FIRST BRRR Complete! Details + Pictures!

301 Replies

Originally posted by @Lourexel Z. :

@James Gates You're an inspiration and a rock-star! Thanks for the detailed post that outlined a lot of important  aspects of real estate investing.  I just found out about FIRE a few months ago and same as you I found Bigger Pockets shortly after and it made sense.  I think I'm still in that nervous and naive state and I'm afraid that I will fall in analysis paralysis waiting for a market correction. 

How did you do your research on out of state investing and where you would invest?  I have read countless forums and every time I read something new I get discourage more and more until I read post like yours.  I'm currently living in Portland, OR with a crazy high market and recent rent control passed.  Washington state across the river is reaping the benefits of an Amazon and Microsoft HQ, driving housing cost really high.  We are planning to move back to San Diego in a couple of years but SD is another high housing market.  

What tools did you use to determine the out of state area that you chose?  Did you contacts with contractors and real estate agents already?  How was your experience managing a flip from out of state?  What would you have differently and any notable lessons learned? 

Thank you so much!

Lourexel

 Hey Lourexel, I feel you on living somewhere where investing doesn't make sense. Investing for cash-flow does not work in my market. I was forced to look elsewhere.

Huntsville is the perfect market for me because it blends a cash-flowing market and a market that has a shot at appreciation (high population growth, good tech jobs, new developments). Because I have a W-2 job and do not need the cash flow immediately (I would just re-invest it), I do not need a strictly cash-flow market (like Memphis) and would rather invest in a market that has a bigger upside long-term. 

Plenty of online tools let you check out markets out of state. Technology has CHANGED THE GAME. It use to be that you basically needed to live within an hour of your rental, now you can manage anything from the device in your pocket. 

Originally posted by @Mehmud S Karim:

@James Gates - Congrats! and thank you for taking the time to inspire us. Wanted to ask how you were able to find a good wholesaler to work with ... I heard some can be shady. Curious to understand how you screened them to finalize your choice.

 Some wholesalers...can be less than trustworthy. So VET everyone. Get recommendations from other investors and past clients. In this business your reputation is everything.

@James Gates what an amazing story good for you!!! You did mention Property Managment. Do you currently have a PM managing that property in Al, and if so, are you happy with their overall performance and cut of the rent?

Thanks you.

@James Gates congratulations ! And thanks for sharing your story. I’ve been listening to BP podcasts and educating myself on wholesaling for 3 months now. I am so hesitant to pull the trigger. I am in NY.

Originally posted by @Nadir M. :

@James Gates what an amazing story good for you!!! You did mention Property Managment. Do you currently have a PM managing that property in Al, and if so, are you happy with their overall performance and cut of the rent?

Thanks you.

 Hey Nadir, all of my properties have professional management. 10% of the rent is pretty standard for my area. It has been a learning curve as regards to how to manage the property management. You definitely need to stay on top of your properties. No one will care about your properties more than you, and good property management is key. 

@James Gates exactly. I currently own a property in Omaha NE and about to close on a second. The first property just got rented out and the first invoice from the PM was a def surprise. With the 50% cut for finding a tenant plus the snow removal survive it really eats away the CF. Makes me contemplate a bit. I’m going to stick with my PM couple more months to see how things go. I knew the first invoice was going to hurt but actually seeing all that money going to PM kind of hit hard!

@James Gates

Congratz.. I'm extremely happy for you. This gave me toms of inspiration as i look forward to jump starting my investment career

@James Gates thank you for your story! Biggest question I have is what did you need to qualify for the HELOC? Feel free to personally inbox me if you like.

@James Gates

Congratulations, we're looking at huntsville as well and would love to connect.

Also HUGE props for responding to everyone's comments, that's very nice of you

@James Gates Wow well done congrats! Can you please inform me on your next step on buying another one with the loan ? Thank you

Great Job!  This is why I love BP, all the great stories, experiences and people all in one place!  I am in Cincinnati area and would love to know which lender you used as well.  Keep up the good work, thanks for sharing :)

@James Gates This is amazing! Thank you so much for the write-up. I am going through a similar situation currently and have a couple questions about how you accomplished some of these things. 

1) How did you estimate the rehab costs from out of state, that made you comfortable offering 60k? Did you get an inspection prior to offering? 

2) How did you determine what rehab work actually needed to be done to get it rent ready, and how did you manage the contractors from out of state? I am finding this stage to be extremely difficult. 

3) Is your partner from Huntsville? 

