The Entrepreneur Forum | Financial Freedom | Starting a Business | Motivation | Money | Success

Welcome to the only entrepreneur forum dedicated to building life-changing wealth.

Build a Fastlane business. Earn real financial freedom. Join free.

Join over 80,000 entrepreneurs who have rejected the paradigm of mediocrity and said "NO!" to underpaid jobs, ascetic frugality, and suffocating savings rituals— learn how to build a Fastlane business that pays both freedom and lifestyle affluence.

Free registration at the forum removes this block.

I closed on a duplex I bought at auction for $9,000 today.

BrandonS85

Silver Contributor
Speedway Pass
User Power
Value/Post Ratio
378%
Sep 8, 2015
143
541
38
Ohio USA
I figured it might be something that would be of use to the forum. This really isn't intended to be a AMA thread, but if you have questions I'll be more than happy to answer about what I do with real estate.

I operate in what in my mind is a interesting area, right outside of a major metro city (Columbus Ohio). Far enough for hedge funds not to be overly interested in property, but close enough to get the benefits of the metro's trend towards higher prices.

Most of the properties I buy are in B & C class neighborhoods, although I wouldn't call them C class, I'd call them C+ as they're all low income, but you're not going to get shot or stabbed in the middle of the night most likely. Sure, your house might get vandalized if left empty for a long time, or you might find someone squatting in it, but those occurrences are somewhat rare, and are greatly offset by the amount of money you can make. I've read through several threads and see some of the bigger guys are put off by smaller deals, but in my mind if I can buy a property and make $500-$600 per month off it for less than one hour of management a month, I might as well do it.

So, in this case I bid on a online auction, and for the most part was the only serious bidder who was interested in the property. The auction firm was Williams & Williams, who does a great deal of foreclosure auctions in the mid-west. They typically only advertise through postcards to local residents (And in this case the post cards were sent to a 70% tenant occupied housing area) and through yard signs. The established investors I know in the area don't want the headache of dealing with properties like this, but for me it has been quite a profitable en-devour.

So, in the end I won the auction for $9,000. The second highest bidder bid a whopping $2,700 on the house, however due to my cell phone messing up during the bidding process, I bid against myself at $2,800 when I increased my max bid from $9,000 to $20,000 which was my max spend on this one.

Not surprisingly enough, they charged me all sorts of BS buyer premiums as well as over-priced title work, so the end amount I've got into it is a little over $9,000 but $9k sounds much nicer for a 2,700 square foot duplex.

2015-09-08%2011.08.24.jpg


Here's how the metrics look
$11,500 purchase price
$16,000 repair allowance
$27,500 total investment

$13,200/yr rent revenues
$2,000/yr repair reserves
$2,200/yr tax & insurance allowance
$600/yr vacancy reserves
$8,400/yr net income

So , $8.4k / 27.5k = 30% ROI on investment, clearing $700 a month in net operating income.

Now, investors and people LOVE to make fun of slumlords, investing in bad neighborhoods, dealing with residential tenants/HUD over commercial clients, however as I said above, I figure I have 1 hour per month in actual work I'll do to keep up with the tenant headaches.

Mind you, I have not included debt service, as this is a private partner deal and 100% cash, but here's to show you what it would look like with a cashout refianance strategy, which I absolute LOVE because it's effectively having your cake (Keeping the property) and eating it too (Putting a lump sum of cash in your pocket).

$27,500 total investment
70% LTV @ $65,000 after rehab value
$45,500 total cashout value, putting $18,000 in my pocket
Interest would run 5.25% or so on a commercial-style loan, or right around $2,400 per year of interest. So, the property would *only* clear $6,000 per year, reducing my net income to $500 a month, but putting that $18,000 in my pocket along with the $27.5k initial investment that could be rolled forward.

Sure, I could flip it as-is, since the price I've paid for it is quite low over what it's worth as-is, but with the buy-rehab-rent-refi strategy, I feel I get the best of all worlds.

Now, here's what a $9,000 property looks like.

341480-PCR.jpg

341480-PCR%20(1).jpg

341480-PCR%20(2).jpg


341480-PCR%20(3).jpg

341480-PCR%20(4).jpg

341480-PCR%20(5).jpg
 
Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.
Last edited:

Fendaril

Contributor
Sep 7, 2015
47
30
31
You know this is about as passive income as it gets.

I am assuming you started another business and used the proceeds of those profits to start this property investment thing?

