Making my splash in Real Estate! 6 Units in 11 months!

9 Replies

Hey there everyone! It’s been a pretty awesome (and hectic) 11 months for me. I went from having just one rental at the start of the year, to having 3 houses close at the same time, with rehabs of various difficulty going simultaneously. I just wanted to drop in and share my story so maybe someone else can either get the courage to jump in or learn from some of my mistakes!

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House #1 : (SFH. 3 Bed, 1 Bath, 1304sqft)

Price: $15k + fees and closing

Taxes, Insurance: $140 per month

Rehab Cost: $4k~

Total Invested: $21k Roughly

Assessed value: 39k~

Rent = $750 per month. Tenants pay all bills.

Details:

This was my first real estate experience. I had never owned my own home, nor did I have any knowledge in the field whatsoever. However, I had been investing in electronics and cars since 2007, so this seemed like the next logical step in my progression. I had spent the entire year traveling the world and came to the conclusion that I wanted to own real estate in the countries that I fell in love with. So when I got home I went to a tax foreclosure and won a house for $15k. This house had it's serious pros and cons, but at the time I was willing to take anything I could afford. So with the help of my Dad and Grandma, we got the house cleaned up and rent ready in about 2 months. Being as new as I was, I took the tenant with money. It worked out well for several months, but fell apart in August. They started lying about the craziest ****. At one point they called and told me the neighbor was breaking in and threatening them with a gun. They were demanding deadbolts. So I called the cops and installed the deadbolts. After I had the police check into it, they changed their story and said it was a friend pretending to shoot stuff in their house with their hands. Long story short, they completely stopped paying rent for 2 months, but left peacefully in exchange for a signed document from me to to help them get HUD.

Work Done:

  • Trash cleanup and removal
  • New Carpet and paint
  • Door and trim installation
  • Hardwood floor finish
  • Flea removal

Pros:

  • Cheap taxes
  • New roof, water heater, furnance
  • Hardwood floors
  • Big bedrooms
  • Porch
  • Big basement

Cons:

  • House takes up entire property, so no land
  • Location is in a sketchy part of town
  • 1 Off street parking
  • Basement & washer/dryer hookups can only be accessed by walking outside

Lessons Learned:

  1. Location matters more than the house sometimes. We made this house look really nice on the inside, but I can't find decent people to live in the location. From now on, I will only buy houses in a B (+) neighborhood, with plenty of off street parking.
  2. Tax auctions are a good way to pick up a cheap property, but they can be really risky since you can’t walk through the house. I got super lucky with this one, but I could have easily picked up a property with stolen copper plumbing, a broken furnace, or mold infested in the walls. The wrong problem could sink your ship before it has even left shore.
  3. Spend the time and money to do the proper tenant screening. Had I done this, I would found the evictions and rental history. I would have never rented to this tenant. Let someone else deal with these headache tenants. Do your homework.

Future plans:

I’ve spent the last 2 months trying to rent this property rented back out. I had to spend the first 2 weeks eradicating a flea problem that the previous tenants brought into the house. The rest of the time has been spent showing the house to people who desperately want to live there because no one else will take them, or love the house, but have two cars or are sketched out by the location. It’s very hard to find someone with 1 car, who can not only afford the house, but who are also willing to live in that neighborhood.

With that said, I’m in works with a woman to sell her the house on a land contract under the terms that she pay me a monthly rent, and pay a large chunk off every year at tax time. I’m hoping this works out so I can unload this headache and move onto a different property.

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House #2 : (SFH. 4 Bed, 2 Bath, 3600sqft)

Price: $20.5k

Taxes, Insurance: $265 per month

Rehab Cost: $22k

Total Invested: $43k Roughly

Assessed value: 59k~ (before work was done. Estimated appraisal currently over 80k)

Rent = $1000 per month. Tenants pay all bills

Details:

I won this home through a VA foreclosure. House had been "winterized" in March...lol. The pipes and the water heater all burst, so my Dad and I replaced the whole system with pex. The siding on the house was this terrible brown scabish siding (asphalt shingle looking), so that had to go as well. I bought all of the materials and took several bids on the labor. It ranged from 3.9k-14k. I was hesitant on going with the 3.9k guy, but his work was acclaimed by many trusted people around town, so I gave him a shot. Luckily this worked out great, but it took him an entire month longer than forecasted to complete.