4) Nobody talks much about the refinance property, people make it a given that the bank will let you cash-out refinance, thanks for mentioning that it was hard. If you don't mind, what type of paperwork did you need, and how would you go about it differently next time?

Thank you so much for sharing! 

Originally posted by @Troy Iversen :

@James Gates Wow well done congrats! Can you please inform me on your next step on buying another one with the loan ? Thank you

 Hey Troy,

I need a little more context on your question. If you mean another investment property, our plan is to continue to buy in cash, rehab, and then refinance to pull as much (or all) of the equity back out and reinvest into another purchase.

Originally posted by @April Paytes :

Great Job!  This is why I love BP, all the great stories, experiences and people all in one place!  I am in Cincinnati area and would love to know which lender you used as well.  Keep up the good work, thanks for sharing :)

 Private Messaged!

Originally posted by @Jayson Brown :

@James Gates thank you for your story! Biggest question I have is what did you need to qualify for the HELOC? Feel free to personally inbox me if you like.

 Hey Jayson,

To get a HELOC on your primary residence, generally, most banks will be able to lend on 80% of the value of the house, minus what you owe on it. For example, if you own a home worth 300K, and you have a 200K mortgage, the lender would be able to give you a HELOC for 40K. (80% of 300K = 240K, 240K - 200K = 40K).

Well, I only had 20% equity in my home (we had just purchased it), so that was not going to work in my situation. I called every bank around and eventually found one that could lend on up to 90% of the value of the home. This allowed me to pull money out that I had -just- put in, and begin my investing journey.

Originally posted by @Heshel Mangel :

@James Gates This is amazing! Thank you so much for the write-up. I am going through a similar situation currently and have a couple questions about how you accomplished some of these things. 

1) How did you estimate the rehab costs from out of state, that made you comfortable offering 60k? Did you get an inspection prior to offering? 

2) How did you determine what rehab work actually needed to be done to get it rent ready, and how did you manage the contractors from out of state? I am finding this stage to be extremely difficult. 

3) Is your partner from Huntsville? 

4) Nobody talks much about the refinance property, people make it a given that the bank will let you cash-out refinance, thanks for mentioning that it was hard. If you don't mind, what type of paperwork did you need, and how would you go about it differently next time?

Thank you so much for sharing! 

Hey Heshel,

1) I used technology to estimate the rehab estimates for this property. I spoke with the wholesaler over the phone, got details of the property, went online ran the numbers conservatively, then built a 40% buffer into my offer, then rounded up to the nearest 10k. Because this home had to be sold in 2 days, I didn't have time to do a more detailed inspection, and I built that into my offer. My offer was accepted on a Saturday, and I built a 1-day inspection clause (on the Monday) into my offer. We closed on Tuesday. 

2) I had found a contractor I was comfortable working with, I had already flown out to meet him and he came heavily recommended from another BP member. It was a learning process for sure.

3) All of my business partners at the start of my real estate journey were from California, but I have begun making partnerships with individuals who are in Huntsville. I have been fortunate enough to make some amazing friends through this process.

4) The banks need all your financial paperwork. W2's, tax returns, bank statements, lease agreements, closing documents, insurance documents. It is a lot, and sometimes your documents are in the right forms. they also need letters explaining any unusual or large transactions in the last two months (which I had a lot of, since I was rehabbing or purchasing other properties during the refinance process). 

@James Gates Excellent story sir! I was wondering if you could share what numbers you use for vacancy rate, repairs/maintenance and CapEx? Thank you!

@James Gates Excellent work, and thank you for the inspiration! Just what I needed to push past my analysis paralysis this week. Keep up the hustle!

Originally posted by @Jesse Daconta :

@James Gates Excellent story sir! I was wondering if you could share what numbers you use for vacancy rate, repairs/maintenance and CapEx? Thank you!

 Vacancy: 8.3% (1/12)

Repairs/Maintainence: 5%

Capex: 5%

If this property had not been completely updated during the BRRRR (New roof, HVAC is from 2018, new electrical) then the repairs + capex would be 10% each. Another beautiful thing about the BRRRR strategy is property is restored upfront, before the refinance, so you pull the capital out and now your ongoing repairs on going to be less on average since you put all the work in upfront to get the property in pristine condition.

Great work @James Gates ! Congrats... 

Would you mind reiterating your rehab breakdown here if haven't already done so?  I am curious as 18k sounds like a very reasonable number for inside outside rehab.

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