Progress thread: My first two deals and beyond

[Arturo-Jay]

WHERE are you buying houses for 8k lol?!??? Out in the boonies or what?
That's dirt cheap. 20k to rehab max would bring you shy of 30k...
Can't wait to see how this goes! :icon_super:

What size house is this??? 900 sq feet?

 

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[danoodle]

WHERE are you buying houses for 8k lol?!??? Out in the boonies or what?
That's dirt cheap. 20k to rehab max would bring you shy of 30k...
Can't wait to see how this goes! :icon_super:

What size house is this??? 900 sq feet?

I am buying all my houses in my hometown. Has about 10k people but is close to many major cities. This particular house is 976 sq feet. Looks like we are closing on the 16th. I will update this thread as I make progress with all the numbers of course. I will also let you know if the house is actually haunted!

Edit: Just made another offer on a house, we'll see if it's accepted or not. NOW I may be getting in over my head!

Attention mods: I think the title of this thread would be better at "Progress thread: My first two deals and beyond" If you would be willing to update it as such, I would be much obliged

 

[Arturo-Jay]

DA NoooooDleeee,

Please update us.
Saw you closed on a house monday for 8k, tell us the scoop. :seeya:

Meanwhile, my loan request was denied, because I changed jobs and am a temp worker at the moment. Dumb! Waiting is the hardest part about this. Perfect credit, stable job, stable everything Ughhh.

 

[danoodle]

Sorry to hear that financing fell through. Your credit score is a bit lower than a lot of banks would be really comfortable with, but I don't know what the guidelines are for loans. You would think they would be more lenient with an investment property. I figure I'm lucky to know my banker as well as I do. He has seen my success with the first two houses and is confident I know what I'm doing for the most part. That's why it's important to have that "team". If I didn't know this guy, I also know a vice president of another bank who went to my church and saw me "grow up". I would probably try and utilize him as a resource if I didn't have my current banker. I would recommend seeing if there is even a friend of a friend or something who can help you with financing. Possibly even get a co-signer or partner with someone if you are really looking at getting into it.

The closing actually got pushed back to Monday the 26th, but my realtor said there was a chance it would happen later this week. I am actually quite annoyed by this as I had the work all planned out and everything. That 4th offer I mentioned earlier was apparently accepted too. That's part of the reason I'm annoyed because if we had closed on the 16th like I planned, I would have the work finished on this 8k house before we close on this 4th house.

Some info on the 4th house: my offer was $28,500 and I am estimating 10k in repairs. 20k at the absolute, worst-case scenario. It is 4 bed 2 bath, 2227 sq feet, 2 car garage, corner lot. Here are the initial numbers. Actually a really nice house imo. Way nicer than any of the others...lol I am actually going to attempt to "flip" this one, although the market seems really really bad for sellers in my area right now. I have it figured if I spend 48k worst case and don't sell it, I could rent it for around $750 per month, and that would still be a 13.15 percent return (minus taxes, insurance, etc) on a 48k investment. So I hope I have most, if not all my bases covered should the "worst" happen.

I will update this after I close on the 3rd house - the haunted house, and get it fixed up. I would also like to add, I think I will be able to reduce my insurance significantly by switching from State Farm to Allied. Apparently State Farm doesn't offer a group policy discount, so this other guy I'm talking with tomorrow discussed some numbers with me, and it may actually cut my premiums by more than half! With 4 houses, this will be at least 1k in savings! Only difference is it only offers 500k liability instead of 1mil. I figure I could add a blanket policy for less than 1k to make up the difference though! Not sure how important it is to have 1 mil in liability or what.

Oh, and one more thing. I am currently studying to get my realtor's license. I figure the commissions I make even on just buying and selling my own homes should cover most, if not all, the fees. Also, it will be nice handling the details of my deals myself and have access to stuff before it hits the market. Cheers

 

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[Arturo-Jay]

Currently trying to get myself the co-signer. Pretty hard.
It's a "big risk" they think (it's a family member). I suppose it could be, even though this is going to be owener/occupied residence. I even offered to pay this family member $50/month to cosign, LOL.
Good news is, I did switch jobs yet again and got an increase in pay and have permanent status.
I'll wait 9 months and see where I'm at and try again. I only have 2k in debt that I have been on time for past 2 years...credit score is 683 TRANSUNION and Experian is like 632 for some reason?

Your already at house #4?! Wow.
The 4th house sounds like a "monster"! 2300 sq feet almost, pretty big to my standards!
Getting your realtor's license is a good move for sure.