All in all, this project took us about 3 months to complete. This was by far the biggest and most complex job I’ve done so far. We had to replace all of the plumbing, update electrical, hang sheetrock, build closets, replace doors, cut and add trim, lay carpet. Ect. In total I had 6 people (including myself) working on different aspects of the project throughout its duration. I also got experience managing people from afar when I had to leave for a job at the U.S open. It was a huge test on my patience, decision making skills and people management abilities.

Work Done:

  • Full Vinyl Siding job
  • Full pex plumbing installation
  • Entire house Sheetrock, paint, carpet
  • Electrical rewiring and updating

Pros:

  • House had a brand new shingle roof
  • Huge basement, back yard, and two porches
  • Previous owner installed wood tongue and groove throughout the living room and kitchen
  • Brand new 96% efficient NG furnace
  • Plenty of parking
  • Solid foundation

Cons:

  • Located on Main Street
  • Only has a 100 amp electrical box
  • Very little insulation in walls and joists
  • High taxes

Lessons Learned:

  1. Stick to your gut when making offers. Without going into much detail, I think the listing agent lied to me about other offers being on the table, thus instigating me to increase my offer substantially (to increase his commission). Know your market, know your numbers and don’t stray from the game plan
  2. There is no way to foresee every expense when doing a large rehab. Things go wrong, things take longer than expected and the costs rack of quick. When doing your numbers, don’t fudge them to make them look better. You’ll be really disappointed (or broke) at the end of the project
  3. Know your game plan for the house right from the start. The price I paid for the house was calculated with the plan on doing “minor improvements” to make it rent ready. As we dug in, I completely re hauled my ideas and did “major improvements” and ended up with a beautiful retail ready home. However, I went way over my forecasted budget and had to readjust my game plan accordingly.
  4. Creating a detailed scope of work is MANDATORY. We wasted a lot time doing things twice because I didn’t do certain projects to completion in a logical order. You don’t clean, shampoo, lay carpet, or paint when you still need to finish drywall or caulk seams.

Plans for the future:

We officially completed this project mid September. My comps tell me that the house is worth approx $80-$100k as it sits. However, with winter looming, I didn’t want to risk sitting on it and heating it. So I rented it out for 6 months. When the lease is up, I plan on either selling it straight on the open market, or offering it to my current tenant on a lease option. I’m also entertaining the idea of refinancing it, pulling my money out and investing into a multifamily.

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House #3 : (Duplex. 4 Bed, 1 Bath each side, 3660sqft)

Price: $15k Cash + $10k seller financing for 1 year w/ 5% interest

Taxes, Insurance, Mortgage: $1,111.41 per month

Rehab Cost (So far): $2200

Total Invested: $29700 Roughly

Assessed value: 65k~

Rent = $750 each side ($1500 per month). Tenants pay all bills

Details:

I found this listing on Craigslist for $29k. The ad had no pictures and a very brief description. I setup an appointment asap to check it out. Overall the house was in fair condition. One side was already rented by a DSS tenant. The other was empty, cleaned and ready to be rented.

The owner was in his late 70’s and had owned the house since the 60’s. His reason for selling was age and he didn’t want to deal with it anymore. Although it looked a little rough, I knew it wouldn’t cost a ton to spruce it up. Also, it cash flowed really well. I started low with an offer of $15k cash. He countered with $25k. I re-countered with $15k cash and asked for him to finance the other $10k over the course of the year. He accepted.

We closed quick and I got the empty side rented out about a week and a half later.

Work Done:

  • I blew the attic full of blow in Atti-cat insulation. It previously had NOTHING, so this was a must.
  • The furnaces had old asbestos wrapped insulation, so we removed those and replaced with insulated flex ducts
  • Back porch had some leak problems so we patched the leaks, and replaced the rotted wood.
  • Eaves were busted up and had nests of pigeons. Tenants complaining about bugs. Come to find out they were bird mites crawling from pigeons into the window. Tried to remove them the first time but a woman across the street called the DEC. They told us we had to wait 2 weeks for any babies to mature and fly away. 2 weeks later we removed the nests and patched the eaves. No more bugs!
  • A tree in the backyard grew at a pretty crazy angle. Most of the tree was laying on the roof, which was causing the flashing and shingles to lift. Got a buddy out there with a lift and got that sucker outta there.

