks in advanced... 

 Yes - hard money lenders is a good option specially since you have so much equity in the house. The only question is: how will you pay them back? HMLs expect to be paid in 6-12 months.

OK - here's what you're going to do:

1. Ask for a HML loan of $15,000 (now a lot of HMLs don't lend that amount because it's too low - some HMLs have a minimum of $75,000 or $100,000; it might take you a while to get a HML but given the equity, there got to be an HML or a private lender or loan shark that will do it)

2. The reason you should borrow MORE than what you need is so you will have some cash to pay the monthly hard money interest payment (and have the money to pay the taxes and insurance now)

3. Then, you look for someone who knows you who is willing to be a guarantor or co-signer on a 15-yr mortgage with you. YES - there is a mortgage company that originates 15-yr mortgages as low as $10,000. The typical bank has a $50,000 minimum. PM me and I can send you the name of this mortgage company.

Just ignore the negative comments you see here on BP. It's an open forum and even experienced investors like me get bashed often specially when I first started posting here. 

But my answer to your post like what I wrote above is how I provide massive value to BP members and I get massive value and business through BP in return. 

me know what other help you need...

Post: How I Am Buying 20+ Houses No Money Down - Week 1

Wendell De GuzmanPosted
  • Investor
  • Chicago, IL
  • Posts 2,188
  • Votes 1,911
Originally posted by @Justin Young:

Thank you for this @Wendell De Guzman. If I'm not mistake, I remember commenting on of your posts a few months ago asking you for advice on something. It seems as though you've been busy since then and successful too. I will be following your discussion to gain knowledge on how to acquire my 2nd property from out of state. Good luck to you.

 Justin, yes - super busy (we're buying 1-2 houses a week) and I apologize for not answering you as fast as I should. 

Send me a PM again - assuming you still want my answers to your questions (or need any advice).

Post: How I Am Buying 20+ Houses No Money Down - Week 1

Wendell De GuzmanPosted
  • Investor
  • Chicago, IL
  • Posts 2,188
  • Votes 1,911
Originally posted by @Joshua D.:

@Wendell De Guzman

 Thanks for your openness about this deal. It takes a great person to share these details. 

Sounds like you got a lot of work ahead of you! 

Good luck!

 You're very welcome and thanks for the words of encouragement. I need it :-)

I did not even mention about the earnest money required on the deal.

Post: How I Am Buying 20+ Houses No Money Down - Week 1

Wendell De GuzmanPosted
  • Investor
  • Chicago, IL
  • Posts 2,188
  • Votes 1,911

Week 1: I am buying 20+ houses in several suburbs in Chicagoland. Due to the fact that this is a LIVE deal, I cannot disclose all the details in a public forum. I will disclose what will be helpful to BP Nation specially with regard to how I am buying 20+ houses with no money down. This level of education is something you will never get from a real estate guru because this stuff is real and happening LIVE in front of your eyes!

The whole transaction is set to close in 90 days. Here are some details about these houses and later on, I will outline the over-all plan to buy all 20+ houses with me putting up NOT A SINGLE DIME of my own money in the deal. Every week, I will give you BP Nation an update - both the good and the not-so-good and you will LEARN with me.

DETAILS About these Houses:

1. Mostly 3 bedrooms, in several suburbs that appreciated more than +20% in the past 2 years. These suburbs are what I classify as C and B- areas. Here's my description of A, B, C, D and F areas:

2. These houses are rented an average of $1300/month and their market value is around $130,000 per house. So, yes - they fit the 1% rule (some of the houses are better, some are worse but these are the average numbers)

3. All these houses are rented, some are section 8 and rents are increasing. Properties are well managed and according to the seller, none of them need any rehab. Over the next couple of weeks, we will confirm this.

4. What's nice is that the seller is offering us GREAT seller financing terms on a second mortgage - which is less than what conventional mortgages charge (yes - lower than 4.75%!). The downside is - I am buying them close to market value (I still have equity but not what I am used to). But I ran the numbers and it makes sense to buy because of the way I will exit with the GREAT seller financing in place. See below.

How I Intend to Buy These Houses with NO Money or No Cash Coming from Me

1. My plan is to SELL some of the houses - in enough number so when I do, the amount of seller financing will be the only debt on the houses I keep. Since this is still a LIVE deal, I cannot share the actual numbers in a public forum but I might do so if you PM me. Anyway, here is an example:

Purchase price: $2M, seller financing $500K, let's just say there are 20 houses or each house is being acquired for $100K each.