I have a weird feeling you'll flip the 4th house at a good profit.
If not the rental income/equity will be nice.
Soon I need to get on the right track like you.

 

[JWatchdog]

reply

Congrats Man, I see that you have taken 4 conventional loans out so far. Is there not a limit as to how many conventional loans you can take out. I understand you are leveraging OPM in some way, but just sticking to this strategy of conventional loans to purchase. a time must come when that wont be such a viable option right. Basically what I am saying "the faucet will be turned off" for your deals. Then what?What other form of leverage do you plan to put forth in your acquisition plans.

 

[danoodle]

Congrats Man, I see that you have taken 4 conventional loans out so far. Is there not a limit as to how many conventional loans you can take out. I understand you are leveraging OPM in some way, but just sticking to this strategy of conventional loans to purchase. a time must come when that wont be such a viable option right. Basically what I am saying "the faucet will be turned off" for your deals. Then what?What other form of leverage do you plan to put forth in your acquisition plans.

I actually don't have 4 loans. I mentioned with the 3rd house, I bought that in cash for 8k. I estimate 10k in repairs and am considering my options for that, pay out of pocket, get a loan, use credit cards, etc. I know that at some point the faucet will be "turned off" as you say, but my plan is that once I have a house paid off, I can always refinance and pull out most of the equity for purchase of the next house. Wash, rinse, repeat. Don't think there is a limit on that, but I also know there is a fine line with having every property leveraged or whatnot. Balance is crucial and not spreading yourself too thin without cash reserves. If you get behind on a payment, I know it can have a snowball effect and you could lose everything with poor money management and being too illiquid.

I guess ideally, what I should be doing is focusing on getting into bigger properties eventually. Commercial RE, apartment complexes, and whatnot. I can't imagine trying to manage 100 houses, but having a couple apartment complexes or other commercial RE would be much more "manageable". I have no experience in this area, but I'm sure there is a limit to how many SFHs you can run before you have to start hiring people, and I know that can be a headache in itself if you don't get the right people.

As for now, my goal is 10 houses by 2016, and I am definitely on track for that. I would like to get to the point where I have solid cashflow coming in. Once I am doing well, I will consider commercial RE, or other business endeavors or just keep with the intentional iteration of SFHs if I can manage it properly.

 

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[Arturo-Jay]

Will vacancies ever be an issue with your 4 properties?
That's something I've worried about.

 

[danoodle]

Will vacancies ever be an issue with your 4 properties?
That's something I've worried about.

Not too concerned with vacancies at this point. There are a lot of renters in this town and if the economy gets worse, I'm sure there will be more. Also, basic supply/demand applies. If you are priced right, you will always be rented. The key is finding the balance between being priced too high or low. If one of my properties wasn't renting, I'd just lower the price or perhaps improve some of the amenities people are looking for.

Just thought I'd update and say that I closed on the 3rd house yesterday. I am going to tear out all the carpet today, as the house was basically used as a giant dog house. The smell is horrific....:/ Wish me luck!

 

[Arturo-Jay]

Just thought I'd update and say that I closed on the 3rd house yesterday. I am going to tear out all the carpet today, as the house was basically used as a giant dog house. The smell is horrific....:/ Wish me luck!

Dangggg lol.... That's gotta smell bad. You'll make off like a bandit once it's all fixed up though.
Hey, have you considered section 8 rentals? I know in my area a 4 bedroom will net you $1330/month in rent by the HOA

But it sounds like there's no shortage of renters though!

 

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[roc]

The worse the smell of the property the better lol.

Quick tip after you rip out the carpet and if the subfloor is in good shape, hit the whole floor with a primer to seal in the dog urine smell.

Great thread BTW, my only advice is to make sure you have enough reserves in case tenants decided to roll and something else I recommend is to make all your units the same, i.e. same faucets, same carpet, same title or vct, etc. THIS will make your life alot easier.

 

[danoodle]

I have considered section 8 tenants, but it is generally not for "newbie" landlords not well versed in landlord/tenant law. It is also not for "nice" houses. From what I've read, section 8 can work, but more often then not, they have "entitlement" attitudes and can be PITA tenants. It is something I don't want to deal with right now if I don't have to.

Thanks for the tips, roc! That is a nice tip with sealing in the smell and will most likely use some kilz to get the job done. Also I can see how ideally all houses would have the same fixtures and materials. It would be great because you could buy things in bulk and have it ready when something needs to be replaced. I tend to just go with the most economical on most things, or at least "lower-end" fixtures that still look decent or get the job done without spending triple the cost.

