Hi BP community! Just want to share with everyone another simple and boring deal that generate over 100% return over two years. How many time have you heard people said something like real estate is complicated and risky? This is to prove that you can keep real estate as simple as it is and it still generate a crazy return. Long story short, this is one of the rental that i bought 2 years ago for 80k from a whole wholesaler. put 10k of rehab into it. I then refinance it out at 25% down payment - 20k with the mortgage at ~$540 a month. The house quickly leased for $1250 and it's needless to do the ROI. with $1250 rent and $540 P and I. the return is like a rocket shooting through the roof The tenant moved out after two years and I decided to put it up for sale at 130k. the house quickly got a contract in less than 30 days of listing and then sold 2 months after that to a happy home owner. With the sale price of 130 minus selling fee and mortgage payoff. i was left with a 47k check. I put 20k into the house 2 years ago. now i am getting the check for 47k. Not to mention all the rent income received for the last 2 years and the tax benefit. what vehicle on earth can beat real estate investment and generate a 100%+ return in two years? If you found one, please let me know Also, do you think that i should keep the house forever, or selling it after 2 years is a good idea? I would love to hear your comment below Thank you! Here is some pics of the house and my fancy check after 2 years of hard work. I might cash out too early, you think so?

Good Job Huy. When you ask a question: good idea to sell or should I keep it long term, you are bound to get all kinds of answers. To clear up a few comments. 1031 can be a good idea but you have to identify property to exchange for and you must accomplish the exchange is a specific time period. Additionally, you CANNOT TAKE POSSESSION of MONIES transacted from the sell, you must use an intermediary until the 1031 is complete. Now to your question Huy. It depends on your objective. If it is your goal to keep building cash to buy more properties maybe selling is the best course of action. However, even with that goal there are options to get cash out and still keep the property. However, if your goal is to create continuing source of predictable and sustainable cash flow for something like retirement planning or replacing job alternative then keeping the property as a rental would better meet those needs. As for me, I am 61 and looking to retire soon so I am extremely focused on creating cash flow from multiple sources. BTW it doesn't matter the age, the earlier we start solving retirement cash flow the earlier we can either retire or do the things we want to .....its called Financial Freedom. It is hard to get risk free yield today. Real Estate is not risk free but when you are renting out at $1200 or below, those in needs are increasing thereby reducing your risk of finding a qualified renter. Lastly, you can always take a cash out refi on the money you personally put in the deal and keep moving down the road with none of your original money invested. Don't look back, keep moving forward, and keep making good decisions!

@Mike H. I have to agree with Mike H and do this myself. REFI out cash after 2-3 yr, combine with cash flow and buy one or 2 more. This goes geometric after 3-4 years of building a portfolio while still working a day job to fund living. We went from 1 house 5 yrs ago to 33 today. 10 houses last year, just 4 so far this year (June) funded by the geometric leverage of REFI + cash flow + some portion of W2 = ever increasing portfolio size. Friday I give notice after closing on #34! Near zero effort self managed using the 3 rules above plus a few minor ones and smart tenant selection. You can't quit your day job on the passive income from rentals you sold no matter how much you made. :) I'm not taking away from this trade, I'm just putting it into perspective of the goal being to quit the day job (least for me). I don't care what my paper gains are, it's the monthly cash flow and only the cash flow that I care about. The metrics I care about and have not calculated are: #hours per $ of cash flow. This is both initial hours finding, buying, fixing, renting. Then the 2nd metric how much effort (hours) to maintain each $. This later metric I know is very low for our business. I don't care about % capital gain as a metric (this article) because I can't buy beer or airplane tickets with that (unless I sell and then I lose the cash flow...). I only care about passive cash flow, because some mornings (after 2 weeks from now) I may not get up until noon. :) BTW I exaggerated quite a bit to make a point that passive income to those wanting to quit a day job and have "choice" is worth immeasurably more than the potential of buying another deal with a cashed out capital gain that I'm now paying taxes on. There is no "one" way. I'm just describing "my" way. Best of luck to all.

@Huy N. Congratulations on the sale. You cannot complain about walking away with a nice check like you did. If it was me I would have applied the BRRRR method (Buy, Rehab, Rent out, Refinance, and Repeat). You could have cashed out your initial investment and possibly some of the appreciation, tax free! I'm not going to bother with rebuilding a proforma but I assume you would have had a decent cash flow generating a few hundred dollars a month in rent. You would be able to depreciate the property on your taxes. You probably spent close to $15k on transaction cost related to the buy and sale of the property. Money you will never get back and eats into your P&L and net worth. The BRRRR method is just my preference. I am trying to scale my portfolio of 5 Buy and Holds. The biggest downfall of this method is it require a lot of capital to grow quickly. I am only able to buy a property or two a year. With prices soaring its is harder to find good deals.

Nice work. Your exit strategy really depends more on your personal needs.

what on Earth can beat RE and generate a 100%+ return in 2 years?

Jerry W.Pro Member

Moderator

Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes

10y

@Huy N.