So how many houses should I sell to have enough houses under the seller second? Here's a little algebra for you (don't worry - even a fifth grader can do this - LOL):

x = number of houses I need to sell

20-x = houses I get to keep

Let's say I sell the houses at some discount and by the time I pay the expenses, I have a net sales proceed per house of $110K

So the equation is:

$1.5M = x * $110K; x =13.63 or 14 houses

This means that if I can sell 14 houses, I get to keep 6 houses with $500K seller financing which is better than what the banks offer. In theory, if I can sell the houses and line up the buyers for each house, I can close them simultaneously with when I buy them. In other words, I can wholesale 14 - theoretically. However, in actual practice, specially if I have to sell each house individually to each buyer (so I have 14 buyers), getting 14 closings to sell the houses to coincide exactly to the day I close to buy them is probably not going to happen. So, I need #2 below:

2. Get a private lender that can raise (in the above example) $1.5M. Downside is they charge 12% p.a. and can fund 80% of the purchase price and they charge a 20% back-end. Arggh! This is very expensive money. I am also looking for cheaper money than that.

3. Raise $300K (or 20% of what I need) from my network of private investors.

So there it is - BP Nation. I might fail and the whole deal may not close. I might not be able to fund it for some goofy reasons of the private lender or through our due diligence, we find the property is not as good as the seller portrayed it. Whatever it is, I want to document this LIVE for all the world - specially BP Nation to see. Hope you will learn a lot and learn together with me.

If I succeed, then you will learn together with me and hope you get inspired in the process. If I can buy 20+ houses with no cash coming from me - it makes buying 1 house with no cash out of your pocket way easier isn't it :-)

I am also open to suggestions on what else I can do or options I can explore to get these deals with no cash coming from my pocket. For example, is there a wholesaler out there who was able to wholesale BULK properties? Maybe I can wholesale (using the numbers above), 14 houses to one buyer so I can keep 6? What other options or ideas do you have BP Nation? 

Post: For analytical types who like helping newbies reach goals...

Wendell De GuzmanPosted
  • Investor
  • Chicago, IL
  • Posts 2,188
  • Votes 1,911
Originally posted by @Betty Cruz:

Here's a hypothetical scenario... :-)

I am not experienced enough nor numbers smart enough to figure this out with confidence but I am devising a plan and would be very grateful for input from some of you who are so brilliant at figuring out what I call real estate puzzles. I have read hundreds of posts and it always seems like the people with really great answers still ask for more info from the poster so I will try to write down as many details as I can think - sorry for the lengthy post...as the subject line reads, this is for analytical types.

1. GOAL - to have at least $1200 passive income and a place to live that is paid for by renters. I want to be able to achieve this within 2 years and sustain it for 10-12 years after that. Basically, I am trying to find gap funding for a pseudo-retired life as I wait to be able to tap into my 401k retirement savings. 

2. Current situation. I have a day job and I'm completely debt free except for my personal home. I have sufficient savings/credit and pre-approval for down payment on up to $200,000 worth of rental property. Additionally, I have $200,000 equity on my current residence that I will definitely sell within 18-22 months. It is way too much house and I'm just waiting till I'm an empty-nester to dump it. I don't think it is a desirable house to rent out because it has high HOA fees and a swimming pool (which I don't wish to maintain).

3. My idea. I have tossed around many ideas and am open to any other options, but this is my working plan...

a. Purchase a rental now (or as soon as I can find something good, which seems difficult) and set it up to cashflow at least $300/mo. This would get me started, get me learning how to be a landlord and get me building up some equity as I'm not a huge fan of a lot of debt.

b. After selling my personal home in about 18-22 months, use the cash ($200,000 equity) to buy a duplex or multifamily that I can house hack. I'm thinking that with no or very low mortgage, I could easily live in this for "free." This also gives me the flexibility to live elsewhere if I want (I'm thinking out of state/out of country, etc).

As I analyze deal after deal, I feel the combination of rental property earnings from one leveraged property and one non-leveraged property could give me the desired passive income. What am I not thinking of? What would be a better plan? Any help would be much appreciated!

 Betty,

You can "house hack" by buying a 4-unit - live in one of the units rent-free because you have the three tenants paying for your mortgage. Then, when you sell and cash out $200,000 from your current house, you can then do private lending with it (you can lend it to other real estate investors). It can earn 12% p.a. or 1% per month - generating an income of $2,000/month.

For the meantime or until you sell your current residence, you can rent it via Air BnB to generate even more rental income.

Post: Hard Money Lenders in Chicago

Wendell De GuzmanPosted
  • Investor
  • Chicago, IL
  • Posts 2,188
  • Votes 1,911
Originally posted by @Chris T.:

welcome Isza, reach out to

@Wendell De Guzman

@Account Closed

They're all local. 

 Thanks for the mention Chris.

Isza, we provide not just hard money but also BUSINESS LINE OF CREDIT of up to $150,000. Please send me a PM so I can send you more info.