In my Experience.

15 Replies

Hi everyone, my name is Phillip Hunt.   I joined bigger pockets about a year ago.  I decided I wanted to invest in real estate about twenty years ago and, about four years ago I finally was in position to do so.  I decided to invest by buying and holding.  After the market crash, started in 2008 I waited till 2010 to be sure the market had really bottomed out. 

      I purchased my first property a 2 and 2 condo 1030 sq ft. for 75k and invested 15k into the rehab.  After all costs it produces close to 300.00 a month positive cash flow.

     I purchased an identical second condo in the same complex for 65k and invested 20k for the rehab.  This property produces just over 300.00 a month positive cash flow. 

In May of this year I purchased a SFH for 120k and will have about 35k in rehab. After the rehab is finished I expect it to bring in 550.00 a month in positive cash flow.

     I curtailed the cost of holding the property till the rehabs have been completed by having my daughter rent the places for herself for whatever the amount of my cost was.  When I put away enough money to buy another property my daughter moved out of the first one and into the second freeing up the previous property to be rehabbed and then rented on the retail market.  It has been a great arrangement,

I put 20% down when buying these three properties and after rehab have fifty or more percent equity in each of them. 

     I used all of my own money and, being a contractor of sorts, did the majority of all the work.  My properties are gorgeous, thanks to my wife's designs, and I have long term tenants who are proud of where they live. 

     Everyone tells me managing your own properties is such a headache.  I find this to be untrue.  If you buy a place in a nice area, renovate that place to be nice and screen your applicants carefully you should have an easy time of it as I have since my first place four years ago.  I actually enjoy managing my own places.    

In the past year I have joined bigger pockets, gone to REIA meetings, and came very close to joining Fortune Builders, which I am very happy I did not. I have of course watched all the shows on television.

The problems I have encountered are: 

Flipping.  Good luck, I am in Tucson AZ. and the market is flooded with flippers and the inventory is now all but exhausted.  Of course few people seem to be buying and holding and the inventory for that is abundant. 

 Private money lenders, No Thanks.  They are hard to find and if you find one I feel like an idiot salesperson trying to convince them to invest.  I will not use them. 

I do not understand how the people on television get their materials and work done so cheaply.  I buy materials on the best deals I can find and do the work myself and it seems like I still spend considerably more money than the people on television do.

The majority of the people at REIA meetings are all people salivating to become millionairs and I wouldn't trust any of them. I quit going to the meetings.

Bigger Pockets member Brandon Turner had a great blog on buying and holding, however he used a perfect model to explain his point and the world is not perfect.  I challenge anyone to buy a duplex or fourplex property put 1000.00 into the property and have a great tenant experience and with the positive cash flow that was suggested. 

     Doing all of this on my own is slower perhaps and can get boring at times as between purchases I have nothing to do but save for the next property.  Like so many, all I need is more money to keep going, but for what I have experienced, doing this on my own is much less of a pain and in turn, much more enjoyable.  

Thanks for listening.  

  

 

     

@Phillip Hunt  

The perfect storm scenario Brandon painted isn't the norm, and I'm sure he knows that and was just illustrating a point.  However, your market determines what kind of deals you can find and how close to that hypothetical perfection you can get.  (This reminds me of a lecture I gave recently on the over-use of Six Sigma theory.  Oy vey!!!)  Anyway, you have a model that works for you, and that's awesome.  A couple of thoughts about how to expedite your process...

1...Instead of Hard Money lenders, have you considered talking with some small, local, portfolio lenders?  You now have a track record with rentals, so the conversation should be much easier.  The terms would also be much better than with a Hard Money source.

2...You indicated you have about 50% equity in each of the properties you own. Have you considered HELOC's on those properties to fund the next deal or using them to help collateralize a commercial LOC. Having that kind of flexibility would allow you to move quickly on deals that might not be in a "mortgagable" state, prior to rehab. Once the rehab is done, you could get a traditional mortgage and refinance out of the HELOC or Com'l LOC, which could then be paid down.

Also, you didn't indicate what kind of a mortgage you have on the properties you hold...conventional vs. FHA/VA insured. If you're doing an insured mortgage, you're likely going to get capped at 4. Conventional mortgages through the larger institutions will generally cap you at 10. A portfolio lender will give you the flexibility to continue growing your portfolio of properties. Something to consider there.

Finally, you have a track record. You know your numbers and what deals work for you. You could consider syndication and looking for private investors. You might have to pledge a larger portion of the profits on the first deal or 2 than you probably want, but I suspect it would be worth it in the long term, as it would give you access to capital that would allow you to grow your holdings. I love the idea of private investors (NOT private money lenders!), because it allows me to spread the returns available through REI to folks who don't necessarily want to be involved in the business of REI. You have the opportunity to provide people a way to have the money outperform ANY IRA and most mutual funds, while having it secured by real estate.

Just some food for thought.

Hattie

@Phillip Hunt  welcome Phillip and thank you for your input. Have you read the E myth?  Would you say you are the technician? I  am a carpenter by trade and I can understand where you are coming from.