Your market down there is going great. Congratulations. I am a buy and hold. The only reason I would sell a rental that cash flowed like yours would be to get more money to put down on 2 or more new houses. I have flat run out out of money to buy new houses and am buying one now that I will try to flip so that I have money to put down on another house. It is funny, I have not seen a decent deal in a year, now I am offered 1 so so deal, 1 deal that has possibilities but not enough for a down payment, and then I have 2 pretty nice deals. I am can turn a $5K to $10K profit in the next 90 days so I am ready to buy when the next deal comes. Oh well.

0 Reply

Billy Allen

Property Manager · Edmond, OK · Member since 2016 · 10 posts · 3 votes

10y

easy to say for the folks who come up with the money to buy the deals!

1 Reply

Karen O.

NYC, NY · Member since 2016 · 617 posts · 456 votes

10y

"....do you think that i should keep the house forever, or selling it after 2 years is a good idea?"

While I'm sure it was great, you forgot to mention taxes and insurance costs on the rental.

Otherwise, it seems you shouldn't be second guessing yourself after making the sale. Pay your taxes, then take your profits and go find another investment.

2 Reply

Malik Roley

Houston, TX · Member since 2013 · 30 posts · 2 votes

10y

Nice! The interior looks great. What area of Houston was that in?

0 Reply

Huy N.

OP

Houston, TX · Member since 2013 · 481 posts · 189 votes

10y

Originally posted by @Billy Allen:

easy to say for the folks who come up with the money to buy the deals!

Hi Billy,

Agreed. I too struggle with the 1st couple deals for the fund. but every time i want to give up.i remember this:

"the rich invest as if they have no money" - Robert Kiyosaki

1 Reply

Huy N.

OP

Houston, TX · Member since 2013 · 481 posts · 189 votes

10y

Originally posted by @Malik Roley:

Nice! The interior looks great.
What area of Houston was that in?

it's in Spring

0 Reply

Alex J.

Investor · Tarzana CA and Houston, TX · Member since 2015 · 326 posts · 130 votes

10y

if you 1031 this you can buy another place and repeat...if not, then you are going to have to pay long term capital gains on that 47k which isnt terrible but why pay tax to the IRS when you can legally defer the tax on the gains??

4 Reply

Huy N.

OP

Houston, TX · Member since 2013 · 481 posts · 189 votes

10y

good point @Alex J. I haven't thought about the 1031 on this. definitely plan thing out a little more on the next sale

0 Reply

Melissa Castaneda

Woodside, NY · Member since 2014 · 12 posts · 2 votes

10y

@Huy N. I checked out your website looks like your doing great. Is it ok if I email you for this wholesalers info?

1 Reply

David Coleman

Houston, TX · Member since 2016 · 104 posts · 22 votes

10y

Congratulation Huy that awesome great return on your investment .David Coleman

2 Reply

Huy N.

OP

Houston, TX · Member since 2013 · 481 posts · 189 votes

10y

Originally posted by @Melissa Castaneda:

@Huy N. I checked out your website looks like your doing great. Is it ok if I email you for this wholesalers info?

Hi Melissa, sure thing

0 Reply

Huy N.

OP

Houston, TX · Member since 2013 · 481 posts · 189 votes

10y

Originally posted by @David Coleman:

Congratulation Huy that awesome great return on your investment .David Coleman

David. Thank you so much for your compliment

0 Reply

Marina Spor

Investor · Buena Park, CA · Member since 2016 · 4 posts · 6 votes

10y

I believe you have 6 months to do the 1031. Go out and find your next bigger investment!

Oh, If I were you, I would have kept the house for the rental income and saved to buy another.

1 Reply

Paul MacInnis

Investor · Windsor, Nova Scotia · Member since 2015 · 128 posts · 34 votes

10y

@Huy N. - amazing story! Love hearing stuff like this - it really reinforces why I'm investor in real estate!

1 Reply

David D'Ambrosio

Investor · Brielle, NJ · Member since 2015 · 121 posts · 21 votes

10y

@huy n. I would have held it unless you needed the money for something and if you needed money to buy another rental, you should have used a 1031 exchange. You're gonna be taxed unnecessarily

IMHO

0 Reply

Erin Onsager

Denver, CO · Member since 2014 · 22 posts · 23 votes

10y

I'm about to do a 1031 exchange. You have 180 days to close on your next investment, but must identify your next investment within 45 days from the closing date of your initial investment. Gotta hustle if you want to do a 1031... Good luck!

1 Reply

Curt Smith

Rental Property Investor · Clarkston, GA · Member since 2012 · 2k+ posts · 1k+ votes

10y

Good one. The unmentioned key which is never talked about in buy and hold posts is:

- best appreciation happens in rentals bought in top school districts via great schools rating.

- buy cute curb appeal in nice nieghborhood.

- If you buy in small towns like me, also deep study jobs and new jobs sources. Only buy in the path of job increases.

Sounds like this deal did this well BECAUSE of one or more of the above was in play. Its a necessity to know why a deal did so well so one can hope to replicate it or share with others to replicate.

