$200k in six months - long distance RE challenge

$200k in six months - long distance RE challenge

Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes

I day traded currency futures in a past life and always kept an online journal to keep me accountable, share what I was doing with the community and have a little bit of fun.  

Even 10+ years later, I enjoy reading back over it, reliving the sweaty palm wins, the heart sinking losses and more importantly, seeing the evolution of my mentality and how I dealt with the highs and lows of risk, wins and losses.

With that said, I've set a challenge for myself to make $200k in equity over a six month period, June-Dec 2018, investing in a market that I know well but am not physically located in.

Details are below - enjoy.


Goals


1) Buy (5) single family properties in 2018 and get them refinanced into long term mortgages

2) Purchase under market and achieve a minimum of $40k in equity per property after all repairs are completed

3) Cashflow $250-400/mo after expenses & debt service per property

Funding

1) A single line of credit established on an existing single family property

2) Private money from existing private money lenders that I've worked with over the years

3) New lines of credit that I'm currently in the process of setting up on existing properties - probably will not be established until late August

Background

I work in oil & gas and I’m currently on assignment in Mexico and will be here for another 10 months. The area I’m focused on is Southeast Texas, where I know the market, rents are strong and rising, housing supply is limited and there is major industrial capital expenditure committed to the area over the next 10 years.

I'm an experienced investor, having built my portfolio almost entirely while abroad and avoiding turnkey companies.  I focus on building quality teams, finding decent opportunities and most certainly over-communicating. 

The Team

1) Project coordinator – my boots on the ground. This is our first project together but we’ve built a relationship over the last few months and he’s an active investor in the area. 

2) Various contractors, some that I’ve worked with before, others only via reference. Despite not being in a HCOL, contractor prices tend to be higher in Southeast Texas due to labor demand in the area. A high school graduate that wants to work 60-70 hours a week can make $80k+ and those with further aspirations can make much more in supervision. So trying to find a decent contractor at a reasonable rate is difficult. Hurricane Harvey has further compounded this problem as rates have skyrocketed.

3)  Agent - young, hungry, willing to write a lot of offers.

Let's get started!

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Most Popular Reply

Sean H.Pro Member
Flipper/Rehabber · Pittsburgh, PA · Member since 2010 · 224 posts · 75 votes
8y

Great job so far. It looks like you may have set your goal a little low if you have two deals and over 60% of the way to your goal and it's not even August!

How are you compensating your boots on the ground? 

See this reply in the discussion

229 Replies

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  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    8y

    Update

    Property #2

    Interior paint progress photos

  • Roshan K.Pro Member
    Oklahoma City, OK · Member since 2017 · 258 posts · 215 votes
    8y

    Congrats! Excited to see what property 1 appraises for!

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    8y

    Thanks @Roshan K. I'm also excited to see how the appraisal comes back.  

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    8y

    Property #1 Update

    Appraisal came back yesterday at $98/sq ft. I was really looking for $100-103 but I'm satisfied. There were a number of uncompleted items (glass repair upstairs, x5 door replacement downstairs) that I think dragged it down a couple of bucks and I made the decision not to reschedule the appraisal in effort to get my funds back and go tackle more properties. I should have the refi funds in my account in two weeks.

    I'm all-in at $62/sq ft. $98-$62 = $36/sq ft *2329 sq ft = $83.8k in equity and most definitely a home run.

    Final photos are shown below.

  • Seabrook/Galveston · Member since 2018 · 274 posts · 178 votes
    8y

    Hi Sam, I’m here in Houston too and just getting started. Our first property closed at the beginning of this month in Galveston. It was rent ready.  Now im on to looking for something that is a fix and rent like what you’ve got. I’ve also got a couple of lines of credit i just got approved so I can move faster than the 6 weeks it took with the standard loan in Galveston. I’ve got some questions if you don’t mind me asking. 

    Property #2 - you budgeted for flooring, but at least what I could tell the floors looked ok. Was it just that you wanted higher quality floors, you kick off all budgets assuming the worst, or you had some info from you local guy that it needed to be done. There’s also the possibility I just need glasses...

    How are you refinancing these so fast?  If it is a local bank/lender, may I ask who you are using?

    You mentioned Harvey and the impact on prices. Do you think you have a good feel for $/sqft on standard work?  Is everything inflated still?  Specific types of work? I got a quote for $10k on 850 sqft hardiplank installation. That seemed a tad high, but it was the lowest of the 3 I got.  Any contractors in the area you recommend?

    I’ve just been using HAR/Zillow and the sheriff auction to look for properties thus far. Do you have a go to group you wouldn’t mind sharing?

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    8y

    @Bruce C.  Congrats on your Galveston property.

