1st Sub2 Deal / Buy & Hold
Hello BP!
My first deal ever was 10 years ago. I bought and fixed, sold to my parents and they owner financed @ 10% for 5 years. My 2nd deal was a year later as a bird dog deal. I didn't even know it had a name, but I made $3k on it.
Fast forward and here's my most recent deal. Obtained through yellow letter marketing. Owner called me about a property in her name, she just didn't want a foreclosure. I met with her at the property, signed the deal on the hood of the car and away I went. Getting title insurance was a tad troublesome, but more so was the fact that the title company had never done a Sub2 deal, so their attorney had to review everything and get opinions from the outside. We were able to close 4 days before auction. 3 weeks of rehab turned into 5, in part driven by my lack of knowledge. Here were some of my mistakes / lack of planning:
-Replace all windows (13) (5 day delay)
-Add a full bath in the master (4 day delay)
-Bees in an external wall :-\ (1 day delay) removed for free! :-)
-Plumbing issue (2 day delay)
-Replace kitchen flooring (3 day delay)
House was a 3/1 when I picked it up. We converted it to a 3/2. It was nearly a complete gut. No roof work, no foundation issues, no electrical issues.
By the numbers:
Reinstate Loan - $5,800
Title Policy - $1,000
Outstanding Mortgage - $23,000
Labor - $18,270
Materials - $21,622 (90% purchased from Lowe's; avg. 12% discount)
Material & Labor was over my estimate / budget by about $5k
ARV - $115k - $127 (based on sold comps)
Rent - $1,300
P&I - $530
Tax - $158
Insurance - $125
Total Out - $813
Cash Flow - $487
*I know there will be vacancies, but as for repairs I should be good for a few years.
Originally I planned to flip it, until I realized how I would get slaughtered on taxes...ouch! So I decided that I'd try to refi / cash out. I posted on BP and got lots of responses from folks who could help. Thank you all! I received word today that my bank was willing to do an 80% LTV cash out for 25 yrs, w/ 30 year amortization at 4.75%.
So this deal closed on 10/1 and demo started on 10/5. While in the midst of this rehab, I saw a deal pop up on 10/14. I went to see it w/ my contractor and while there a roofer, who my contractor sometimes subs work out to shows up at the property as a buyer. Talk about awkward. It ended up being a bidding war between me and the roofer and I upped my bid 3 times over that night. I got that property for $44,300. $23k in labor & materials and ARV will be $104k. My contractor and his team will wrap up things next week. Working with a FANTASTIC hard money lender on this one.
Back to the original subject property...I had the house staged for pics and showings. The husband of the lady I hired to stage came along and dropped off furniture. While there he and I chatted a bit. I showed him before pics and told him the details of the deal. Before he left he stopped and said he might want to invest with me. That could mean a lot of things. He said we should get together. I sent him a text two days later to set up an appointment. He called me back w/in 2 minutes and started telling me he'd get back with me next Monday and we could get together Wednesday. Initially it felt like I got the brush off. He called me this past Saturday and asked if we could get together on Tuesday (the day of this post). I met with the couple and after a few minutes of telling each other who we were and about our families and backgrounds we started to discuss how we might be able to work together. Long story short, he offered to fund EVERYTHING on future rehabs...acquisition, titles, surveys, labor, materials, marketing fees, the whole nine. He only wants to be the money guy. In exchange for me finding properties, negotiating the deals and managing rehab, I will take 60% of the after expenses profit and they would take 40%. I was floored! We're going to get started after the first of the year.
So...this will be my first rental and in about a week my 2nd will be complete...it will cash flow nearly the same as the first.
I'm thankful to have been blessed with these opportunities. I'm also thankful for BP, my contractor, my HML and my stager and future investor couple.
Yes, we converted this closet w/ a hot water heater into a FULL bathroom! It's small but effective.