If you buy one property a year you could make $80,000 in a perfect world,

but than that would be 10 hours of management a day, and that WOULD suck lol.
 

BrandonS85

Silver Contributor
Speedway Pass
User Power
Value/Post Ratio
378%
Sep 8, 2015
143
541
38
Ohio USA
You know this is about as passive income as it gets.

I am assuming you started another business and used the proceeds of those profits to start this property investment thing?

If you buy one property a year you could make $80,000 in a perfect world,

but than that would be 10 hours of management a day, and that WOULD suck lol.



One hour a month per rental. For me to have a normal workload, I figure I could personally handle 200 units. At $300 profit a unit thats $60k/mo , not year.
 
Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

Fox

Legendary Contributor
Staff member
FASTLANE INSIDER
EPIC CONTRIBUTOR
Read Rat-Race Escape!
Read Fastlane!
Read Unscripted!
Summit Attendee
Speedway Pass
Forum Sponsor
User Power
Value/Post Ratio
690%
Aug 19, 2015
3,881
26,764
Europe
Congratulations. Looks like a great bargain for 9k.

Lick of paint on the outside and trim the bushes round back and it will look even better. Do you have to do any work to provide services or is it good to rent as is?
 

therealneek0la

New Contributor
User Power
Value/Post Ratio
20%
Oct 1, 2014
5
1
54
Will you be using a property manager to lease out the property or will you be doing it yourself?
 

ZCP

Legendary Contributor
Staff member
FASTLANE INSIDER
EPIC CONTRIBUTOR
Read Rat-Race Escape!
Read Fastlane!
Read Unscripted!
Summit Attendee
Speedway Pass
User Power
Value/Post Ratio
336%
Oct 22, 2010
3,952
13,267
Woodstock, GA
Tip..... Hold the property in an entity. Make sure anyone you meet in relation to this unit knows that you work for that company.... NOT that you are the owner...... Helps with collections, getting stuff done, less grief, etc.
 
Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

Oztrepreneur

Bronze Contributor
Read Fastlane!
Speedway Pass
User Power
Value/Post Ratio
122%
Aug 9, 2013
218
267
Wow property is affordable in the USA. Sound like you got a good plan Brandon.
 

BrandonS85

Silver Contributor
Speedway Pass
User Power
Value/Post Ratio
378%
Sep 8, 2015
143
541
38
Ohio USA
Will you be using a property manager to lease out the property or will you be doing it yourself?
Doing it myself, no real reason not to as I said earlier - It takes me about an hour a month on average to do what I need to per unit I add to my company.
Tip..... Hold the property in an entity. Make sure anyone you meet in relation to this unit knows that you work for that company.... NOT that you are the owner...... Helps with collections, getting stuff done, less grief, etc.
Yep, everything I have is in an LLC, I have multiple LLCs depending on what investor/partner/lender I've taken on. Everything I do "has to be approved by the investor".

Congratulations. Looks like a great bargain for 9k.

Lick of paint on the outside and trim the bushes round back and it will look even better. Do you have to do any work to provide services or is it good to rent as is?
it looks straightforward but it's hard to say what's all going to need done till we go through and do a section 8 list on repairs. At this point it's carpeting, painting, and windows.
 

DrunkFish

Bronze Contributor
Read Fastlane!
Speedway Pass
User Power
Value/Post Ratio
151%
Mar 25, 2015
182
275
29
Missouri
So this is something you're doing right now? Still have yet to rehab it and what not, correct?
edit: Answered in above post while i posted. Interesting. That'll be a lot of work!
 
Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

BrandonS85

Silver Contributor
Speedway Pass
User Power
Value/Post Ratio
378%
Sep 8, 2015
143
541
38
Ohio USA
Congratulations. Looks like a great bargain for 9k.

Lick of paint on the outside and trim the bushes round back and it will look even better. Do you have to do any work to provide services or is it good to rent as is?
So this is something you're doing right now? Still have yet to rehab it and what not, correct?
edit: Answered in above post while i posted. Interesting. That'll be a lot of work!

Closed on it today, waiting on my rehab team to be done with a flip they're working on now so we can work on it. Still have to run an assessment on the HUD viability as-is.
 

redsfaithful

Bronze Contributor
Read Fastlane!
Speedway Pass
User Power
Value/Post Ratio
255%
Jul 2, 2014
126
321
Bexley, OH
Front porches could look really nice with some paint.

Mind PM'ing me roughly where you are operating? I'm in Bexley - have considered doing something like this, but tough to find time. I do get some of the local wholesaler's emails, it's interesting what is out there, but some of the neighborhoods I do find intimidating.
 