As for an update on the house, I had a very unpleasant surprise today with the plumbing. I turned on an outside faucet where you connect a hose, and the pipe somehow burst and was spewing water in the house. We had to shut it off at the city connection, as there is no shut off valve to this particular pipe. Also, it appears previous owners cut out a sewage vent pipe and hid it under the flooring. When I ripped out the vinyl, the wood was all rotted and it looks like it had been leaking for quite sometime. It is literally just an open pipe, there must be a clog somewhere that is causing it to back up, but I cannot believe someone would just cut out a vent pipe like that and leave it completely exposed under the flooring........insanity! I am quite fortunate, however, as it would have been much, much worse if I had not discovered this and already had all the flooring installed and whatnot. So it will work out in the end, even though it will add to the cost.

Here are some before pictures for your viewing pleasure: here As you can see there was quite a bit of mold; we have cut out all the mold and put up new sheet rock in its place. We are so close, and yet so far. All that's left is to fix the plumbing, spray the walls with knockdown texture, paint all the interior walls, put in the flooring, then do all the tile work in the bathroom. Then paint the exterior of the house....and all the little things like install blinds and whatnot. I'm thinking it will still be a couple weeks until it's finished. I still estimate around a total of 15k in this house and $450 month rent. Planned for 20k, but if it's less all the better!

I also close on my fourth house tomorrow! Kinda bad timing because I was hoping we would have this one done by then. I may need to take a break from these houses for a bit after this. They are a lot of work when you are putting in a lot of sweat equity. I'll be happy when I get to the point of hiring most, if not all, of the work out.

I will keep updating this thread if people are interested. Also, if a mod reads this and wants to change the thread title to something like: "My first two deals and beyond: progress thread" it might make for a better thread title.

 

[Talisman]

Wow properties that cheap turning a great rental yield. That's insane.

I'm in Australia, and yeah for a 4BR place, haha, 20k.. Maybe for the letterbox.

Keep it up and speed++.

 

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[roc]

This is a great thread. Can I ask where you got the seed money to start all this?

Also I forgot to mention something that may help your cash flow, regarding your college house you should rent each room out for example if is a 4br charge 600 per room but here is the kicker offer them housekeeping for the general areas, free cable and wifi, etc. There is a course I have about setting up this type of system but check Kansas ? state laws. Regardless of what you do with your college make sure you get the parents or legal
guardians to sign the lease b/c college kids are brutal.

You should check to see if there is a real estate investment group in you area, b/c you will find like minded people as well as new resources, i.e. Contractors, lawyers (important b/c some have no clue when it come to REI.
Best of luck, Roc

 

[danoodle]

Hey Roc, I have a combination of loans, personal money saved up, and I did receive a small inheritance I managed to grow through investing in precious metals to finance my properties. I'm sure you could get creative with financing if you wanted to get into real estate. Now is as good a time as any, for sure!

To be honest, where I am located there are mostly slumlords and a few good landlords. There is a huge gap...literally no middle ground. My current tenants came from a house where there was mushrooms growing out of the carpet and quite a bit of black mold. Luckily, my banker friend is one of the "good" ones and I use him as a good role model, not to mention financing...

Quick update: My friend who I pay by the hour had a fight with his wife about not spending enough time with her, and is unable to work indefinitely. I have been doing all the work myself, which sucks royally....lol I thought I would be finished by this weekend, but now I'm saying by Halloween. The house is coming along nicely though. I got a pleasant surprise when both the furnace and a/c turned on! So far I have just under 11k into this house. At this point, I honestly think I will come in at around 13-14k total for this house. Not too shabby

 

[roc]

Trust me if the banks would lend I would buy everything lol. I'm working on assuming a mortgage (sub 2) now which I hope goes through.

As for the labor issues, try to have multiple guys lined up who can do work. You should join your local investment group club (if not all ready), you can usually network and find good people.

Another option is mayber craigslist. Hope this helps. Roc

 

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[danoodle]

House is finally finished for the most part! Took a lot longer than I expected due to the situation with my worker I mentioned earlier. Here are some before and after photos. Here is a spreadsheet of all the expenses I have incurred.

Here's the quick rundown: As of right now, I have 12.8k into this house including purchase price. I have a few more expenses so let's just round up to 13k. I spent almost 2 months working on it. I expect to get $450-$500 rent for this house. If I had to guess it's value, realistically, I'd say 25-30k.

This was my first "major" rehab and I learned so much about construction and just life in general. I already have the next house lined up and am actually going to attempt to "flip" this one. Backup plan is to rent it and the numbers should work out either way. I might end up renting it for awhile, then selling when the market is better too. If you have any questions or wish to continue to hear about my results in my RE journey, let me know.

