Make $1M in 12 Months (Real Life of a Real Estate Investor Year 2)

135 Replies

Alright BP Nation, this is the start of Year 2 of the Real Life of the Real Estate Investor  thread.

In the first year of the Real Life of a Real Estate Investor, without meaning to do so, it attracted and resulted in Joint Ventures that produce a low six-figure profit. I was thinking - what if I deliberately seek out JVs on Year 2 of this forum thread? Maybe it can result in 7-figure JVs. Hence, I am setting the goal and making it public: make $1M in the next 12 months (deadline: March 20, 2016). I will have a separate posting on HOW this could be achieved with the help of BP Nation.

OK - so here's Week #1 of year 2 of Real Life of a Real Estate Investor.

The Good

1) Marketing, Sales & Closing
Below is the list of properties now controlled by our Chicago team that I've decided to focus our marketing efforts on:
- a 6 bed home in Crestwood: $110K (new & under contract)
- a 3 bed townhome in Villa Park: $80K (under contract)
- a 5 bed home in Chicago Portage Park: $270K (reduced)
- a 3 bed home in Bishop St in Chicago: $6K
- a 3 bed home in Glen Ellyn (rehab project)
- a 2 bed condo in Country Club Hills: $20K (under contract)
- a 127 acre land in Washington state: for sale for $6M

Last Monday we got Crestwood. On Thursday, I found a buyer who is also a member of BP. Good deals sell quickly.

2) Acquisition, Offers, Leads and Renovation
We got 26 leads this week which is higher than what we got last week (22). Below is the breakdown:
16 leads from the MLS
4 pocket listings
3 HUD
3 other wholesalers

The other 2 leads from HUD are from southside Chicago. The numbers don't make sense so we're not doing these.

I saw the rehab work of my business partner Dale on our Antioch property. I like it. Below are some before and after pictures. We will stage it and then list it on the MLS. We acquired it for $141K, we put $40K to rehab it and we're thinking of selling it for $280K.

Before


After


Before


After

3) Raising Money, Organization, Systems, Training, Networking & Relationships

This Saturday two investors I talked with and they expressed interest in investing their IRAs with me and in my lending business. They said they can invest up to $250,000. Nice.

The NOT So Good
The house in Portage Park did not appraise for the $470K we're expecting. We got a disappointing $415K as the appraised value. With this lower than expected appraisal, we will have to shell out more money to buy and rehab the property. The risk is going to be too high with us needing to invest more money and the returns will be less too. We've decided NOT to do the deal.

LESSON OF THE WEEK: WHY THE PORTAGE PARK HOUSE DID NOT APPRAISE AND WHEN TO WALK AWAY
The Portage Park house is not the usual fix-n-flip. It's in an area where houses usually sell between $250K to $350K. Then in some parts of the area, there are houses sold for $430K, $463K and some are even listed for $500K to $550K. When we looked into it, we found out that in those parts of Portage Park, they are doing 2nd floor additions, they are opening the floor plan and they are doing high end finishes. By making the house look like a million dollar home and expanding the square footage with 2nd floor additions, they are increasing the value significantly. So we're thinking (really hoping) that the property can be resold for $470K.

However, that did NOT happen. Why? According to the appraisal, the most expensive comp sold for $450K but it's 0.63 miles from the property. The comps closer to the property (0.1-0.3 miles) sold anywhere between $370K to $400K. Granted some of those comps are not directly comparable (some are frame, some have only "half" 2nd floor additions) and so the appraiser correctly increased the value to $415K. My conclusion is that the whole 2nd floor addition strategy is working in some parts of Portage Park but not yet in the block where our house is at. We are ahead of the "movement" and I don't want to be the pioneer who lost his shirt with an unprofitable rehab. I care about my investors' money too much to take on unnecessary risk when there are other deals out there. SO I've decided to walk away. Yes - I will lose my earnest money but a few thousand dollars of loss is better than putting in $90K and then not making money out of it (or worse, even losing money).