Pros:

  • One side rented with guaranteed check and the other was ready to go, no work needed.
  • Huge property with massive back yard and plenty of parking.
  • Separate utilities,
  • Updated Electrical w/ 200 main panel, that branches to separate panels
  • Copper plumbing (Hey, it’s better than pvc),
  • New Water Heaters
  • Natural gas furnaces
  • New roof
  • Dry basements, with no leaks
  • Huge Attic that could easily be turned into another apartment

Cons:

  • No shutoff valves in the plumbing. If I end up with a water problem, I’ll have no way to isolate the problem.
  • Old wooden windows.
  • Ugly yellow asbestos siding.
  • Old Carpets
  • One unit has an old claw tub bath that fills up the entire width of the room.

Lessons Learned:

  1. When you have an empty unit, take the time and spend the money to do preemptive updates. This will save you a lot of headache in the future, especially since you won’t have to work around an entire unit filled with other people and their belongings.
  2. Make a point to make a list of the necessities every house needs to operate smoothly and go through that list every time you look at a house. Had I done this, I wouldn’t have overlooked the complete lack of insulation in the attic.
  3. Establish ground rules about noise, trash removal, and shared space right from the beginning. At first one side of my tenants were putting their garbage in the basement for 1-2 weeks before taking it to the dump. This result in the unit next door getting flooded with flys coming nowhere. Once we figured out the source, it was a simple fix and everyone was much happier.

Plans for the future:

My plan for this house is to hold and add value. My area has a weatherization grant that will pay for 75% of the rehab costs if you can cover the other 25%. They will replace my old wooden windows, old asbestos siding, fully insulate the house from top to bottom and possibly upgrade my furnaces to energy efficient models. With an attic fully insulated with batts, rather than blow-in, I would like to finish it and turn the house into a triplex.

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House #4 (SFH. 3 Bed, 1.5 Bath, 1482sqft)

Price: $11500 Cash from Fannie Mae

Taxes, Insurance: $242

Rehab Cost (So far): $500

Total Invested: $13000 Roughly

Assessed value: 59k

Rent: $0. I am currently living in this property. If I rented it, I could get $900 a month

Details:

I'm pretty proud of this one. I was browsing through homesteps, homepath, hudhomestore, zillow and ect, when I stumbled on this house. It was ONLY listed on homepath. I didn't see it on the MLS, zillow, or any other resource. When I drove by, there were no signs in the yard. Just a lockbox and a winterized sticker.

So I called the agent and she gave me the lockbox info. Upon inspection, it appeared as though the only thing wrong with the house was the lath and plaster wall papered walls. It was a pretty solid house. I had no real hope of buying it, but I figured I’d put in an offer. So I called her back up and put in my offer for $10k (Original asking was $29k, reduced from $54k). They countered $24.9k. I countered $13k. They countered $19k, and I stayed. Two days letter I got an e-mail “CONGRATZ! They accepted your offer”. My first thought was ….****….what did I miss!??! So back over we went, and we inspected that place from head to toe with a fine tooth comb. We came back with no real issue. A little unsettling in the driveway asphalt, some algea on the shingles, but that was about it. So my girlfriend and I moved in and have been slowly upgrading it.

Work Done:

  • Installed new SS1 power vent motor for furnace ($320)
  • Shingle Repair on back side of house ($40)
  • Paint for upstairs bedrooms ($100)
  • Shower assembly for claw tub ($100)
  • Small pex replacements for small leaks in a section of the copper plumbing ($30)

Pros:

  • Immediately move in ready. There wasn’t anything I HAD to do to live in there.
  • Quiet street in a good neighborhood
  • Good sized yard with some “woods”
  • 1 stall garage
  • Nice patio porch

Cons:

  • High taxes
  • Oil Furnace
  • No gravity vents or heat ducts to the master bedroom
  • Claw foot bath unit

Lessons Learned:

  1. Don’t ever be afraid to make a lowball offer. You never know, they may say yes!
  2. Diversify your search methods. Don't rely only on the MLS or Zillow to find house. Use every services search function. Sometimes things fall through cracks
  3. Having my real estate license is a huge advantage. Not only am I able to submit as many offers as I want, I also get paid to buy houses

Plans for the future:

I think my plan for this house is to keep it for 2 years, while slowly upgrading it. It’s in a very desirable family oriented neighborhood, 1 minutes walk from the hospital. It will be worth quite a bit when I’m done with it. Unfortunately taxes property taxes wipe out 3 months of rent payments right off the top, so renting it out doesn’t seem like a smart option to me. So I’ll wait to hit the 2 year residency mark, and sell it capital gain tax free.