This is one of the great things about this forum...  a thread is started and then 19 minutes after posting -- BAM!....  a long, well-written, and informative response magically appears.     

Hi Christopher,

Yes I am definitely a technician. 

Hi Kurt,

I know right. 

Hi Hattie,

     I am sure Brandon was also, to give a little more info, I have them all on conventional loans.

After the first two properties I decided, to put the investment properties in a LLC and of course open up a business account in that LLC. I paid the down payment on the third property using savings and used the business line of credit for the rehab on the second property .

     I will definitely look into more info on Portfolio Lenders.

HELOC's that sounds like good advice that may just work for what I am doing. Thank-you for that. I should have thought of that myself.

     Syndication I Know little about so I will  have to do some research on that one.

Thanks for your very well stated reply and advice.

Phil 

@Phillip Hunt Glad you are sharing your success with others! My husband and I are buy & hold investors too. We purchase a property about every 5 years (SFH and small multiplexes). We have 15 rental units now (3 SFH, 2 duplexes, 1 8-plex) I share your passion for landlording and especially like that you are creating homes that your tenants take pride in. Good for you!

Marcia Maynard, Fischer Properties | Podcast Guest on Show #83

@Phillip Hunt  Brandon's post was unrealistic - I can say this since I told him so over the phone :)  But, the system works!

When I read the post, I felt as though he was writing about me.  My wife is in fact 33 years old.  We are in fact both teachers.  We don't have 3 kids, but we have 2.

Brandon's assumptions of what life costs were ridiculous, and he forgot a little thing called CapEx. And therefore his conclusions relative to how much money is left at the end of the day to invest were overly optimistic...

That said, I do have the portfolio and the financial statement that he talked about.  I've been at it since 2006.  In 5 more years, if we don;t encounter any major, major set backs - God's willing, we will be more or less financially independent, or at least quite comfortable; even if we don't buy anything else.  Patrisha will be 38 and I will be 43.  When I am 50, even if we just stay put, we will be retired nicely...

How - it's called creative finance.  Normal people, with normal jobs will never accumulate enough down-payment to do what Brandon suggested in his post.  But, creative finance opens those doors. Creative finance did it for us.  Cheer up :)

Hey @Phillip Hunt  thanks for jumping into the Forums! Great to have you here, and we could definitely use your advice around here :)

As for my blog post, yes, the plan is "idealized" some (in regards of nice-clean numbers) - BUT it's not impossible. I ask people this: 

So you are telling me that if you only had to buy one property every 24 months... anywhere in the world... with a 20% down payment... you couldn't find a deal like this?  

And to @Ben Leybovich 's point - I actually included CapEx in those numbers, but Ben doesn't know how to read yet so it's okay, I forgive him ;) And I know a family of 4 who live on 30,000 per year. They have a nice house, nice car, nice life. But they are frugal and smart. So to say that a family of 5 can't live on 70,000 a year is absurd and that line of thinking is one of the reason people hate Americans.

Besides, I've purchased 4 properties with numbers BETTER than what that article proposes in the past year. Am I some super hero? Not at all. I just hustle more than 99% of other people and as a result, I get results that 99% of people will never get.  And it's never "easy" and handling those tenants can be a pain in rear... but nothing in life worth anything is easy. 

Medium fbprofileBrandon Turner, BiggerPockets | http://www.BiggerPockets.com | Podcast Guest on Show #92

You two knock it off!! lol

I'm on the same track as you are Phillip!! Slow and steady. 

Can someone post a link to Brandon's blog post that is being referenced? Thanks in advance.

@Chris K.   beat me to the link!

I saved the link for inspiration (which I think was the goal), not for the numbers and factual information.

@Phillip Hunt   you're doing very well! $1150/month in income is nice. You could continue paying down the mortgages or save that money and keep investing into more real estate.

Ben,

      I am fifty right now and am a little behind when it comes to Brandon's example and although I am pleased with my numbers, my goal is 60th birthday with five properties paid for.  Given my example in this forum, to the more experienced than I, Is it looking like I will be able to achieve that goal?   I will listen to any information on "creative financing."

Brandon,

     I am not saying deals like this do not exist in the country I am sure that within the limits of the world it is possible, it may even be possible to find one locally for a few seconds, the competition is fierce.  I would have to agree with Hattie and Ben that the example you used is by no means the norm, and I say again that I thought your blog was great. 

       By looking for those "extremely rare" deals even with the small chance of getting it,  I would give up being able to choose the appropriate neighborhoods and being able to manage it myself.  I would have to take the deal where, and when the deal was available, I would rather not do that.  I like to have the advantage of which property to have and where to have it.  If I give up a little to do that, I am fine with that. 

      It is the pace I am most concerned with to meet my goals.  And, because I love to do this and rehab my own places I would like to speed up the process. 

      Alas, we are back to financial solutions to make it possible. 

Chris,

     Exactly my view on sweat equity, that is an advantage over many other investors, the more I can do myself the better.      

Brandon H.

     The goal is five so two more to go.

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