@Wendell De Guzman  So happy to see you've decided to continue on with this new thread.  You've inspired many BPers including myself with your updates. Good luck with the $1 mil in 12 months! Go Wendell, go Wendell. We're all cheering you on.

Is your goal to Net $1mil for yourself, of gross $1mil in gross profit?

Wendell,

Thanks for challenging not just BP nation, but also your Chicago Team in attaining $1M in 12 months! Guys and gals we are here to support you and your goals as we ALL make this happen!

Elpidio Quiballo Jr.

President of Acquisitions 

HHS Capital LLC

Originally posted by @Ryan Billingsley :

@Wendell De Guzman  Exciting stuff!  Thanks for motivating me this morning!

 You're very welcome and I am glad you're motivated.

Real estate is truly exciting stuff. Finding deals, structuring them creatively in a way that makes a lot of money is a lot of fun!

This post has been removed.

@Wendell De Guzman , that sounds like great stuff. Keep up the good work and this is extremely motivating.

Originally posted by @Darrell Lee :

Is your goal to Net $1mil for yourself, of gross $1mil in gross profit?

 $1M Gross profit coming from Joint ventures through Biggerpockets.

Originally posted by @Account Closed :

@Wendell De Guzman, that sounds like great stuff. Keep up the good work and this is extremely motivating.

 Thanks Francis. I am glad my weekly postings inspire and excite.

Your goal is convoluted... I used to set my income goals based on gross income but found it meaningless... When I was a broker, I used to set gross income goals of double the previous year. When I hit  $125k in '85 I thought how do I hit $250k? That year I didn't hit $250, but I hit $360k! I thought impossible to hit $700k so I opened a big office and did $1.2m, then 2.1mil etc... But I was making less money grossing over $2m than when I grossed $360k ($220k net) as a one man shop... Grossing over $2 million and I was netting less than $40k/yr!

Better to set NET income goals, that is the true measure of success...

Making money being an investor is much easier than being a broker... and can be a lot less stress...

Keep track of both your gross and net and focus on how to net more to yourself. Little things make a BIG difference. When you structure your JV deals, work on making the deals more favorable for yourself while being fair. Don't give away the store...

@Wendell De Guzman As always, it's encouraging and enlightening to see your goals, progress, high points and "areas of opportunity." I'm glad you are doing the transparency without giving away the farm.

Also, I appreciate that  you show that a lot can be accomplished,but only by hard work and doing your due diligence. 

All of the information is invaluable.

By the way, looking forward to cheering you on to your goals for this year, and hoping I can exceed some of mine too!

@Darrell Lee

 you have nailed it. It doesn't matter if you bring in $100k or $1M in gross income. What matters is the profit. If your expenses are $30k and you bring in $100k that is $70k, but if you gross $1m and your expenses are 995k, ouch.. 

This is why a restaurant that grossed $3m last year in Seattle is now closing, because the increased minimum wage took their 4.2% profit and dropped it losing 2%. 

Well, saying you grossed $1mil profit is more impressive cocktail chatter than saying I netted $100k or $200k and while perhaps accurate, it might come off as bragging...

@Darrell Lee , I set the goal of $1 M Gross Profit just for BP partnerships and I set it gross because I have no control on the cost/expenses of whoever my JV partner is.

Example:

In the biggest wholesale deal I did in 2014, I did that with a BP member and he found a deal in Lockport IL. I found a buyer. Together our gross profit (after paying the closing costs) is $59,000. My share is $26K and his share is $33K. I know my overhead but I don't know his overhead or marketing expenses he spent to find that awesome deal.

The money I make outside of BP partnerships is not included in that $1M goal. My overhead is minimal and I pay my acquisition and sales people on commission (but only if they sell or acquire properties themselves - in the Lockport deal, I was the one I found the buyer so I didn't pay any of my sales people commissions). The only overhead I have is office, internet, and a Virtual Assistant in India.