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House #5 (SFH. 3 Bed, 1 Bath 1890sqft)

Price: $8000 cash FSBO

Taxes, Insurance per month: $125

Rehab Cost (So far): $100

Total Invested: $8300 Roughly

Assessed value: 55k

Rent: $750 per month

Details:

Every year I work the U.S Open in NYC for 2.5 weeks. We work roughly 13+ hour days for nearly 15 days straight. We don’t have time for anything other than work during this time and we only get one day off throughout the tournament. My father gave me a call on the morning of my only day off and said he had a lead on an elderly couple looking to sell their home ASAP. I called and got their story and asked if my Dad could go over and check out the house. They agreed, so he went over and sent me pics and gave me the go ahead to offer. I asked how much they were looking to get. They told me they needed $3k to pay a medical bill and needed enough to buy a decent car to move. They would be moving away in exactly 7 days, and would like it sold by then. I’ve bought and flipped cars in my day, so I knew that $5k would buy a decent car, especially in our area. So I told them I would give them $8k cash, pay all closing costs and have the check in their hands by Saturday morning. I expected them to tell me “Are you kidding me?!” And hang up. Instead, they said “hmmmmmm, ok! That sounds good!”. I almost **** my pants on the spot. I immediately got ahold of my lawyers secretary and informed her on what just happened, and asked if it was possible for us to achieve the speed I promised. She assured me it was as long as the title search came back clean, which it did, and we closed on Saturday.

Over the week I spoke with them off and on to see what they would be leaving behind. They told me they’d only be leaving some of their “nice furniture” and some tools. I couldn’t believe my eyes when I did my first walk through. They left behind an entire room filled with everything a handyman/carpenter would ever need. Not only was it all there, but it was meticulously labeled and organized in hand made storage units, closets, and rolling work stations. I’m talking a table saw, drill press, hand sanders, jig saws, sawzaw, a generator, air compressor, bolts, screws, nuts, ect. It was practically almost everything I’d ever need to do my own carpentry, and really any other handy man job there is. They also left behind like new appliances (microwave, washer/dryer, stove, refrigerator), and had every outlet sticky noted with labels on what purpose it served. It was clean as a whistle and absolutely rent ready.

Work Done:

  • Rented a Uhaul to transfer out all of the tools

Pros:

  • Location. It’s a beautiful property with a nice cozy feel. It’s also located in a small town with really low taxes
  • Has it’s own well and septic, which reduces that monthly bill for my tenants
  • Needs no major work
  • Huge Kitchen

Cons:

  • Operates on baseboard heat, which can get pricey
  • Whole house has pvc plumbing
  • Living room is small

Lessons Learned:

  1. The more people you know, the better. This deal would have never happened if not for our neighbor. He knew I was buying houses, so he got ahold of my Dad to contact me.
  2. Don’t be afraid to start low with your offer. You can always go up, but rarely can you go back down.
  3. Identify people's problems, and figure out how you can solve it with the best solution for you both.
  4. Have a good relationship with your closing attorney or title company. This relationship gave me the ability to close on this transaction in less than 1 week. I may not have been able to get this price if I wasn’t able to do this.

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Conclusion:

If you made it this far in my post then I would like to say I admire your perseverance. That’s probably a good sign that you have what it takes to continue exploring the world of Real Estate. I have definitely made a lot of mistakes in my short journey, but I think I’ve also made some great successes. There are days when I stop and think “What the hell am I doing? These people are entrusting me to provide a safe home for their families. I’m not qualified to do this!” But the majority of the days I feel the complete opposite. When I get a call, I’m there personally either the same day or the next. I don’t make promises I can’t keep, nor do I do things half assed. I’ve had one women break down with tears of gratitude after I spent 3 straight days working on their insulation and furnace. Her previous landlord of 6 years couldn’t even be bothered to replace their bathroom door, which rotted right out of the frame. It’s moments like these that make me proud of what I’m doing, and it helps drive me forward. I want to show people that not all landlords are “slumlords”, and in doing so, grow a business that will provide for my future family. I have big plans for the future, and thanks to everyone here at BP I have ideas on how I can achieve them! I owe a huge portion of my success to Joshua Dorkin, Brandon Turner and all of you amazing people on this sub! I hope I can help contribute to the amazing community that is BiggerPockets!

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Extra Info on what I’m up to moving forward

Current project:

I’m currently working with a friend to acquire 2x quads, 1x tri and 1 duplex. There’s still a lot of details to work out though, especially in terms of financing. I have approx 275k in equity between all of my houses, but I’m having a hard time finding a local lender to help me unlock it since my landlord history is less than 1 year. However, we might be able to work a seller financing deal, so hope is not lost.

