First Year Debrief-Thoughts?

7 Replies

I fly airplanes for a living. One thing we do pretty well as pilots is debrief and critique each mission. It’s how we improve. So, I'd like to share my last year's efforts in hopes that I can get some good critiques and atta boys to help in future ventures. This might be long, sorry in advance.

In the fall of 2012 I was notified that I was going to be transferred to Alabama for a one year tour, and then transfer back to northern California. I looked rentals that fit my wife's requirements and found they were generally dumps. I wanted to get into RE, but really lacked the knowledge. I decided to buy a foreclosure (HUD) live in it initially while we were stationed there, and then turn it into a rental. These are the numbers:

#1) HUD-asking $236,000 I closed for $219,500. It needed about $4K to bring it up to my wife's standards. $60K equity capture. PITI come to just under $1200/mo for a VA loan @3.25%. Closed March 2013. Lived in it for a year, July 2013-July 2014. First tenants took possession July 2014 for $1850/mo.

#2) A buddy was buying turnkeys in Memphis, I thought why not, so I bought one too. Good that it was my first pure investment. Bad that I quickly realized I could do much, much better. $58,700, 20% down + closing $15K cash, PITI $350ish/mo + mgt fees rents for $725/mo and zero equity capture....I'm almost positive I paid too much for this one.

#3) Realizing that this was not the best, started looking local and went through about 6 realtors before I found one that had a clue about what an investor wanted. Walked through a home one day after work with my uniform on. Owner saw me, and I just happened to ask if he would entertain an offer w/ owner financing. He said maybe for a guy in uniform?. I bought it for $45K w/ 20% down, owner finance 80% @6%= $330ish PITI rents for $850/mo. Captured 10-20K in equity. Needed 1800 in paint, and cleaning.

#4&5) At almost the same time, I found two foreclosures I liked, both needed rehabs, both were substantially below market value. First was a 3/1 I bought for $24,500, needed $4500 in rehab. 20-25K in equity capture. Rents for $750/mo. Second was a VA foreclosure I got for $41,500, needed 5K in rehab, rents for $850/mo. I bought both with cash....not mine. I used a signature loan with 9% int, that I refi'd after the purchase w/ tenants in place w/ a portfolio lender @ 5.25% for 80% of my total receipts in the properties =$400ish/mo plus $60/mo taxes and Insurance for both properties. I retired the remainder of the signature loan w/ my cash, and never had to make a payment on the signature loan. btw, the payment would have been around $1200/mo if I could not have refi'd.

#6&7) Were almost the exact same process. I like doing my acquisitions with cash, just not mine. One is a 3/1 I bought at an estate sale for $28K cash right before Christmas :), and the other was a Homepath I bought for $33,5K. Both rent for $800. Both had great equity capture. Both required $3-5K in rehab, this time, however, I used a Line of credit from a bank I have a great relationship with. My great credit got me 8% interest only for 5 yrs...Don’t need that long. 6 month seasoning ends in May of 2015 when I will do a conventional refi and hopefully pull all my money out and get both on a 15 or 30 yr fixed. The goal is to have zero into these properties and still generate 400ish in cash flow.

Sorry for being so verbose, thoughts please.I’m now looking into trailer parks and MF.Prices have gone up about 20% in the last year where I “farm”.Probably switching tactics and investments.


@Neal Hinson

 Thank you for your service! Enjoyed reading your debrief, what are you flying these days?

I'm a U-2 pilot.  I love it, but know I can't do this for ever.

@Neal Hinson  whew Dragon Lady, explains the space suit! What does it feel like flaring one of those right before touchdown? 

Manufactured housing communities usually have the best cash-on-cash returns of all real estate investments, but they are management intensive unless you specialize in retirement communities or something similar.

@Neal Hinson great post man. Glad to see other flyers making some moves. I just started investing myself last year and am looking forward to the day that I have 7 properties as well. Have you been using private money for the cash buys? or hard money then refinancing out? Best of luck brother. Fly safe.

Well done!  Pulling the trigger is difficult, and you now have the hang of it so you can work to obtain better results, consistently.  TQM was the buzzword when we were young airmen...Continual Improvement is a great concept on and off the flight line. Our strategy (and now at 22 years in service) is to "go wide" with 30 acquisitions, and then "go deep" by paying them off.  

PS: I attended survival school with a Dragon Lady pilot, Capt "Hawk" Hawkens.  All the best to you~ fly safe.

@Kerry Baird- Thanks for the kind words.  I'm working toward $200K in passive cashflow including my Military retirement which should be around $40K/yr.  So, divide that by homes/appartments or whatever and that's my number.  Then, I like your go "deep" by paying off the debt.  PS, if its the same "Hawk" from a few years back, he made the ultimate sacrifice for his country a while back, well before I got into the program.  He's memorialized in a painting in our "heritage room" back at Beale.

@Tyler Flagg - My favorite TTP is to use a line of credit to purchase as rehab homes, then collaterize the debt aginst the home with a REFI.  I don't know anyone else who does this, but sure beats hard money!  Sure, its my debt, but the rates and flexibility are great.  USAA gave me 75K on my first aquisition, and I had it paid off before the first payment was due.  Not hard, but you have to be disciplined, and have multiple exit strategies.

@Denise Evans - I do want to get into MHPs.  I'm looking at a few in Anniston, Montgomery and Prattville.  I like the fact that its something that scares people away...kinda like my buddy who made his millions pumping pot-o-potties.

@William Byrd -The jet is fantastic, the takeoffs and landings are nothing short of both terrifying and impressive.  The airplane practically stands on its tail on takeoff then climbs like a homesick angel.  Trying to get her to land is like putting my kids to have to fight it every step of the way!

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