Make $1M in 12 Months - Week 26 (Hey BP - it is BACK!)

21 Replies

If you have been wondering what's happening to my goal of $1M in 12 months through real estate Joint Ventures with Biggerpockets members...well, I've been busy in the past 6 weeks since my last update and the good news is: I am BACK and I promise to give you an update every week - every Saturday afternoon in fact.

If this is the first time you're reading this post, read the link below (you will see why I started this $1M in 12 months goal and how I did in the first 20 weeks):

https://www.biggerpockets.com/forums/223/topics/183925-make-1m-in-12-months-real-life-of-a-real-estate-investor-year-2

Instead of just updating you BP Nation, I want this to be INTERACTIVE and a learning experience for you and for me. So, I will pose a question at the end of every posts and my hope is I will get experienced and newbie real estate investors alike to contribute. By doing so, we'll all learn from each other. If I received ZERO responses from the question, I might skip a week in my update.

I've also simplified the update so it's easier and less time consuming for me to write and it's easier for you to read. OK, here we go.

Over-all Financial Update:

The Good

Since my last update, we have since acquired 2 properties CASH - 2200 Seaton and 2520 Heather. We've also gotten good tenant/buyers for both 327 Clarendon and 2409 Ruth Fitzgerald. The tenant/buyer for Clarendon gave us $6,000 so far ($4,000 more) and for 2409 Ruth Fitz, we got $4,000 ($4,000 more). We've found that by asking the downpayment in installment, more people can afford our rent to own program. Lastly, I've wholesaled a duplex in Cincinnati, Ohio to 2 BP members (Richard from Chicago and Susan from Canada) - they partnered on this duplex.

Properties Acquired Since Last Update:

2200 Seaton

ARV: $235,000; Repairs: $8,000; Acquisition Cost: $170,000
Exit Strategy: Sell on Owner Financing: $250,000 (20% Down + $1995/mo)
Stage of the Project: Renovation Started; Marketing to Sell it

2520 Heather

ARV: $140,000; Acquisition Cost: $70,000; Repairs: $30,000
Exit Strategy: Rent to Own at $155,000; ($10K down + $1600/mo)
Stage of Project: Getting BIDS from 3 different GCs (start of rehab next week); Marketing to Lease It

Properties Sold or Rented Since Last Update:

2409 Ruth Fitzgerald


Cash Received: $4,000 (non-refundable option fee) + $1,600 rent = $5,600
Cash Receivable: $4,000
327 Clarendon

Cash Received: $6,000 + pro-rated rent ($1,100_ = $5,110
Cash Receivable: $4,000
1126 Groesbeck


Cash Received: $6,336 (wholesale profit)

The NOT SO Good:

None of the fix-n-flip properties we have that are ready (Harvest, Virginia) have sold yet. We've replaced the listing agent on Harvest. We've decided to market these and our other properties simultaneously for rent to own. We've also lowered the price on both (reduced both by $10,000). Also, we've lost a good wholesale deal (Hyde Park) as the attorneys didn't agree on who which side will do the title work. We want to be in control (to be able to wholesale it) and so we want our attorney to do the title work but the seller's attorney wants to do the title work so he will get paid for it.

Question for the Week
For the more experienced investors out there - specially REHABBERS, do you acquire properties in the fall knowing that over the winter you can't sell it or do you wait until winter to start acquiring properties that you rehab over the winter so you can sell them come spring?

To know my answer, please post yours first :-)

Talk to you soon!

Originally posted by Account Closed:

Question for the Week

For the more experienced investors out there - specially REHABBERS, do you acquire properties in the fall knowing that over the winter you can't sell it or do you wait until winter to start acquiring properties that you rehab over the winter so you can sell them come spring?

Great question.  We look @ the fall & winter as a good time to fill the pipeline.  

  • Get some short sales under contract that won't close right away.  
  • If the numbers work on a deal we'll buy & add additional $  to holding the property in our financial analysis 
  • Also good not to be dependent on one market & have a North/South strategy.  When it freezes in the north, we keep our eyes open for deals in the south.  

Thanks @Crystal Smith for such great answers as always!

Here's what we do during the fall season:

We usually focus on wholesaling during the fall season (just to get quick cash coming in) and like you, we also focus on shortsales. Also, now is the time to do the BIG rehab projects - which will take 6 months to finish so we're right into the spring when we sell. We have a big project like that now - 4432 Mozart in Ravenswood Manor neighborhood. 

