Last summer I decided to take the plunge and buy my first single family home ("SFH") to rent, so my money could start working for me instead of me always working for my money.

I had discovered Bigger Pockets ("BP") earlier in the year and had listened to several podcasts about many different facets of real estate ("RE") investing and read countless posts in the forums of people who were experiencing success in their own RE investments across the nation.  So, basically, I knew everything there is to know about RE investing and was fired up to go get a piece of the action!

I pay my bills on time and have a great non-RE career, so I knew I'd have no problems getting a mortgage from a national bank for a small SFH. I also had plenty of savings to put 20% down on the property and make necessary minor repairs/improvements before placing the property on the rental market. I had no appetite or time for a major rehab project--I had (and have) enough unfinished home improvement projects at home!

Since this was my first foray into RE investing, I wanted to keep the purchase price around $100k and buy close to home.  I signed up for a paid membership on BP so I could take advantage of their awesome rental property calculator and started analyzing the snot out of any potential opportunity that met my criteria (viz., in decent shape within 20 miles of home and around $100k purchase price).  My realtor fed me information on the going rent rates for properties comparable to my target(s) so I'd have realistic expectations for what I could make in rent on each property I analyzed.

After considering many properties and making a couple lowball offers on a couple houses that were in worse shape than I would have preferred, I found a real beauty (3/1/1) listed for $110k within 20 miles of me that had recently been refreshed but not completely remodeled. The numbers checked out on BP's rental property calculator.  If I could pick up the property for $110k and get $1,400/mo. in rent as projected, I'd make approximately 20% cash-on-cash return on my investment!  It had just hit the market that day, so I called my realtor and got in the truck to go check it out.  

It was in Small Town, Texas, just outside the greater Houston area in a great rent market.  The home was in great shape for the price point, so I offered $105k knowing that the dollars worked even if I had to ultimately pay asking price.  I had gotten a pre-approval letter from my bank and submitted that with the offer.  Just a few hours later the Seller had accepted the offer!

Roughly 45 days (and a clean inspection and $110k bank appraisal) later, I closed on the property and the weekend after that took the entire family down there to get it cleaned up and ready to put on the market.  We spent an entire Saturday power washing, cleaning out the rain gutters, doing some touch up painting, swapping out plumbing fixtures, doing a little trim work, replacing light bulbs, trimming bushes, and doing general housekeeping and yard work.  By the end of the day, we had the place looking great!  It went on the market shortly thereafter and, within 11 days of closing, we had a signed 12-month contract at $1,350/month with a rock-solid tenant.

I quickly signed up with Cozy so the tenant could make monthly ACH rent payments online on auto pay for free.

Here we are seven months and seven rent payments later and I'm hooked!  After paying principal, interest, insurance and taxes, I'm clearing $615/mo. on my first deal.  

Hurricane Harvey stole the dryer when the garage took on several inches of water later that fall, but the house (built on pier and beam) stayed dry, and the washer somehow escaped unscathed.  I replaced the dryer with a $300 Amana special from Home Depot, since I didn't trust any of the 8,000 dryers on Craigslist in the Houston area after Harvey. Other than that, I've had no problems.

Now I want to try landing my first BRRRR (Buy, Rehab, Rent, Refinance, Repeat) opportunity. Infinity cash-on-cash returns sound too good to pass up!

If you're stalking BP forums, listening to RE podcasts and thinking about jumping in for the first time, I say "jump right in; the water's fine"!  Just please don't fish in my hole. :)

A big shout out to BP for giving me the tools, competence and confidence to do my first deal!

Awesome story and great job Clint!

One thing to note though - Besides PITI make sure you also account for all of the other expenses like Property Management, Maintenance, CapEx, Vacancy, etc. That will give you your true monthly cash flow once you factor those in.

Thanks, Brian!

You’re right. True cash flow is less than the $615 I mentioned.

I built those expenses in when analyzing the opportunity but haven’t actually incurred any of those costs yet.

Congrats Clint!

Awesome @Clint S. !!  Glad you jumped in.  That's a great return.  I'd recommend building a solid relationship with a small local bank that offers portfolio loans.  Once I past 10 I had to look all over the place and build new relationships  with local banks.  

@Clint S. - congrats, that is a great start.  Agree with @Rocky V. - I am shopping small, local banks now since we are about to hit that wall. One tip: if you are married and your wife also works and can support the DTI, do your buying in separate names so you can each max out the 10 Fannie Mae loans. Goes a lot farther.

Andy

P.S., we make down your way from time to time to jump at Skydive Spaceland in Rosharon, especially for the 20-way competition in the summer.

