Our long term plans are coming into fruition finally!

16 Replies

After working like dogs literally all the time (I left my house at 6am yesterday for my full time job and my husband and I didn't get home until 10pm after working on our business), we have now 5 rental properties.  3 already have tenants and 2 have tenants moving in next week.

Husband and I also found an investor for our home flipping business.  Basically, the guy has a lot of money so he will put down the cash to buy a house, we will hire people and do work on it.  He has seen our previous design and work and said he was impressed with the results.  We have successfully flipped several houses in the past, so we know what we're doing by now.  We haven't drafted out an agreement, but verbally we are talking about splitting the profit.  He provides the financial support and we design and renovate the properties.

Our goal is to have 8 rental properties up and running by the end of the year.

Oh my goodness, our long term plans are beginning to have real tangible results.

good job I see so many trying to start out.. with limited capital but when they talk of partners they don't understand that a financial partner is not your parent you need to financially reward them far more than you would borrowing money.

An LLC with a very GOOD BUY SELL agreement and also a mediation clause is a nice start.

Thank you all for your kind words. 

I first came up with the business plan a couple years back. So happy my husband agreed to follow the pln after I explained it to him. The plan called for one of us quitting our day job to tend to the business full time. 

That time came earlier this year. Since my salary at my day job was more than his, he resigned from his PR professional job. I kept my job to provide a safety net for us. He mnages the properties and also run our home flipping business. If this become profitable enough for us, I will start looking at quitting my day job to dedicate to our business full time. 

Woo-hoo! 

@Lam N.

Great to hear!

As someone forming a similar plan for my wife and myself currently, do you mind detailing a couple of specifics about these last few years?

When your husband quit, had you already been in the business for awhile, or was that a cold start?

What was the volume of work in the first year vs second? You say you've been working like dogs, but was that the case on day 1?

I forgot to mention.  The monthly rent for all 5 properties is 4% of the total cost for us to acquire them + renovations.  :D

Originally posted by @Micah Stewart :

@Lam N.

Great to hear!

As someone forming a similar plan for my wife and myself currently, do you mind detailing a couple of specifics about these last few years?

When your husband quit, had you already been in the business for awhile, or was that a cold start?

What was the volume of work in the first year vs second? You say you've been working like dogs, but was that the case on day 1?

 I don't mind at all telling you what we have planned and what we have done.

So, when we were ready to buy our first house, we were poor.  We were so poor that when we took a vacation, we drove to Florida from Chicago, ate dollar sandwiches at Mcdonalds, slept in the car because we couldn't afford to rent a hotel, and enjoyed the beaches during the day.

Anyway, we decided to buy a foreclosed home for about $80k.  For a year, we kept having renovation projects where we did everything ourselves.  We did not at all intend on flipping it or anything like that.  We were determined to make it our own.  We completely gutted the kitchen, flooring, bathrooms, etc. and made the place into our own palace with minimal budget.

Then a year after we moved in, I got a job offer elsewhere with a 50% pay increase.  They were also willing to pay for moving costs plus pay for rent for the first year.  Couldn't pass up the offer so we put the house on the market and promptly moved.  Sold it for $162K.  With all the renos we did, we only put in about $15k in renovating costs.

So, when we were ready to buy another house, I started formulating a plan.  What if we kept doing live-in flips and every year we would end up getting a wad of cash for it?  Hang on, what if we start getting really cheap places, fix them up ourselves, and rent them out?  

I talked to my husband about this idea and he had his doubts.  But I worked out the numbers and showed him that within 5-7 years we would have enough passive income to keep us going indefinitely.  I also reminded him that when we first met I asked him what he wanted to become and he said he wanted to flip houses like the property brothers.  I told him he could still pursue this dream.  Once we have enough cash we don't have to do everything ourselves.  We could start hiring people and he could direct the renos.

So, we put this plan in motion.  We got another foreclosure and worked on it.  We both had our full time jobs (I'm an engineer and he was a PR professional) and during the weekends we would work on the house.  Turned out he had a lot of great ideas.  I'm fashion blind, but I know how to do everything from plumbing to electrical to walls to flooring.  We put in about $15-18k into that property and made a huge profit when we sold it a year later.  Did it again and again made huge profit on it.  

Then we started buying really cheap properties and worked on them to rent out.  I know that most people don't want to get their hands dirty.  Most people we have talked to imagine getting a mortgage and buy a place for $200k that's move-in ready and then rent it out.  We on the other hand got cheap places.  Like really cheap places.  One of our properties we bought for $15k and is now renting for $1100/month.  We spent about $500 on repair and reno costs and millions of manhours of our own labor.

Earlier this year, we bought 2 more, bringing the total number of rental properties we have up to 5.  Between showing potential tenants, managing the properties, and everything else required a full time person.  So, we decided it was time for one of us to quit the day job.  I made more with my engineering job so he resigned from his position and started dedicating his full attention on our gig.

And this is the part that I think is the most important part of the long term plan.  We have been extremely careful with going about this.  When we first met years ago, I owned an IT business.  Took some unnecessary risks and I lost EVERYYYYTHING.  Was up to my eyeballs in debt.  So, this time, one of us has to keep our day job to provide a safety net while the other nurture the business.  