BrandonS85

Silver Contributor
Speedway Pass
User Power
Value/Post Ratio
378%
Sep 8, 2015
143
541
38
Ohio USA
Front porches could look really nice with some paint.

Mind PM'ing me roughly where you are operating? I'm in Bexley - have considered doing something like this, but tough to find time. I do get some of the local wholesaler's emails, it's interesting what is out there, but some of the neighborhoods I do find intimidating.
I feel kind of dumb but can't figure out how to PM you.

I'm 20mi south of Columbus if that helps you figure things out.

As for finding property, I have absolutely no problem finding properties, it's always finding a source of money to do it. Banks aren't too keen on lending to landlords/investors, they want to lend to 'stable' channels like owner-occupants. Contacting wholesalers CAN be good, but you have to realize that all they do is mark up a pre-existing contract or property. Granted, Realtors do the same thing with their commission, however the difference on a low end property is usually something like $5,000 for a wholesaler vs $1,000 for a Realtor, so for me I really do like MLS and on-market deals (This property I believe is the 3rd or 4th one I've bought at an auction).

There isn't a single thing a wholesaler is doing that you can't easily do. One of my more favorite methods, and has worked GREAT for me is just being out every day when I'm wanting to buy a property, look at a dozen properties, quickly come up with a rehab estimate and make a lowball on you 1st favorite, 2nd, ect till you get something accepted. Don't get too worried about finding the deals, they're certainly out there, do worry about learning more about investing, the neighborhoods you're in, estimating repairs and market value.

I'm HUGE on source, income and as much data tracking as possible, so finding out what is working and what is not is much easier. Many business people fail due to poor tracking, it's horrendous in the agent arena (I am still a licensed RE agent). Most don't know, nor care how they get sales, just that they get them, the truly good agents track their sources so they can allocate better.

Here's my deal breakdown of the 16 I've bought.

dealchart.png
 
Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

therealneek0la

New Contributor
User Power
Value/Post Ratio
20%
Oct 1, 2014
5
1
54
That is such great news. Im shocked just how cheap some property is in the states.
The average property price in Sydney PASSED $1M a few months back. Maybe i should sell me investment properties and invest in the states
 

BrandonS85

Silver Contributor
Speedway Pass
User Power
Value/Post Ratio
378%
Sep 8, 2015
143
541
38
Ohio USA
That is such great news. Im shocked just how cheap some property is in the states.
The average property price in Sydney PASSED $1M a few months back. Maybe i should sell me investment properties and invest in the states

Several investors I work with are from Australia, they feel the same way, unfortunately I agree with them that AU might be in a bubble. Granted I don't think the foundation is nearly as bad as the US was in 2008.

The US is a pretty amazing place for real estate. Granted we have many areas similar to other international metros (NY,LA, Seattle, SF all compare pretty decently against Toronto, Sidney, Vancouver, ect). The thing here in Ohio that I like is that the cost of living is so low and median wages keep going up. Many of my properties rent for $500-$600 and are 1200-1400 square feet on average. As neighborhoods get better and crime continues to go down, you're looking at giving the ability to ALOT of people to have affordable housing with a overall low cost of living.
 

danoodle

Freedom Seeker
FASTLANE INSIDER
Read Fastlane!
Summit Attendee
Speedway Pass
User Power
Value/Post Ratio
118%
Feb 1, 2011
251
297
Kansas, toto
This sounds awfully similar to some of my deals, except I don't deal with section 8. I congratulate you because I generally shoot for a minimum 20% cash-on-cash return for my properties with a couple deals in the 30%+ range. I'm curious how you figure you will spend 1 hour per month per property when you don't hire out management. I only have a few properties myself, and simply to get a tenant in the unit you have advertising/screening/schedule showing/do showing/verify rental app/background check/sign lease. That process alone is at least a few hours probably more to get a "good" tenant. That doesn't include any repairs if you do them yourself, prepping the unit inbetween tenants, etc. Now that I think about it I would say I might spend an hour or so per month per property when everything is running smoothly (which we all know doesn't always happen :p), but it seems like it may be more all things included.
 
Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

BrandonS85

Silver Contributor
Speedway Pass
User Power
Value/Post Ratio
378%
Sep 8, 2015
143
541
38
Ohio USA
in my experience (5 years), one hour per month per rental seems high. It's more like 10 min/month or less

This includes me physically going to a tenant and collecting rent on all our non-HUD properties, which is the vast majority. When I get more properties I will go to automated rent collection (Either having the deposit it to our bank or via western union/store billpay). I am collecting rent in person so I can visit each property a minimum of once a month as well as talk to the tenant to try and be more involved with the rentals.