    Re: floors, I also thought I could use the existing floors but in some areas they were non-existent and it would cost about the same to find something that you could mix (new floors in some areas, existing in others) vs new floors throughout.  It was a shame, as the existing wood floors were decent but unfortunately, they did not exist throughout the house.

    Re:  refinancing, I'm using MCT Credit Union.  Start to finish is about 7 weeks. 

    Re: inflated pricing, yes, still seeing high pricing and that siding price certainly seems high.  As my properties/contractors are in SETX, about 90mins down the road from you, my references won't apply.  I'd recommend keep shopping around if you can.  My sq ft rehab prices vary from $18/sq ft for a lighter cosmetic upgrade to $40/sq ft for a full gut job.

    Re: where to buy, I've been buying off the MLS and from a couple good wholesalers that are a part of the local BiggerPockets meet-up group.

    Hope this helps.

  • Colorado Springs, CO · Member since 2016 · 39 posts · 6 votes
    8y
    Nice journal on the rehab. Keep the rest 4 going strong. Looks like Property #1 over budget but #2 was under. What’s the trick?
  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    8y
    @Steven Hu Property #1 was over budget - I'll do a full tally soon and post up. A lot of unknowns with my first flood house + exterior paint that I don't think it really needed, that was a 5k blow right there. I knew my spread was very large so I was probably a bit more loose with capital spend than I should have been. Property #2 is still on-going so we'll see how we shake out but I think we'll stick pretty close to budget. But it's a cosmetic rehab where I had a pretty good handle on the scope before hand.
  • Homeowner · Houston, TX · Member since 2018 · 21 posts · 8 votes
    8y

    that's great Sam! I'll definitely be keeping up with your progress.

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    8y
  • Peter StewartBusiness Member
    Real Estate Broker · Indianapolis, IN · Member since 2018 · 160 posts · 168 votes
    8y

    Great job so far Sam! Really appreciate all the detail and photos. Very informative!!

  • Colorado Springs, CO · Member since 2016 · 39 posts · 6 votes
    8y
    @Sam B. Okay thanks. Thought you founds ways to work with contractors to have better control. Budget management is hard.
  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    8y

    Sure, thanks for your feedback @Peter Stewart

    @Steven Hu  Yes, with Property #1, it wasn't so much controlling the contractor as it was the amount of unknowns.  

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    8y

    Property #2 Update

    Floors are in, just wrapping up some trim, transitions and other bits and pieces.  I'm pretty satisfied with them at the .55c/sq ft price point.

    Bathroom rehab to be completed this week.

    Exterior repairs and paint to start next week, appraisal to be scheduled for early September.

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    8y

    Property #3 is now under contract.

    Property #3
    Purchase Price: $44.5k
    Estimated Rehab: $60k
    Estimated After Repair Value: $137k ($98 sq ft)
    Estimated Monthly Rent: $1500
    Source: MLS
    Funding: Purchasing cash via line of credit, private money
    Schedule: Unknown

    This is another flood house just around the corner from Property #1. That's great news as it's in a super desirable neighborhood and I already have the comps. The bad news is that it's been sitting since Harvey, never being demo'd, dried out and made sure the house was clean.

    I haven't been able to get my contractor inside the property yet but he was able to do a walk around yesterday. Below are my initial estimates for rehab and I'll get to see how those shake out vs reality in the coming days as we get access to the property and can do a detailed scope of work.

    Demo of all drywall (walls and ceilings) @ $5000
    Drying, treating and obtaining a mold free certificate @ $5000
    Insulation, Drywall & Paint @ $15000
    Floor & Trim @ $5000
    Kitchen @ $5000
    Bathrooms @ $5000
    HVAC & Possible Ducting @ $5000
    Garage Door @ $3000
    Appliances @ $2000
    Dumpster @ $2000
    Unknowns @ $8000

    Total @ $60000

    Listing photos suck but it's all I have now.

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    8y

    Property #1 Update


    Refi closing is today. It will be my first time using an online notary, so we'll see how this goes. Hopefully all goes smoothly and I won't have to make any flights for closing. Texas has some odd restrictions, I suppose dating back to backlash post-80s savings and loan debacle.

    Keys will be picked-up by the property manager today.

    Property #2 Update

    Bathrooms and exterior paint in process but currently paused due to rain all this week. Hope to get back on it early next week. Trying to get the appraisal scheduled for next Friday, 7-Sept.

    Knock on wood, budget is very intact with this property. The joys of a non-flood, light cosmetic rehab.

    Some progress photos shown below:

    Property #3 Update

    Worked out a scope and estimate with my contractor - looking at about $26k, labor only, to get it demo'd mold free, insulated, drywalled, painted, floored, baseboards, door trim, doors hung, bathrooms done. I'm pretty happy with that.

    I've bumped the all-in budget up to $70k, which is pretty conservative and includes a little higher end finishes, taking some lessons learned from Property #1. I may be able to come in less but I want to keep a lot of meat on this one due to the unknowns of getting a property dried out and mold free.