I actually was wondering about that a couple of days ago. I know short sales can take 6-9 months and thought that may be a good idea to be ready in the spring. 

@Wendell, another great, informative post.  Thanks for sharing your success and opportunities.  

@JerryStanford, on short sales, indeed, they are a huge time suck, but as such, why not give one a try for the quieter winter market?  You never know, it might be a great all around deal.

Best regards!

We never have right mix of product or capital. We buy whenever a good deal arises. If we can't start right away, we will wholetail some as we go. Right now we have 10 under rehab along with about 14,000 sf of office rehab. Due to market in our area we have had a shift to medical office buildings that tired and wore out.

Originally posted by @Jennifer Kinzle :

@Wendell, another great, informative post.  Thanks for sharing your success and opportunities.  

@JerryStanford, on short sales, indeed, they are a huge time suck, but as such, why not give one a try for the quieter winter market?  You never know, it might be a great all around deal.

Best regards!

 You're very welcome Jennifer. Do you know anyone who is good and have the patience to negotiate shortsales?

Originally posted by @Duke Marquiss :

We never have right mix of product or capital. We buy whenever a good deal arises. If we can't start right away, we will wholetail some as we go. Right now we have 10 under rehab along with about 14,000 sf of office rehab. Due to market in our area we have had a shift to medical office buildings that tired and wore out.

Nice operation you got there - 10 SFH rehabs and an office rehab.

I guess with enough capital, you really don't worry about the winter months, isn't it?

One decision I made is to buy with CASH during the winter months so I minimize the holding costs during the winter months. Chicago winter can be long and no one wants to move here. Also, people don't want to move in the fall as well. Hence, a project that we start now might take whole of fall plus winter or a total of 6-7 months before they can rented or sold.

Account Closed can you tell us how you are structuring your owner finance deals in order to stay compliant with Dodd Frank?  Or, maybe some advice on how to negotiate deals like the ones you are doing with the sellers?

I am in the third month of my direct mail campaign right now and would appreciate any advice you could give on how you do your deals.

Thanks.

I'm kind of confused here... you mean $1M in profit, after all expenses, in 12 months? Or doing $1M in business, like acquisitions. Because normally you'd think of these properties as a long term hold, or at least holding for more than a year. But if you're talking about doing $1M worth of business in a year, then it's all about getting financed through partnerships but even then you'd be building a portfolio unless you're just creating a massive flipping business.

Originally posted by @John Hixon :

@Wendell De Guzman can you tell us how you are structuring your owner finance deals in order to stay compliant with Dodd Frank?  Or, maybe some advice on how to negotiate deals like the ones you are doing with the sellers?

I am in the third month of my direct mail campaign right now and would appreciate any advice you could give on how you do your deals.

Thanks.

 John,

We buy the property cash (not owner finance) so selling them owner finance is not an issue.

Originally posted by @Vincent Crane :

I'm kind of confused here... you mean $1M in profit, after all expenses, in 12 months? Or doing $1M in business, like acquisitions. Because normally you'd think of these properties as a long term hold, or at least holding for more than a year. But if you're talking about doing $1M worth of business in a year, then it's all about getting financed through partnerships but even then you'd be building a portfolio unless you're just creating a massive flipping business.

Vincent, our business model is fix-n-flip and rent to own. The profit per deal is based on when these properties get sold or in the case of rent to own - the tenant/buyer cashing us out. We work with our tenant/buyers so they cash us out in 12 months.

So the answer to your question - the goal is $1M in PROFIT (shared by me and the JV partners) not $1M worth of properties. Right now, the properties in the list is cumulatively worth $2.4M and we're half way to our March 2016 deadline.

Account Closed Okay gotcha. I think it's awesome you have a tangible plan with solid numbers. It looks like you're really hustling and doing a fantastic job, and it's definitely encouraging to see someone take a huge goal, make a plan for it, and start chipping away, figuring out ways around obstacles and not letting anything stop you. Bravo.

Thanks for the kind words @Vincent Crane ! Sometimes it feels we're not making any progress and we're chipping very little (just dust size bits) from that boulder called our $1M in 12 Months Goal. But here's value of always moving forward and having a good team in place. You'll be surprised by what can be done in such a short span of time. 