So when I achieve the goal of $1M gross profit from BP JVs - my net profit is...good enough (and WAY higher than your $40K net). :-)

As a new member of BP, this is pretty awesome!!! I definitely have to expand my horizons. I just connected with a cash buyer that wants multi families out of my state & I don't even focus on multis.

Do you have a JV contract that you use, that I could make a copy of??

@Wendell De Guzman I grew up in the Lockport area. When we moved there in '76, the house we bought brand new cost $59K. It re-sold in 2013 for $248K. The sod farm near my house now has $450K homes on it.

It amazing to see how the world grew into that area. Thanks for bringing back some memories for me!

Medium webuysmallmultifamilesRonald Perich, We Buy Small Multifamilies | [email protected] | 314‑896‑0669 | http://webuysmallmultifamilies.com

Over 200 miles!

That's how much driving we did yesterday 3/28/15 with our out-of-town investors. We looked at several SFH in our current inventory and a rehab underway. We now have on board a NJ and California investors to JV with. Exciting way to end the month of March! We also had the privilege of our FL consultant, Henry to give his invaluable insights on the tour.

Thanks to our Chicago TEAM and our Investors in making it happen.

Let's keep that momentum going!

Your tour driver, Elpidio

@Wendell De Guzman thanks so much for this thread. :-)

Can I ask you some estimating questions?

How are you estimating your Closing cost to Buy and Closing Cost to Sell? Are you using a rule of thumb such as "multiply purchase cost by a percent"?

Am I right in understanding that Closing Cost to Buy refers to your closing costs when you acquire the property and Closing Cost to Sell refers to the closing costs when you sell after the rehab has been completed?

Originally posted by @Robert Solis :

@Wendell De Guzman thanks so much for this thread. :-)

Can I ask you some estimating questions?

How are you estimating your Closing cost to Buy and Closing Cost to Sell? Are you using a rule of thumb such as "multiply purchase cost by a percent"?

Am I right in understanding that Closing Cost to Buy refers to your closing costs when you acquire the property and Closing Cost to Sell refers to the closing costs when you sell after the rehab has been completed?

 Robert.

Those closing costs are based on experience (and these are true for IL, not in other states we operate). These are all negotiable though - depending on the seller and buyer you have, you can even negotiate that they pay YOUR closing cost not you. But, we assume worst case - that we pay BOTH of them.

Thanks @Wendell De Guzman ! Can you clarify for me... do these closing costs refer to the closing costs incurred when the rehabber acquires the property or when the rehabber sells the property or both?

Good Luck @Wendell De Guzman ! I'm interested in following along and seeing the updates throughout the year.

Originally posted by @Robert Solis :

Thanks @Wendell De Guzman! Can you clarify for me... do these closing costs refer to the closing costs incurred when the rehabber acquires the property or when the rehabber sells the property or both?

 Both

Alright BP Nation, here's Week #2 of Year 2 of what's happening in my real estate business. Since I have a goal of $1M in 12 months through the help of BP members, here's an update on how we're advancing towards that goal:

As you can see from the above, our profit (cash received and when we sell our rehabs) are on-track vs. the goal (by this week, profit should be $38K and total profit right now is $85K). Over the next few months as our properties are sold, our cash profit received from properties should rise and catch up with our goal.

The Good

1) Marketing, Sales & Closing
Below is the list of properties now controlled by our Chicago team that I've decided to focus our marketing efforts on:
- a 6 bed home in Crestwood: $110K (back on the market)
- a 3 bed townhome in Villa Park: $80K (under contract and will joint venture on it)
- a 2 bed home in Chicago Portage Park: $215K (new)
- a 3 bed home in Bishop St in Chicago: $6K
- a 3 bed home in Glen Ellyn (rehab project - started demo)
- a 4 bed home in Antioch (rehab project - finished and ready for staging)
- a 3 bed home in Calumet City: $30K (new)
- a 4 bed home in Bolingbrook: (new) I've decided to Joint Venture on this and sell it rent to own
- a 4 bed home in Plainfield: I've decided to Joint Venture on this and sell it rent to own
- a 127 acre land in Washington state: for sale for $6M

2) Acquisition, Offers, Leads and Renovation
We got 20 leads this week which is lower than what we got last week (26). Below is the breakdown:
3 from HUD
16 from MLS
1 from another investor - this one lead contains 100 properties so technically we have 119 leads. We need help in evaluating all these leads.