 

[T&R]

You are a champion. That house looks so good after all the work you put into it.

Keep the entries coming. The story and pictures are great.

I know you rented your other properties. Have you been able to get some real numbers on operating expenses yet?

 

[danoodle]

Actually yes. For the first house, here are the income/expenses so far. I had some big expenses right away, but I chalk it up to no one having lived there for over a year and I knew something would come up right away. Go here for the college house numbers. The college kids have been so easy so far; basically no complaints and all the money up front. If you look on my profile, you can check out my blog and I have all the numbers on the sidebar to the left that I try and keep updated on a regular basis.

 

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[PopEmersen]

How much was the hardwood floors?

 

[PHD]

I have 12.8k into this house including purchase price

Wow!! In Aust that wouldn't even qualify as deposit for a loan! Great work on the house, looks much more habitable now.

How much was the hardwood floors?

I'm guessing its a Laminate based on the budget, although I have been wrong before.

 

[danoodle]

How much was the hardwood floors?

I'm guessing its a Laminate based on the budget, although I have been wrong before.

You are correct, it is laminate. The cheapest of the cheap at 68 cents per square foot. If you look on the spreadsheet and click the tab on the bottom that says "rehab costs actual" you will see that I spent $932 on laminate, about $145 on underlayment, and about $650 on allure flooring. I only ended up using about half of the laminate due to deciding on getting allure later, but I will either return it or probably just use the excess on the next house. Allure claims to be the "easiest floor ever" and I tend to agree. It is highly water resistant and I used it in the basement of the college house as well. It works really well on uneven floors and that is another reason why I used it in two of the rooms. It is in the room where all the mold used to be and I got the same "oak" color to match the laminate in the rest of the house.

 

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[roc]

Nice job man!

 

[T&R]

Any updates?

 

[danoodle]

Nothing new really. The 3rd house I just finished is still vacant and I have not started on the 4th house yet. I am having minor surgery Thursday, but will hopefully start on the 4th house this week or the next. I do have some before photos of the 4th house here. I am just calling it the yellow house for now. I am actually going to attempt to "flip" this house. My backup plan is to rent it, and I may rent it for a year or two anyway while I wait for the RE market to improve.

 

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[rc08234]

Great thread! 8k is a steal. This is what we get for 30k around here!
15 Green Street, Pleasantville NJ | MLS# 384807 - Trulia

And thats the hood hood, a place I wouldn't want to walk at night.

 

[shane8399]

the irony in the town name of Pleasantville, and "i wouldnt walk there at night" is amusing.



OP - i have read your entire post, and i too am baffled at how cheap the properties are, i know the dakotas and the midwest states can be cheaper though, especially in smaller towns, further away from big business.

To fetch 1100 a month rent here, the house would at the min cost is prob 150k, would be a bank purchase, and might need a little work.

 

[danoodle]

Just thought I'd give a quick update if anyone cares. I still haven't rented out the "crap" house yet. I have a couple promising young couples with no kids or pets looking at the house this week though and hopefully one of them works out.

We started work on the yellow house last Monday. Making some decent progress and as of right now, it seems as if I'll be way under budget, but who knows what could pop up. If I can have less than 50k total into this house and sell it for 80k+, I'll be a happy camper. Especially considering this is my first "flip". I'm giving myself a March 1 deadline to have this house fixed up and on the market. I also found another house that I really like and hope to pick up. It has a nice garage and I would really like a place where I can store all my stuff without renting a storage unit. Cash is tight though, and I probably won't be able to pick it up until I sell the one we're working on. Might be able to go in on it with my brother, but we'll see. Here's to a successful 2012!

 

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[T&R]

How is the self managing going? No problems (yet) with late rents or other issues?

 

[danoodle]

How is the self managing going? No problems (yet) with late rents or other issues?

So far so good. My first tenants were having some trouble paying on time, but we worked it out where he pays on the 1st and 3rd friday of every month and has not been late since the change. The college kids paid up front so no problems there. I have a tenant moving into the "crap" house this weekend who just got a job in town as a firefighter so that should hopefully go well too.

Making decent progress on the yellow house. No clue if we're on schedule for March 1 or not. I'll probably be able to tell in a week if we're gonna make it. Still projecting to be under budget but something always seems to come up. Apparently while I stepped out for a bit this morning, my worker said a well-dressed lady with a nice truck knocked on the door and inquired about the house. Said that she had been waiting for someone to fix it up and will check back in a couple weeks. Would be great to have a buyer lined up before we even finish the work!