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The Harder you Work the Better Business Gets

by Michael Zuber on December 2, 2011 · 6 comments

  

Over the last 90 days my posts have been primarily focused on helping new investors and discussing topics pertinent to successful real estate investing.  I have thoroughly enjoyed the experience and all the feedback.  One of my personal goals for contributing to this great site was to discuss real life deals.  Like a lot of the readers, I work full time and can only find limited time a day to devote to my real estate business.

The following is a quick summary of our business over the last 30 days. I wanted to share the summary to show investors with full time jobs that they can be successful in this business.

Closed Deals:

Let’s start by reviewing the last three deals we completed.  Over the last 90 days, we have closed, repaired and leased all three of our new purchases.  The average purchase price was 41K with 8K in repair costs.  We leased each property for an average of $925 a month.

In addition to successfully leasing each property, we were also able to place Passive Investors in first position.  Leveraging our Passive Investor network allowed us to extract approximately 80% of all the cash we had in each deal, leaving us with expected monthly Cash Flow of $350+ each per property.

In summary, the last 90 days we executed our 5-step process to perfection across three deals and now we are ready to recycle our capital and buy the next batch of assets.

Passive Investors:

One of our competitive advantages in our market is the ability to negotiate and buy distressed assets for cash at ridiculously low prices. This flexibility only works as long as we can continuously recycling our capital.

Passive Investors are key to our working business model.  They like the idea of earning a secured return on a performing asset versus lending on a distressed asset.  The time lag from closing a deal to the successful recycling of capital means we must grow our business at a measured pace.

We could undoubtedly grow much faster if we secured capital at the point of purchase, but that wouldn’t fit our model.

The last thing I want to point out is that over the last 60 days, we have successfully opened up a new channel for our passive investors.  Previously, we had only taken cash investments but now we have successfully leveraged Self Directed IRA’s.  Working through this process has already earned us additional commitments, and we look forward to growing this funding channel over the next couple of years.

Deal Flow:

The most exciting news I have to share is about the deal flow we are currently working on.  I consider each of these to be a direct benefit of what I have written about on BiggerPockets.

The first property is a distressed house that actually has a converted garage for In-Laws.  It needs a new kitchen, paint, carpet, rear fence work, a couple of new windows, heater, etc.  The house is on a nice lot and we purchase this property for only 36K.  We estimate the repairs will be 12K, once it’s completed, it will rent as a 5/2 to one large family.  Estimate rent is $1,095 – $1,195.

The final deal to be highlighted is simply outstanding, and it goes back to the importance of understanding that this business is about people, solving problems and creating value.

I am always on the lookout for multifamily or apartment deals.  Unfortunately, over the last 2 years most of the deals have been with single family homes or duplexes.

I just secured a 10-unit apartment building listed for $220K that needs a lot of repairs.  The asking price was very high given the current market but I knew there had to be a story to this property, so I called the agent.  (I plan to write up a detailed timeline for this purchase as it highlights how investors earn profits by solving problems)

The 10 unit apartment building will produce approximately $5K a month in rent and have a mortgage payment of $1,600.  Expected monthly cash flow is $1,200 to $1,500.

I am happy with both these deals.  I am most proud of the 10 unit building because it is based on our core beliefs:  Real estate investing is a people business and the greatest profit is made by solving problems and not by being cheap.

Remember, learn your market, look at deals, set criteria and take action!!!

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{ 6 comments… read them below or add one }

Greg December 2, 2011 at 7:00 pm

As always, excellent information. Bravo.

Reply

Mike Z December 18, 2011 at 10:35 am

Greg

Glad you like it and find value

Good Investing

Reply

Stephanie December 3, 2011 at 3:40 am

I literally know what it means to be in a full time job while being a real estate investor. I definitely congratulate you for your great efforts and i wish you all the luck. Thanks for the info Michael.

M Stephanie

Reply

Mike Z December 18, 2011 at 10:36 am

Stephanie,

Thanks for comment and feedback

Good Investing

Reply

Arthur Garcia December 5, 2011 at 7:38 pm

Great model! I like the way you keep recycling the cash. How long did it take for your to find your passive investors? Do you actively solicit or do they just come to you at this point?

Reply

Mike Z December 18, 2011 at 10:38 am

Arthur

I don’t actively seek passive investor as that would go against securities laws but I am always happy to talk to folks that might be interested in being a part of our program.

I would say it took a year and 10+ deals before I had a long enough track record to show potential investors

Good Investing

Reply

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