Almost 2 years into being a buy-and-holder - 18 units & a full time job

68 Replies

I still wouldn't mind hitting 50 units this year as per my other post - http://biggerpockets.com/forums/522/topics/160698-...

However even if I don't, I'd still consider myself a success.

Mid 2013 I was able to source investment in return for equity for a buy-rehab-rent-refi setup that I wanted to do. The equity split is extraordinarily favorable to me, so as part of the deal, I was willing to quit my 'dayjob' of managing websites and go into REI full time.

Since then, I've been able to buy and rehab a total of 13 properties consisting of 18 units in my area.

Total expense has been in the neighborhood of $550,000 with around $110k being financed via refinances at the bank. The bank was, and still is extraordinarily slow to lend, and we're having to change our strategy a bit to incorporate flips into our model while we wait for the properties to season a little more.


Metrics look like this :

~$440k in via equity investment + a minor amount of rental income
$110k debt (Resulting in debtservice of $750/mo)
For a total of $550k invested.

ARV between 3 properties of $850k - So a net equity of $300k or so.

Monthly rental revenues of $11,000

Costs are 
$1000/mo in insurance
$1000/mo in property taxes
$1500/mo saved back for maint/repairs - Actual expense last year was around $700/mo due to the fact we try to fix everything that might need repaired in the next 5 years, so far it's worked quite well
$500/mo for vacancies (Actual vacancy rate was 3.8% last year based on total of damages + lost rental days).
$750/mo in debt service ($285 or so goes towards principal curtailment)

For a grand total of $6,250 in monthly cashflow or 16.6% return based on the $450k cash invested. Our LTV right now is

My total time investment is pretty low overall, and the best part is I've created some pretty serious value in the properties as we're getting independent appraisals and they're all coming in close to my ARVs. 

That is awesome Brandon! Keep at it! Exciting seeing how far so many people have come in such a short amount of time! 

Are you using a property manager for your properties or are they all relatively close to you and you are self managing (apologies if I missed that info in your post). 

Congratulations @Brandon Schlichter !!

That progress is amazing for only 2 years on the job 😄

I can't wait to start my buy and hold adventure!!

Originally posted by @Eric Deshaun :

That is awesome Brandon! Keep at it! Exciting seeing how far so many people have come in such a short amount of time! 

Are you using a property manager for your properties or are they all relatively close to you and you are self managing (apologies if I missed that info in your post). 

 I'm doing all the management myself. Personally I don't feel that I can trust property managers (Sorry guys). My plan is instead to build my own in-house management team when it gets too much for me. Based on these 18 units, I feel I could personally manage around 100 before I need to look at hiring people to help. 

Originally posted by @Brandon Schlichter :
Originally posted by @Eric Deshaun:

That is awesome Brandon! Keep at it! Exciting seeing how far so many people have come in such a short amount of time! 

Are you using a property manager for your properties or are they all relatively close to you and you are self managing (apologies if I missed that info in your post). 

 I'm doing all the management myself. Personally I don't feel that I can trust property managers (Sorry guys). My plan is instead to build my own in-house management team when it gets too much for me. Based on these 18 units, I feel I could personally manage around 100 before I need to look at hiring people to help. 

That sounds like you have a plan worked out and are investing within a close proximity to your current residence which is awesome.

Do you think you will ever branch out into other states or areas that may be a bit of a daily reach for you? Just curios as each person has their own way of building their portfolio out.

Originally posted by @Eric Deshaun :
Originally posted by @Brandon Schlichter:
Originally posted by @Eric Deshaun:

That is awesome Brandon! Keep at it! Exciting seeing how far so many people have come in such a short amount of time! 

Are you using a property manager for your properties or are they all relatively close to you and you are self managing (apologies if I missed that info in your post). 

 I'm doing all the management myself. Personally I don't feel that I can trust property managers (Sorry guys). My plan is instead to build my own in-house management team when it gets too much for me. Based on these 18 units, I feel I could personally manage around 100 before I need to look at hiring people to help. 

That sounds like you have a plan worked out and are investing within a close proximity to your current residence which is awesome.

Do you think you will ever branch out into other states or areas that may be a bit of a daily reach for you? Just curios as each person has their own way of building their portfolio out.

 I'd like to, but it's a question of what plan I want to pursue in those areas.

Just in my central Ohio region, where I can either manage or closely manage managers, there's a volume of maybe $50m/yr in rental sales. That's a crapton of property and almost impossible for any investor to get close to market share. So, this gives me tons of room to grow in the area.

I would be open to other areas and working with managers, but I'd want to build some sort of management 'system' in other areas, which means buying a bunch of property to justify it.

@Brandon Schlichter

 Yeah!  I would definitely consider that a success!  I love the B-R-R-R strategy for the exact reason you just stated.  You mentioned that your "total time investment is pretty low overall," but just out of curiosity how much time would you say you work on your real estate business per week?  Congrats on the success!

Serious time spent is well under 10 hours. Most of my time is spent on property research when we have available cash, and talking to my investors (Trying to get set up to crowdfund when the SEC changes the rules).

Our absolute biggest hurdle is the refinance aspect. The banks have lent us only $100k on the $800k we own and getting more seems to be a uphill battle till we get our next year's tax return done. We could go with a HML, but the rates just don't make sense on rentals, even in the interim.

Congrats!  Sounds like an awesome adventure!