The other thing that determined who to quit the day job is he is a lot more creative than I am.  His interior design ideas are pretty darn good.  Like I said, I have zero sense of fashion.  None.  So, naturally it's him that will take the main role in flipping our next flip house.

And that's where we are at right now.  The next phase in our plan is to find another house to flip after all 5 rental properties have stable tenants.  Right now, 3 have tenants and 2 have tenants moving in next week.  And since we are tired of living in sawdust, we will no longer be living in our flips LOL.  

Keep this in mind.  This is not for everyone.  We have made a lot of sacrifices.  Don't get me wrong, we are anything but frugal.  We just came back from Cancun.  We're millennials and we like to travel way too much to be living on beans and rice.  We take some advice from Dave Ramsey but we also make sure we can enjoy life as much as possible.  In a couple months, we will be spending a week in Palm Springs, CA.  This winter we plan on going to Hawaii... or somewhere else.  Haven't decided.  

LOL sorry, we don't have any trade secret that's ground breaking.  If you take how much money we have made versus how much time we have put into them, I bet my hourly wage is like $3/hour.  But once we have tenants in all 5 units, for the first time the rental income will surpass my active job income.  WOOHOO!

Feel free to ask any question to me directly.  I wish you guys the best in your venture.  I really do hope for nothing but the best for you.  A couple more years and we should be financially independent.  Aim for it!

@Lam N.

Thanks for the breakdown. We've unintentionally flipped a couple of our "forever homes" ourselves for a pretty great profit so we have a similar tendency. The next step is to BRRR one to test the waters.

Good luck to you!

Originally posted by @Lam N. :

After working like dogs literally all the time (I left my house at 6am yesterday for my full time job and my husband and I didn't get home until 10pm after working on our business), we have now 5 rental properties.  3 already have tenants and 2 have tenants moving in next week.

Husband and I also found an investor for our home flipping business.  Basically, the guy has a lot of money so he will put down the cash to buy a house, we will hire people and do work on it.  He has seen our previous design and work and said he was impressed with the results.  We have successfully flipped several houses in the past, so we know what we're doing by now.  We haven't drafted out an agreement, but verbally we are talking about splitting the profit.  He provides the financial support and we design and renovate the properties.

Our goal is to have 8 rental properties up and running by the end of the year.

Oh my goodness, our long term plans are beginning to have real tangible results.

Love stories of sacrifice and planning paying off.  Congratulations! 

I keep my lenders as lenders. They get a lien on the property and earn interest. For extra profit, you could do a per deal JV agreememt maybe. Don't give up too much. You're doing all the deal sourcing and the work!

@Lam N. - Thank you for all the great info.  I am orginally from Elgin, so streamwood is close by.  Where are you doing all your flips and how are you aquiring the properties (off markets w mailers, auctions, etc.)?

Originally posted by @Jonathan Klemm :

@Lam N. - Thank you for all the great info.  I am orginally from Elgin, so streamwood is close by.  Where are you doing all your flips and how are you aquiring the properties (off markets w mailers, auctions, etc.)?

 Oh, that's old info. We moved out of state long ago. We tried to start up our business in cook and Kane counties but the property taxes were strangling us. So we sold everything and moved out of state and started here. Property taxes of all 5 properties here combined is less than what we paid for a single family home back there. 

Update.  Our flip just closed today.  Another successful flip woohoo.  

Tomorrow, we have tenants moving into our 4th property.  A young couple in their mid 20s with a 4 year old daughter.  And on Friday, we have another young couple moving into our 5th property.  All 5 rentals filled!  Passive income, baby!

We are eyeing another property to add to our arsenal right now.  Will be our 6th if we get it.  I have a good feeling about it, but we will decide once I've inspected it myself.  I'm a structural engineer, so... 

I was at the property with tenants moving in tomorrow earlier today.  While my husband (the property manager) was showing them around before they signed the contract, I was changing out FGI outlets and double checking the plumbing.  It was pretty cool watching him work.  

See, all our properties got brand new toilets, brand new outlets and light switches, brand new LED lightbulbs, etc.  We decided from the beginning that we will not be slumlords.  We paid cash for these properties and they are our investments.  Why let them rot away?  We have experience with renovating houses.  We can get 10 new electrical outlets for $3 and 10 new light switches for $4.  Every little thing like an outlet and light switch makes a huge difference when they are all replaced.  

And as a preventive measure, we switched out all the water valves in the houses as the old ones were visibly corroded and such.  Again, the valves all together probably cost us less than $100, but we now have the peace of mind.  I've seen the damages a bad old water valve can cause.  We also replaced all the old corroded faucets and drains.  Again, they don't cost much but now we can be sure they won't be leaks anytime soon.

We have plans to renovate these houses gradually in the next few years.  Rental properties need just as much TLC as regular homes.  

Are we being too idealistic for thinking this way?  Keep in mind we are still relatively new at this. 

Originally posted by @Micah Stewart :

@Lam N.

Thanks for the breakdown. We've unintentionally flipped a couple of our "forever homes" ourselves for a pretty great profit so we have a similar tendency. The next step is to BRRR one to test the waters.

Good luck to you!

What's BRRR?

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