I finally completed my first out of state BRRRR! Received me first rent check a month ago. I was a little nervous to start but I am happy with the outcome. It ended being a decent deal; nothing blow your socks off.
First I started market analysis. I found I would not be able to cash flow in California so looked out of state. Looked in Kansas City, Indianapolis, Memphis, and Detroit. Ultimately I decided on Detroit Metro in the suburbs. The biggest reason was I just found better people out in Michigan. The other cities just seemed saturated with investors and it was hard to find reliable boots on ground. In Detroit, I was able to find great deals on MLS, good realtors, property managers and contractors. Now - I know Detroit has a bad reputation. But the suburbs are fairly low crime (see trulia crime heat map of Redford, MI) compared to downtown; plus the market is an appreciation based market that actually cash flows (hard to find).
The plan was to build a team of 3. I had a realtor, property manager and contractor lined up. With time my first realtor was sucking, but my property manager was kicking *** (shout out to @Keith Jourdan). He also happened to be a realtor, so i started using him as my primary realtor. In a short amount of time, I finally placed my first offer.
First offer was in Redford, MI. Offered 80k cash on a home that needed ~20k of rehab and would appraise for ~120k and would rent for 1250 a month. Was surprised to get an accepted offer right away.
Next came the rehab. I got a few quotes on contracting. Surprisingly my realtor and property manager (Keith Jourdan) gave me the best quote and also gave me in depth video walkthroughs of the rehab needed. We started the rehab and things were good at first until we got an inspection done from the city. We had to replace the driveway and other electrical code issues which added around 9k of additional rehab. That was painful; even more so being out of state. So overall the rehab cost me 27k.
Rehab took around 2 months. We found a tenant quickly. So end of the day, 80k cash purchase plus 27k rehab. 107k all in. Home should appraise for 115k-120k. 1250 rent. Cash on cash is around 13% after refinance. Would have been a much better deal if these surprise rehab costs did not come up.
I am now going for deal number two. Wish me luck!
@Aamir Shah Great work on your first deal. Almost all rehabs come in over budget. Just part of doing work with dinged up assets. Keep going and make money!
@Aamir Shah Did you use a hard money loan to finance or use all your own cash for the acquisition and rehab?
Awesome stuff @Aamir Shah . What methods / systems did you use to hold your team accountable from out of state?
@Rob Terpilowski purchase + rehab was cash. Started the refinance after finding a tenant
@Chris Caminata I followed a lot of advice from David Greenes Out of State Investing book. Had my contractor send me videos, itemized invoices and regular updates with pics. Had other contractors double check the work and give their own bids. For deal analysis I got multiple opinions from realtors and property managers. Generally speaking I refused to work with anyone who is not tech savvy. People I work with have to be good at sending me digital content (videos/pics) and have to be good at staying in contact via text/email.
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