We got a 4-bedroom home in Bolingbrook. It needs light fixtures, kitchen appliances, and other minor stuff. The plan is to sell the property rent to own. Below is my rent to own analysis (assuming the market value is $240K). The nice thing about rent to own is that you can sell it at a future (and therefore higher) price with minimal tenant headaches (since the landlord is not responsible for repairs and maintenance) while not needing to pay a real estate agent commission. So, you get a higher price, lower selling cost and while you wait, you get paid a monthly cashflow (and the cashflow for rent to own is higher than a normal rental).

Bottomline, you can make MORE money with rent to own vs. a rehab project (and yes, you have to wait 6 months longer but in some deals, the IRR makes it worth it).

3) Raising Money, Organization, Systems, Training, Networking & Relationships
This Saturday 2 investors - one from NJ and another from CA came and visited me and my team. We toured them to 5 properties as 1 day is not enough to go through all the properties we have. One of them decided to JV on our property in Bolingbrook. The JV partner will get a conventional loan on it while putting down 50% of the downpayment. I will put in the other half and do all the work in selling the property rent to own. We'll then split the profit 50-50.

The NOT So Good
The buyer for Crestwood backed out. Argh. They claim it needs a lot more repairs. I sent 2 GCs there and I inspected it myself and I didn't see the "too much repairs" they are talking about. They could just back out for another reason but use their inspection contingency as their "weasel clause". I am not worried. A property worth $200K that I am selling for $110K (needs $30K repairs) should sell.

LESSON OF THE WEEK: HOW TO GET OUT OF STATE INVESTORS/ BUYERS THROUGH BIGGERPOCKETS
This NJ investor who visited us last Saturday and I have first talked about investing together (over the phone) more than 6 months ago. He called me then because of my ad in BP Marketplace about a property I have. But nothing happened for several months - I guess, he became busy, I became busy so I thought this buyer lead was a dead end. I didn't realize he signed up in my blog and has been receiving my emails about my properties. He contacted me about 1 month ago and said he wants to joint venture on one of my properties. He said he like to visit me and my team. I arranged it and last Saturday he saw the properties and decided to pull the trigger on the Bolingbrook rent to own property.

The above is a familiar pattern with all the out-of-state investors who decided to JV with us or buy our properties.

Below's the process and what you can do so you can too can get out-of-state investors:

1. Don't expect this to be instant. It takes several months or even one whole year. Step 1 is to actively engage in the BP forums. Answer questions, provide resources and useful links to people. Do not actively sell in the beginning (specially NOT as your post #1). You are doing this step to be known in BP as a provider of value not as someone who just use BP to sell. The best way to sell is to "sell without selling". When you provide value to people, you are selling yourself.
2. Once you've done step 1, now it's time use the BP Marketplace (you need to become a Plus or Pro member) and start marketing some of your properties there.
3. Answer questions from your prospective buyers who respond to your ad. Talk to them on the phone. Prescreen them by requiring proof of funds though. Those who can "proof up", you spend more time with. FOLLOW UP is crucial here.
4. If they show interest in your properties, invite them to come to you and tour them around. Show them why it's wise to invest in your city or area. Focus on building rapport and trust by being professional in the way you speak while being yourself.
5. If you're capable of having skin in the game in your deals, do that. Out of state investors will feel at ease when they know you have something to lose if the deal goes sour.

Out-of-state investors will invest with you if they know you and they know your market better. So put yourself out here on BP, be patient, focus on finding good deals and you will see that finding buyers or joint venture partners in your city or out of state or even out of the country is EASY.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you