@Wendell, actually, I do!  Short sales with The Keller Group.  I've got a team of highly experienced short sale listing professionals and we have an exceptional close rate because we do all the tricky negotiations in-house with the banks. Our close rate is over 95% and we never let the deal get below our radar.  By handling the direct negotiations, all via the listing side, we stay on top of the deals, which is absolutely vital to manage the complicated short sale process.  Patience with short sales is our specialty. 

Thanks and I'm happy to answer any questions!  

Account Closed I'd say $1M in 12 months is more than just dust size bits haha. Look at it this way... Most of the podcasts I've heard on BP, many of the people didn't even buy their first property until they saved up for 2-3 years and then finally got one, then maybe in year 4 or 5 they expand like you are and get 20 or so in one year. Very few people, less than 1% ever get to that point. But once you're there, whether it's with small multi's and then trading up to apartment compelexes, or having 50+ SFR's that cashflow $10k+ per month, they'll both get you the financial freedom you're looking for pretty quick once you get the financing in place and set up systems to scale.

"We work with our tenant/buyers so they cash us out in 12 months."

     I am curious as to how you structure these rent-to-own contracts, with what sounds like a 12 month balloon.  Dodd-frank indicates a minimum of 5 years before a balloon payment is required, correct?  Or are you structuring these as lease-options?

     How are your tennt buyers able to cash you out 12 months later, and what happens if they can't?

    Seems like in the short term at least, the cash-on-cash returns are extremely small, given these deals are unlevered and using lots of investor cash -- unless I am misinterpreting?

Originally posted by @John D. :

"We work with our tenant/buyers so they cash us out in 12 months."

     I am curious as to how you structure these rent-to-own contracts, with what sounds like a 12 month balloon.  Dodd-frank indicates a minimum of 5 years before a balloon payment is required, correct?  Or are you structuring these as lease-options?

     How are your tennt buyers able to cash you out 12 months later, and what happens if they can't?

    Seems like in the short term at least, the cash-on-cash returns are extremely small, given these deals are unlevered and using lots of investor cash -- unless I am misinterpreting?

 Yes - lease options not owner finance.

If they can't get conventional financing in 12 months, depending on the reason for the delay, we may extend the option period.

Most of our deals utilize leverage. We sometimes buy the house cash and then do a cash out refinance to pull our cash out. Sometimes we buy using conventional financing.

Account Closed I recently purchased a fix and flip property that needs extensive rehab (likely a 6 month holding period). I paid cash with the goal of minimizing holding costs knowing we were going into the slow winter RE sales period.  Property should be ready for listing come spring.  Hoping to save a little money on rehab costs/labor given that I'm thinking subs will be a bit slower in the winter months as well. 

And am actively looking for more deals  - kind of feel like you just have to grin and bear it with the winters here.  And hey, they are predicting a mild winter this year anyway :)

@Jennifer Kinzle ,

To make the @ work, do the following:
Hold down the shift key and type @?
Look below this Window, and you will see a list of names of people that have posted in this thread.
Click on the name of the person that you want notified via an email, that you responded to them.
If you are a Colleague with anyone that has NOT posted in the thread, and you want them to see your post, hold down the shift key, type the @ and the first 4 letters of their First or Last Name.
Then look below this Window and click on that person's name.
Raymond

@Raymond B. Thanks for the tip!  That makes a huge improvement.  

Sincerely,
Jennifer

Account Closed first of all, thank you for sharing here! I spent the past two days catching up with your two other related threads and I am extremely impressed with your discipline and stamina to update them with such consistency. I have been an investor and developer since 2001 and I have accumulated months if not years worth of knowledge from you and a few other BP members in the short weeks since I signed up. Just having the opportunity to peek in a different market is invaluable. Thank you so much again!

Regarding your question, I grab a deal when I can find one. There is of course such a thing as bad timing but the market here in the Boston area has been appreciating in such an unhealthy manner that it's very hard to keep up. I try to be conservative without being totally on the sidelines and I have been focusing on development-hevy deals with a lot of potential equity so I can theoretically hedge against a potential correction. A crash is a different beast but the consensus across the board is that we will have a strong seller's market in 2016 as well. I would say both fall and winter are busy times for developers to acquire. I have just been outbid $125K on a property I offered $175K over asking (which was over $1MM) - that pretty much sums up what's happening around here...

Please keep up the updates and if you have leads or potential leads on anything around the greater Boston area definitely send me a PM.

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

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.