This will cut 20-30 minutes off a month on average. Even more can be outsourced than I do now. Our marketing on properties works really well IMO and I usually end up with 10-20 renters per property, so instead of doing showings, I do one, maybe two open houses, have them do the application online and then process from there. The open houses also could easily be outsourced to a house sitter, then a fee collected for applicants to pay for it I have plenty of plans in place to continue to grow while not increasing my personal workload severely.

My goal is to build a nice rental company, then use the cash/capital to do guides or like youtube series on how various businesses operate. I've been offered MANY opportunities to buy restaurants, gas stations, C-stores, and other brick-and-mortar places but been unable to due to capital. Some went on to make their new owners severe amounts of money with very little management. For most people, those kinds of businesses (And rentals as well) are a mystery.
 

BrandonS85

Silver Contributor
Speedway Pass
User Power
Value/Post Ratio
378%
Sep 8, 2015
143
541
38
Ohio USA
what type or marketing do you do that works best?

I do craiglist and postlets mainly. YouTube has landed a few.
what type or marketing do you do that works best?

I do craiglist and postlets mainly. YouTube has landed a few.

Facebook 70%, Craigslist 30%. Craigslist has better quality applicants, facebook provides significantly more. Some of our FB posts are getting 100-200 organic shares with 15,000-20,000 image views. It's hard to quantify the look/view data for Craigslist, but it does provide many leads as well. Our FB page is beyond 1,500 likes currently, with a total population of 125k between the two counties we service.
 

EvanOkanagan

Gold Contributor
FASTLANE INSIDER
Summit Attendee
Speedway Pass
User Power
Value/Post Ratio
380%
Aug 2, 2013
579
2,198
That duplex would cost 400-500k where I live...
 

BrandonS85

Silver Contributor
Speedway Pass
User Power
Value/Post Ratio
378%
Sep 8, 2015
143
541
38
Ohio USA
That's awesome, thanks for this thread. I'm currently searching for a duplex or 4plex to buy. Excited.

Just remember, you make the money at the purchase moreso than any other period of the process. It makes much more sense to wait for a good or great deal than take a medicore deal and deal with the consequences later on. The great thing with real estate is that for the most part you can grow out of a bad deal, but I'd much rather prefer have good equity from day #1 than have to wait years to get equity.
 

Madhu

Contributor
User Power
Value/Post Ratio
128%
Sep 9, 2015
61
78
43
I live in the UK, where as a general rule of thumb, bargain properties are in difficult to rent areas (This is a very rough rule, you can find brilliant offers if you hunt around, but it requires a lot of work and often lots of repairs).

Is it different in the US? From a UK perspective, this $9000 property seems to good to be true!
 

BrandonS85

Silver Contributor
Speedway Pass
User Power
Value/Post Ratio
378%
Sep 8, 2015
143
541
38
Ohio USA
I live in the UK, where as a general rule of thumb, bargain properties are in difficult to rent areas (This is a very rough rule, you can find brilliant offers if you hunt around, but it requires a lot of work and often lots of repairs).

Is it different in the US? From a UK perspective, this $9000 property seems to good to be true!
Yes, many areas of the US do not have extraordinarily restrictive laws on building homes. In my area it's quite possible to build a new, energy efficient home with all regular amenities for an American home for right about $40,000 , 120sqm 3 bedroom 1 bath ranch-style home on a concrete foundation, then maybe $5,000 for a 600-800 square meter lot in a average area.

Now, price a $40,000 new home and what it offers in terms of amenities and energy efficiency vs a old home and it makes some sense why things can be so cheap. Granted the $9,000 house is a mindblowingly good deal, BUT I really don't have a problem finding a 2-3 bedroom, 1 bath home in the areas I work for $25,000 or so in good enough shape that I won't have to put much money into.
 
Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

Swoop

Contributor
User Power
Value/Post Ratio
74%
Oct 22, 2012
66
49
GA
Congrats on the purchase. That's a nice chunk of house for that money.

Please post some pics after you get it fixed up...I geek out on home renovation stuff, haha.

-Swoop
 

JSW

New Contributor
Read Fastlane!
User Power
Value/Post Ratio
60%
Jan 14, 2015
5
3
I live in the UK, where as a general rule of thumb, bargain properties are in difficult to rent areas (This is a very rough rule, you can find brilliant offers if you hunt around, but it requires a lot of work and often lots of repairs).