I remember my first year i bought 8 rental properties and filing taxes that year was a complete nightmare. I would get a separate bank account and credit card and link it through quickbooks from the start to keep things sorted as you go. 

Outstanding work Clint, great to hear you followed the steps and it is generating cash for you.  

Excellent Job! I also has similar background like yours and patiently looking for my buy and hold property. Keep up the great work!

@Clint S.

Nice post and great success story! Great move enlisting the help of cozy.co too.

Keep us posted on the growth of your portfolio. 

Thanks, everyone, for the encouraging words and good advice.  I'm looking forward to hitting the 10-home limit; though admittedly that seems far away at this point. Better start building a relationship with a small lender now than scrambling for one later.  I'm happy to report that I've already established 2 LLCs (a property holding company and a management entity) and have a separate business checking account for the property management company to which rent payments are deposited so I can maintain corporate separateness and limit liability.  If a thing is worth doing, it's worth doing right.

Awesome @Clint S. Great story for many newbie investors who hit BP every day. It will surely inspire any new investors who just waiting on the fence whether to take jump or not. 

Like my favorite quote, A journey of thousand miles always starts with single step" . I am happy that your took your first step and moving on....

Few things you are doing right,

1. You mentioned about analyzing properties all the time. You gotta keep with that process. Doesn't matter whether it will work out or not, just keep checking numbers. 

2. Separating out personal and business using LLC and bank accounts. Good job! But there are few caveat to making this really work for investors favor.

3. You are looking to do BRRRR. Good segway with your first rental experience. Be careful when estimating rehabs. Try to build a team of Contractors who you can trust to give a better estimate.

Few thoughts,

1. It will happens that you might have to pay for repairs and parts through your personal credit card and quickly transfer money from your business to personal to pay it off. Try to pay via check not bank transfer to have more legal and clear transaction and avoiding commingling of funds which is big no no to IRS. 

2. I know people suggesting to get with local banks. You have more time, you just started with first one. Get this going and build your business tax return and they will automatically give you loan. Here is the problem, once you have the property in LLC or business, it's tough to get conventional loan. I am sure you bought your first rental through your name. Did you transfer your title to LLC already? You cannot report your income in LLC entity if you haven't done so.

3. I know people suggesting to get with local banks. You will have more time. As you said, 10 properties sometimes might take longer than expected if you are looking for deals. Sometimes people just buy with less equity and just looking for cashflow, that's not bad thing but watch out. Try to build lenders network instead of local banks. Our local banks these days don't invest on residential, they are very interested in commercial. May be some banks do but very picky.

Anyway, hope to see you around more.. Keep it going!!!

Vijai

@Vijaianand Thirnageswaram Thanks much for the very thoughtful reply.  

1. Real estate investing feels a bit like a calling.  I could do it every day.  Analyzing properties doesn't feel like a burden; I do it for fun!

2. What I'd really like to do is set up a series LLC. I'm considering hiring David Willis of lonestarlandlaw.com to set it up for me when I'm ready to make the jump to multiple properties. Have you had any experience with him or known anyone who has. He's got an impressive website and a steady stream of business (near as I can tell).

3.  I've got a great contractor friend that's helping me analyze opportunities and would handle the work within budget.

Few thoughts,

1. I carry my business debit card with me everywhere I go to be sure expenses are billed to the company.  No mixing business with pleasure!

2. I appreciate your insights here. Sounds like you've been there, done that! And, yes, like anyone else going through a big bank for financing, I had to purchase the property in my name. I'll transfer it to the LLC soon. I was waiting to accumulate enough cash to be able to pay off the mortgage if the bank takes the unlikely step of calling the loan as a result of the covenant breach. Better safe than sorry. Good to know about the tax implications of holding it in my name temporarily.

3. And I agree that a bigger network is usually better than a small network. :) To me, BRRRR is not just a cash flow game; it's a free equity and cash flow game if you can land the right deal. I have no interest in being highly leveraged with no equity to backstop me if and when the music stops.

Take care!

@Clint S. I never worked with David but heard about him from other investors. I also checked out his website and it has all the fees and numbers which helps but they are bit expensive. For creating an LLC, you shouldn't be paying more than $795 including all things. If you just want LLC, you can get done for $695 with fees included.

About series LLC, it's bit complicated. I did my research and don't go that route. It might seem easy but when it comes to IRS filing, you might be able to file one return but you still have to maintain separate bank accounts and accounts. Main advantage, it cost saving to create one and add many under it instead of creating separate ones when needed. But again, LLC which covers your asset it another gray area many investors don't follow property. If you have the property in LLC, you gotta follow strict paper work otherwise when it comes to legal issues, court/judge will not consider it as proper LLC.