Originally posted by @Brandon Schlichter :

I still wouldn't mind hitting 50 units this year as per my other post - http://biggerpockets.com/forums/522/topics/160698-...

However even if I don't, I'd still consider myself a success.


What an inspiration you are! I've been studying REI since 2013 and preparing myself to finally take action and implement what I have learned and studied; I am low on liquid cash, so I want to flip first to earn enough to finance cash flow properties.

I hope one day I can be in your shoes. Great work and please keep us updated on your success!

Originally posted by @Brandon Schlichter :
Originally posted by @Eric Deshaun:

That is awesome Brandon! Keep at it! Exciting seeing how far so many people have come in such a short amount of time! 

Are you using a property manager for your properties or are they all relatively close to you and you are self managing (apologies if I missed that info in your post). 

 I'm doing all the management myself. Personally I don't feel that I can trust property managers (Sorry guys). My plan is instead to build my own in-house management team when it gets too much for me. Based on these 18 units, I feel I could personally manage around 100 before I need to look at hiring people to help. 

 So your full time activities are now the management of your properties.  Can you take us through a basic day? What are the day to day activities of property management?

Originally posted by @Brandon Schlichter :

Serious time spent is well under 10 hours. Most of my time is spent on property research when we have available cash, and talking to my investors (Trying to get set up to crowdfund when the SEC changes the rules).

Our absolute biggest hurdle is the refinance aspect. The banks have lent us only $100k on the $800k we own and getting more seems to be a uphill battle till we get our next year's tax return done. We could go with a HML, but the rates just don't make sense on rentals, even in the interim.

 What are the legal issues preventing you from using real estate crowdfunding sites like fundrise.com or ifunding?  Oh, and did I say good job?  Good job!

Hey newbie here! You are awesome man! I can't wait to be in your shoes. 

So for my newbie questions: what is LTV? (Not familiar with all acronyms yet)

And what is crowdfunding? 

Hi Brandon,

Thanks for sharing your story. I'd like to confirm some numbers... you're saying that your average unit cost to purchase is $30K and your average unit rent is $610? I'm mostly familiar with duplexes in Victoria BC Canada where the numbers are more like $300K and $1500 which is why after 20 years I'm selling and wondering whether my only option is to invest in another province or even country to get back to the great numbers I had years ago. I looked at Vancouver quickly and the numbers there seem even worse!

Dominique

good work!

This is amazing man!!! Great work, your an inspiration. Out of curiosity, do you think you would have been able to accomplish this without quiting your job? I like my job and do not plan to quit it when I start. Wouldn't having your income make it easier to secure financing? And that is a great investment setup you did. 

At your rate in a few years if the market keeps going your name will be in lights.

 If this RE bubble bursts we may find your BP account deleted.

Good Luck I hope the best for you

good for you my only question is how can u get financing for more then 10 properties I would love to grow my portfolio too

What are the lenders telling you as to why they are not interested? Sounds like a seasoning issue? I am a commercial lender in NM and would be happy to do a deal like this but at lower CLTV than the typical maximum. Probably somewhere between 60 and 65%. Also, are they requiring direct assignments? If not maybe offer it to entice them To do the deal. Another idea is a payment reserve until a specified future date. Hate to tie up funds for a while but may be worth it to get the loan now.

Justin, LTV & CLTV is loan to value or cumulative loan to value. Depending on the loan structure these calculations may be the same.

Brandon,

very interesting as it mirrors closely what we've done here in California, albeit with a different capital strategy.

We started in 2012 and now have 9 properties with 25 units in them (all multi-family) but everything is financed. Our capital input is quite low around 180K with equity now standing at 1.1m. So in terms of percentage CoC returns we fare much better, but our absolute cash flow is lower because of the debt service.

Unlike you, we've not had any trouble getting financing, both residential investment property mortgages and commercial. We just refi'd into a commercial umbrella which will give us access to the equity via a commercial credit line to buy more. 

But the general strategy is the same, buy and hold - we tend to look for "no rehab necessary" properties. Our parameters are <40K downpayment and ~1K net cashflow per month per property. Now that we finance 100% (with the credit line used for downpayment) the monthly net cashflow is closer to 800/month/property. 

We accept the lower cashflow in exchange for faster growth and zero capital input. As long as our DSCR requirement is met we feel pretty safe about the rate risk (especially since we use commercial loans where the principal adjusts every year).

It'll be interesting to see how your strategy plays out as you look for outside capital to fuel growth in comparison to using the financing model. 

Thomas

Brandon,

You mentioned the banks don't want to re-fi; what is the sticking point with them? Have they told you what they want to secure a deal?

Originally posted by @Thomas Richter :

But the general strategy is the same, buy and hold - we tend to look for "no rehab necessary" properties. Our parameters are <40K downpayment and ~1K net cashflow per month per property. Now that we finance 100% (with the credit line used for downpayment) the monthly net cashflow is closer to 800/month/property. 

 Those numbers sound very impressive to me.  $40k down for no rehab properties with $1k net cash flow per month would be phenomenal.  I don't think I've seen anything approaching those numbers in MD.

Originally posted by @Stephen Chittenden :

 Those numbers sound very impressive to me.  $40k down for no rehab properties with $1k net cash flow per month would be phenomenal.  I don't think I've seen anything approaching those numbers in MD.

 West Coast market is pretty great right now if you know where to look. High inventory and high rental demand. 

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