Is it different in the US? From a UK perspective, this $9000 property seems to good to be true!

It sounds like you say that from experience Madhu, what areas roughly have you hunted in and what would you consider a bargain price here in the UK? I'm from London myself, I'm sure you're familiar with our prices haha.

Got distracted from the op there for a minute, nice purchase man! As Madhu said, it's largely a different ball game in the UK, especially London where I am.
 
Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.
Last edited:

andviv

Gold Contributor
Read Fastlane!
Summit Attendee
Speedway Pass
User Power
Value/Post Ratio
40%
Jul 27, 2007
5,361
2,143
Washington DC
here's to show you what it would look like with a cashout refianance strategy, which I absolute LOVE because it's effectively having your cake (Keeping the property) and eating it too (Putting a lump sum of cash in your pocket).

$27,500 total investment
70% LTV @ $65,000 after rehab value
$45,500 total cashout value, putting $18,000 in my pocket
Interest would run 5.25% or so on a commercial-style loan, or right around $2,400 per month. So, the property would *only* clear $6,000 per month, reducing my net income to $500, but putting that $18,000 in my pocket along with the $27.5k initial investment.

Just curious, what banks are you seeing doing refis like this in your area?
Are you actually getting these types of refis done, or it is just a general idea that you have not implemented yet?

Also, The estimated rents sound higher if the cost of living is as low as you mention. Are you getting similar rents for other properties in the area?

In my limited research for the mid-west, the rents vary quite a lot and I was not able to estimate with confidence in the income side of the rents equation.
 

BrandonS85

Silver Contributor
Speedway Pass
User Power
Value/Post Ratio
378%
Sep 8, 2015
143
541
38
Ohio USA
Just curious, what banks are you seeing doing refis like this in your area?
Are you actually getting these types of refis done, or it is just a general idea that you have not implemented yet?

Also, The estimated rents sound higher if the cost of living is as low as you mention. Are you getting similar rents for other properties in the area?

In my limited research for the mid-west, the rents vary quite a lot and I was not able to estimate with confidence in the income side of the rents equation.

The rents are typical for the area or slightly under market rates (I'm trying to go a little under normal rates for the area).

Last year I was able to more or less do finance on 4 different properties - Two 20yr notes and two as part of a $100k line of credit we could use to (if everything went right) buy, rehab, rent then cashout refi to pay off the loan. The problem was/has been in 2014-15 that the banks we're working with just don't comprehend buying properties as fast as we are. In 2014 I bought something like 12 properties, 4 were in the first half of the year, the remaining 8 were in the second half.

So when we showed the bank our finances for FY 2014, it showed income that reflected effectively 4 properties operating 100% of the year, and 8 properties operating less than half of the year. Rather than estimating income through 2015 of all properties at 100% less vacancy rates, they took only what income we showed in 2014, and based an estimated full year of 2015 expenses (Taxes, insurance, repairs) against it. So, by their estimate, we were to have a pretty poor performing year due to them assuming that we would be operating the ~50% of the properties in 2015, when in fact we've operated them closer to 90% or better. So, in order to get new refinances through, I'm waiting till we complete 2015 and go to them showing we hit all of our 2015 goals, and a tax return showing 90% or better occupancy on all the properties.

The real problem with rent estimation in areas like mine (non metros) is that a very small % of properties are posted on craigslist/online. The vast majority are posted in the newspaper or simply signs in the front yard. Unless you're in those areas and can drive around or access a newspaper, you're SOL to find the actual pricing.

Cost of living in my area(s).

2 bedroom apartment ~$550/mo
Gas/Electric/Water/Trash service - ~$150-$200/mo
Gallon of milk - $2.79
Gallon of gasoline (Today's price) $2
Average starting wage for a worker at walmart - $9.50hr

So, in order to pay for your housing you'll run about 73hrs of labor, and for the most part you will not be taxed on any income. For a household of 2 workers at the starting wage, you're spending 25% of your household income on housing which is under the suggested average of 40%.
 
Last edited:

Post New Topic

Please SEARCH before posting.
Please select the BEST category.

Post new topic

Guest post submissions offered HERE.

Latest Posts

New Topics

Fastlane Insiders

View the forum AD FREE.
Private, unindexed content
Detailed process/execution threads
Ideas needing execution, more!

Join Fastlane Insiders.

Top