On the financing front, I do things. I either buy cash and refinance after renting out or I go with conventional if possible when I purchase using our credit for now. You can always transfer the property to LLC which only cost $150-$200. Once you do it, you can only use portfolio lenders to get loan out of it because it's commercial loan. I had to do it once since my tax return didn't support conventional. Try to create strategy and stick with it and follow it religiously.

Congratulations. Thats a great start to your investing. And now you can see why people get hooked. Gross profit of $615/mo is fantastic. Just curious but what do you think the house is worth? Was wondering because you mentioned wanting to BRRR your next stuff and was wondering why you couldn't do it on this one..

IF - and I know it may be a big if - but if that house is worth 140k, you could technically BRRR it and get all your money back out. Refi for 75% or 105k and that would allow you to get your 21k back out. The best part is pulling that 21k back out would only knock your gross profit down from 615/mo to about 500/mo or so......

But you can grow a portfolio far greater when you're doing it with a lot less money out of pocket than 20k to 40k (20 to 25% down plus rehab out of pocket).

btw: What I also find funny is that people in Texas think they have high taxes. Working backwards on your numbers, you have a loan of about 84k on that house so I'm guessing your mortg payment is about 450/mo. If your rent is 1350 and you're grossing 615, that means your taxes and insurance are running about 285/mo?   

Here in illinois I'm paying about 4k/yr on taxes on that same house.  So roughly 375/mo or so for taxes and insurance (40 to 50/mo for insurance).

Illinois is the worst state in the country for property taxes...... :-)

Noob Alert!

Looking to buy a $200K SFH in partnership with someone. We both can invest $20-25K each + closing for LTV of 75-80. We both want to use our own LLCs to by the property in partnership. Is that even possible?

Secondly, just needing $160K loan and that too split between the two, what are our loan options? DFW area.

@Dev Khosla You are confusing yourself with buying property on your own LLC's with property in partnership. That's like 2 companies on the contract. It's possible like 2 buyers but won't recommend it. Instead you can create a new LLC with 2 of you 50% partnership. If you do the way you wanted, it will created cascade effects. You cannot get insurance. You cannot refinance loan.

This is want we did for my client. They are both friends and both live out of state actually different states and want to invest. We actually applied for loan, conventional and bought the property in their name. Then we created LLC and transferred the title over. This way we were able to get conventional loan and also have the property in LLC for liability purposes. I know it's risky what if the lender calls the loan using due clause to pay full money. They won't do it, if it comes, showing them that LLC is 50% ownership of both owners, they might work with us instead of foreclosing it..

Hope this helps.

@Clint S. Very inspiring Clint thanks for Sharing. I am currently in the middle of my first deal rehabbing a SFH to keep as a rental so i hope to have my own success story soon.

Keep pushing!!!

Sounds like a great deal @Clint S.   congrats and good luck with #2!

@Mike H. I’m not sure how I missed your comment, but I did. Sorry about that! But the timing of the realization is fortuitous. I was just considering selling the property (since the value is right at $140k now) to realize a pretty incredible return on my 12-month investment, but after reading your comment I believe BRRR could be a real possibility for this property and I’m pretty stoked at the idea! I can just skip the rehab “R” and go straight to repeat! And all your numbers are spot on, so nice work! Thanks for taking the time to comment and for the excellent tip! Texas is pretty great; I’ll try not to complain too much about our property taxes. ;) Best wishes for you and yours in IL!

@Jason Brown . Thanks! How did your rehab go?

@DJ Cummins Thanks for the well wishes. Wish I could tell you #2 was in the bag, but I can’t. Home improvement projects and private school tuition for my 3 ragamuffins are burning up most of my dry powder for RE investing in 2018. :(

@Vijaianand Thirunageswaram Apologies for the uber-delayed response; just wanted you to know I appreciate the time you’ve taken to share your wisdom with me. I especially appreciate the insight on the ramifications of transferring the property to my LLC when it comes to refinancing the existing loan. Hadn’t even thought of that! Hope you’re well, friend!

2 👦 buy 🏡 in their personal name. 

Same 👦 S get a mortgage in their names. 

Property quit claim into Llc. 

2 👦 personal name not on title is good. 

2 👦 name still on mortgage is bad. 

That's commingling personal n llc business. 

Llc shield is pierced. 

I think mortgage needs to be reFi into name of LLC.

Any other opinions?. 

@Eric Adobo I’m a lawyer, and I can tell you the corporate veil is not so easily pierced. Absent aggravating facts like fraud, etc., the facts as you’ve laid them out wouldn’t suffice to establish a veil piercing claim.