    This property is in an A+ area so I'm OK trading less equity (maybe making $25-30k) for a good cashflow house.

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    8y

    Update


    Property #1:
    Property management has possession now, completing a couple little things here and there and we'll be getting a tenant placed.

    Online notary was a fail as the title company refused online notary at the last minute. I'm flying into Washington State this weekend for another line of credit notary and will do both of them at the same time while escaping this Mexico heat for a couple of days. I'm definitely looking forward to completing this first refi.

    Property #2: Granite installed and backsplash on-going. Exterior paint complete.

    Found a leak in the kitchen that requires some wall demo to get access. Working through that now and will understand the full impact later tomorrow. ALSO, had the HVAC go down. It's not an old unit so I'm confident we can get it squared-up. A few parts on order, should be squared away by this weekend.

    With the backsplash, plumbing and HVAC issues, budget with bust a little but nothing bad.

    Planning to have final professional photos done this weekend. Appraisal is next Wednesday. I'll schedule the close date around late-Oct when I'll be back on Texas for a few days.

    Property #3: No real update, spoke with the title office this morning, still working to get the title paperwork completed, looks like closing should be later this month. I'm totally OK with that as I'm nearly out of funds, hence the flight to Washington State this weekend to ensure the refi and line of credit happen.

    Property 2 progress photos below

  • Specialist · Denton, TX · Member since 2018 · 126 posts · 84 votes
    8y

    @Sam B.

    These are really looking good.  

    Thanks for sharing so much information.  I am referring people who are flipping to this thread so they can see the ups and downs!

    -James

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    8y

    Sounds good, thanks @James Call

    You hit the head on the nail - there are always ups and downs.  I think being honest with yourself, accepting that there will be some unknowns that pop-up during a project and also knowing that you can tackle them helps relieve anxiety and roll with the punches.

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    8y

    Update


    Property #1


    Goes on the rental market next week. Refi is complete and funds dispersed to my account. Woo.

    Property #2

    Plumbing fix completed and the HVAC was a simple fix, both not exceeding $1000 combined, eating up the remaining misc budget.

    Photo update below, appraisal is tomorrow, rehab completed, total rehab costs @ $33,405, all-in with purchase @ $120,905. I'm looking for the appraisal to come out at $157,000. We'll find out the results next week and I'll probably fly back to Houston to close this the following weekend.

    Property #3

    I flew to Washington State last weekend to have this closing notarized (along with property #1 closing notarized and another line of credit notarized). Paperwork received by the title office yesterday, funds wired yesterday, closing is officially today and we should have keys this evening/tomorrow. Once keys are in hand, my contractor will commence demo on Saturday.

    Property #4

    A good investor friend shot me a note over the weekend that he had a property in my area that he'd wholesale. I looked up the address, we worked out a price and he went back to the seller. Monday came along and we're under contract. Rough details below with some initial photos.

    2300 sq ft, purchase price $115k. Rehab estimate ~$40k-ish. Haven't been able to walk through and the pictures look rough - no flooding but heavy cosmetic w/indoor smokers. That said, it's in a great location, great schools and after repair value will be around about $200k. As always, I'll try and get aggressive on that budget and see if I can shave off a bit here and there. Probably won't close on this until mid-Oct.

    Photo updates below, enjoy.

    Property #2 Photo Updates

    Property #4 Photos

  • Kerry BairdPro Member
    Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
    8y

    The before-and-afters show how much of an impact a rehabber can have on a property, and on a neighborhood.  Great job on these.  Like the other posters, I appreciate your estimates on budget, as well as a run down on your financing.  This last one is quite ugly...but not for long!

  • Baltimore , MD · Member since 2011 · 32 posts · 8 votes
    8y

    Following.. great job!

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    8y

    Thanks @Kerry Baird for the positive feedback.  And yes, that last one is rough.  I'd rather start fresh with a gutted flood house vs going into an existing heavy cosmetic like this.  You never know what fun surprises are lurking behind that yellowed bathtub :)

    @Randy Coffren  Thank you.

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    8y

    Update


    Property #2 Appraisal came back yesterday afternoon @ $131k. I was expecting $157k and am pretty disappointed. On the phone with my banker, he's also surprised, which is good. It's such a gross delta for the area, it doesn't make sense.

    I've already requested another appraisal be ordered.

    I received an appraisal before purchase to confirm my comps - $157k right on the dot.

    Property #3

    Demo has commenced.

  • Flipper/Rehabber · Henderson, NV · Member since 2018 · 76 posts · 27 votes
    8y

    Wow @Sam B. these posts are very motivational. As someone getting out of a 9-5 and going solely into REI, I love to see these posts! Definitely Subbed!

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