Buying a cheap house in the hood will never do this well. Rough areas don't appreciate nor attact occupant offers bidding the price up. Only the above points will cause this to happen.

Good luck folks.

5 Reply

Nik Krohn

Investor · Woodland Hills, UT · Member since 2016 · 84 posts · 31 votes

10y

I would've held onto that gem for a few more years (like 10). Great job @Huy N. on the spectacular "boring" deal!

1 Reply

Michael Lee

Investor · Coppell, TX · Member since 2008 · 2k+ posts · 646 votes

10y

Hello and welcome to BP! What you do really have for your goals. Now is probably be a good time to sell but if you are making from renting the market will be a seller's market again. It is probably better to just go for what is more valuable now. And how old you are will probably make a difference and what your goals are. Good luck to you!

1 Reply

Mike H.

Rental Property Investor · Manteno, IL · Member since 2009 · 2k+ posts · 2k+ votes

10y

Let me ask you this though. If the house was worth 130k, why didn't you pull all your money out of it during the refi (i.e. 75% of 130 is 97k). If you paid 80k and put in 10k more, you were all in at 90k. Refi for 97k. Pocket 3 or 4k after closing costs and keep the house.

Then you'd have all your money back and have no money into the deal. The new mortgage would have been 650/mo? Taxes and insurance another 250/mo? So gross profit of 350/mo and no money into the deal.

Why sell? You could do 10 of those and be in great shape....

5 Reply

Rob Lucey

Investor · Colorado Springs, CO · Member since 2014 · 17 posts · 8 votes

10y

Hi Huy - Looks like a great deal. I wouldn't say it was 100% return, since you need to include your $10k renovation with the $20k down, so you had $30k (plus taxes, closing costs, etc.) wrapped up in the deal. But it certainly was a very good return.

I wouldn't second guess your instinct to sell. You happened to catch the Spring market in a huge upswing as some of the major oil companies moved their offices up into that area. However, with oil prices still way down, those companies aren't going to be doing a lot of hiring for a while, so I suspect the market has cooled for the time being. You might still find deals with good returns in that area, but I wouldn't expect such oversized huge returns on every deal... unless you wait for the right ones to come along. It's part experience knowing what you're looking at and part luck catching the right market timing.... so stay smart and stay lucky!

1 Reply

Ramon Smothers

Investor · Houston, TX · Member since 2015 · 30 posts · 12 votes

10y

Nice! The 1031 is always an option but a 100% return is always a 100% return. Good job. I'm in Houston too!

1 Reply

Jeff Flaherty

Professional · Scottsdale, AZ · Member since 2016 · 15 posts · 7 votes

10y

Well done! I personally would have held on it it longer as well, especially given the cash flow but I'm assuming there was some logic behind your decision. Additionally, I don't know the slightest thing about the TX market so perhaps your timing was strategic. At the very least I'm glad you were able to capture that profit!

1 Reply

Huy N.

OP

Houston, TX · Member since 2013 · 481 posts · 189 votes

10y

Originally posted by @Mike H.:

Let me ask you this though. If the house was worth 130k, why didn't you pull all your money out of it during the refi (i.e. 75% of 130 is 97k). If you paid 80k and put in 10k more, you were all in at 90k. Refi for 97k. Pocket 3 or 4k after closing costs and keep the house.

Then you'd have all your money back and have no money into the deal. The new mortgage would have been 650/mo? Taxes and insurance another 250/mo? So gross profit of 350/mo and no money into the deal.

Why sell? You could do 10 of those and be in great shape....

Mike,

that's a great idea, i done two of them like that already as a matter of fact and post it on BP as well. i pulled out 100% of my down payment + more. i posted it on BP here as well

I just happen to decide to test the market myself and sell this one. As an RE investor i am confident that i can always find great deal again. thanks for your great input!

0 Reply

Huy N.

OP

Houston, TX · Member since 2013 · 481 posts · 189 votes

10y

Originally posted by @Rob Lucey:

Hi Huy - Looks like a great deal. I wouldn't say it was 100% return, since you need to include your $10k renovation with the $20k down, so you had $30k (plus taxes, closing costs, etc.) wrapped up in the deal. But it certainly was a very good return.

I wouldn't second guess your instinct to sell. You happened to catch the Spring market in a huge upswing as some of the major oil companies moved their offices up into that area. However, with oil prices still way down, those companies aren't going to be doing a lot of hiring for a while, so I suspect the market has cooled for the time being. You might still find deals with good returns in that area, but I wouldn't expect such oversized huge returns on every deal... unless you wait for the right ones to come along. It's part experience knowing what you're looking at and part luck catching the right market timing.... so stay smart and stay lucky!

Hi Rob thanks for your input!

it was a really a more than 100% return for 2 year ~ 20k all in, the exact number is 23k. my bank is a commercial bank and i have good relationship with the VP so he roll the rehab money into the refinance as well. plus the rent for the past two years was not even factored in

0 Reply

what on Earth can beat RE and generate a 100%+ return in 2 years?

what on Earth can beat RE and generate a 100%+ return in 2 years?

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