End of year goals:

  • Acquire 5 more units
  • Wholesale 3 deals
  • Launch 1200 person DM campaign

2 Year Goals:

  • Have 50 total units
  • Become a well recognized name in Real estate in my area
  • Own a vacation rental in Costa Rica

5 Year Goals:

  • Acquire 200+ units within 2-4 buildings
  • Be the name people in my area think of first when they want to do anything real estate related
  • Have 10+ vacation rentals operating in South America, Virgin Islands and S.E Asia

Wow! Great work! I need to take a page out of your book!

The prices your getting these properties for is INCREDIBLE! Some rents are close to 10% of your all-in amounts! 

@Pratik P.  My area is definitely pretty great in terms of strong positive cash flow.  The downside to that is our properties don't see much appreciation.

Michale do you have any tips for doing these rehabs so quickly and efficiently ? I seam to get over whelmed with the amount to do and working a full time job and all trying to get things done on your own can be a challenge. Organization and determining where to put your time and money for the best return is hard. Keeping in mind I am buying and holding and not getting near as good of deals as you.
Thanks

Very, very impressive. Congrats!

Amazing post @Michael Ablan and "thank you" for sharing your experience, congrats on what you have achieved. One of the things I love about RE is that you are always learning and continually educating yourself...best wishes with your goals!

What a great post, thanks for sharing!
I take it these are all in your local area of Watertown, NY? It appears that way from some of the comments above. Those numbers are awesome, these properties seem to cash flow really well for the prices you're able to pick them up at.

Nothing says 'take action' like taking a whole lot of action. This is impressive. I may have missed it, but are you doing this 'full time', or do you also have a W2 job? If the latter, that would be even more impressive. And proof that we really can start up a new career/business in our 'spare time', which is what I've been working towards.

These seem like mostly cash deals, so I was wondering where that was coming from, if you were doing hard money or something. But then at the end you mentioned the financing you were hoping to find in the near future. With all you've done so far, I'm sure you'll find a way to get that done and keep moving forward. But my question stands, how did you finance this first group of properties?

Lessons learned are important. Often times we see lessons, but not a lot of learning. I think a lot of people don't take action because they're afraid of making mistakes. Although if we don't make mistakes, we don't learn anything.
Your suggestion to have a checklist of things you'll need to do to get each property up to your standards is gold. I'll bet that really helps with rehab estimates.
I've learned a few things just reading this post, so thanks for that.

The fact that you end by listing your goals is great. I just returned from a trip to Costa Rica about a week ago. We love vacationing there, so a rental in that part of the world is likely a good investment in my mind. Interesting to see that long term you want to branch out into more vacation rentals around the world. That's a whole different animal from long term rentals. Based on what we've seen from you thus far, I don't think those challenges will be insurmountable. Good luck!

@Nathan Bell  -  I'm definitely no expert in doing rehabs.  The best advice I could give from my experiences is to make a scope of work.  Read J. Scotts book on Rehabbing houses and use his template to help you build yours.  Projects are infinitely easier when make a cohesive order of tasks to complete. This will also allow you to communicate much easier with any contractors or help you've hired on.

It also sounds like finding a partner, or a mentor may be a good idea, especially sense you work a full time job.  It really helps to have someone around to help you keep your focus and make decisions.  

Feel free to PM me if you'd like to chat some more!

@Garry C.  Hey Garry!  I'll try to answer everything in succession.  Yes, I deal mostly in the Watertown NY area.  I like it because the taxes are cheap, the rents are stables and I can pick up properties pretty damn cheap.  

I would say I'm a mixture of part time and full time.  I'm a licensed real estate agent, and I own my own electronics repair and sales business.  I also work at the U.S Open for 2 weeks each year (which gives me a pretty awesome chunk of $).  But typically I'm usually bouncing between the 3 jobs.  I will probably close down my (or severally scale down) my electronics business as I acquire more properties.  

For financing, it was a mixture of cash, seller financing and credit card loans.  I bought the first house with all of my own cash, with the hopes of being able to refinance it to draw out my money. However banks wouldn't touch me because of my self employed tax returns.  So I had to get a little creative, and play a little risky.  I started getting those interest free for 1 year CC offers in the mail, and decided to take advantage of them. So the rest of the deals were funded from a mixture of my own cash, those CC loans and seller financing.  

If you don't mind, I'd like to continue this conversation in PM.  I'd like to hear about your Costa Rica trip and about your rental business!  

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