$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!

12Reply
302 views

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

Jump to latestLatest
  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    Thanks!  @Marla B.

  • Silver Spring, MD · Member since 2018 · 14 posts · 1 vote
    7y

    @Sam B. Hi Sam I'm a newbie, great post I learned a lot. My question on Property #2 is when you talk about getting your 121k + 9k, what is the process of getting it back and how does the property then structure financially. Would this generally work with a live and flip?

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    @Mao Pmn  Thank you.

    The $121k + 9k = $130k total given to me by the bank after the refinance was completed.  After that, the property is structured as follows:

    Value $163k

    Mortgage $130k

    Monthly PITA approx $950

    Rented $1595

    This would absolutely work for a live-in flip, yes.  

    Hope this helps, holler if you have any other questions or if the explanation above didn't answer your question.

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    Update

    Property #1 Rented at $1800/mo

    Property #2 Rented at $1595/mo

    Property #3 Just wrapping up the finishing touches with baseboard paint, door knobs, etc. Both the fridge and the master double vanity were delayed 2 weeks, to be received and installed mid next week. I hope to have this turned over to property management by the end of next week.

    Property #4  Closed last Friday but things slowed down since then. Still working to lock down the HVAC quote and ran into a little drama pricing out a total electrical rewire of the house - bid came back at $18,000 (lol). I went with a new electrician that was well referred as this was going to be a little bigger job than just installing new plugs and dropping a few light cans in. We were about 10-12k apart on price...so back to shopping around.

    Fortunately, my local BP group has a couple of moonlighter electricians and they are out today to assemble the bid. Back-up plan is another investor's electrician from Houston - talking full rewire, 30+ light cans, plugs, everything for around $8k.

    We'll see what happens with that. Insulation and drywall should start late next week, just waiting for the garage door to be installed so that we can safely store materials. The garage door width needs to be modified, so we're working on framing that up come Monday.

    A little slower start than I had hoped but once we sort the electrical, the rest of the house will go quickly.

    Property #5 Property #5 is now under contract. This 2400 sq ft cape cod is a time capsule, very similar to Property #2 but in better condition. I'm working to close it by the end of the year but this is the first property that I'll be performing financing on the front end for, so we'll have to see how that goes. I'm leasing it back to the owner until May 2019 prior to starting rehab.

    Purchase Price: $150k

    Estimated Rehab: $30k

    Estimated After Repair Value: $252k ($105 sq ft)

    Estimated Monthly Rent: $2000

    Source: Off-market

    Funding: Financing w/local credit union.

    Schedule: Unknown.

    Property #3 Progress Photos Below

  • Kerry BairdPro Member
    Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
    7y

    Looks fresh and modern.  How did you manage to get the owner's stuff aside while you renovate...rhetorical question.  They are going to like it, and want to stay.  :D

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    Haha, thanks @Kerry Baird for the feedback! Appraisal is this week on Property #3, so we'll see how we come out on the ARV. But the property really does look great, inside and out. Professional photos also this week, I'll post those as soon as I have them.

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    Update

    Property #1 Rented at $1800/mo


    Property #2 Rented at $1595/mo


    Property #3 Finally done, except for a couple of HVAC grills. Property management now has possession as of this weekend, appraisal was completed yesterday, I'll know the results next week. Really swinging for $150k but I need my funds back asap so...I probably won't fight a low appraisal. Final photos below.

    Property #4 New garage door installed, some additional drama with the electrical that I'll share later but it's going. Drywall start won't start for another 10ish days due to electrical delays. Progress photos below.

    Property #5 Title paperwork is in process. Loan paperwork to be submitted next week. Then appraisal.

    Property #6 I really didn't want another property but it was hard to turn down the equity capture with this one. I'll post more details later but the core numbers are below.

    Purchase Price: $65k
    Estimated Rehab: $40k
    Estimated After Repair Value: $150K ($86 sq ft)
    Estimated Monthly Rent: $1400
    Source: MLS (Fannie Mae Foreclosure)
    Funding: Financing w/local credit union.
    Schedule: Unknown.

    Initial photos shown below.

    Property #3 Final Photos Below

    Property #4 Progress Photos

    Property #6 Initial Photos Below

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    Update

    Property #3 Appraisal came back today $165,000. I was all-in at $123k, capturing $42k in equity. I was shooting for $150,000 ($105/sq ft) and I'm obviously happy to see it come in at $115/sq ft. 

    This project went quite a bit over budget due to a number of factors and I'll make a detailed post breaking down these cost overruns and lessons learned.

    A summary update of this challenge thus far, including some forecast data points.

    Property #1 Equity Earned: $83,000 Monthly Cashflow: $250

    Property #2 Equity Earned: $42,000 Monthly Cashflow: $375

    Property #3 Equity Earned: $42,000 Monthly Cashflow:  $400

    Property #4 Equity Earned:  (forecast $92,000)  Monthly Cashflow: (forecast $400)

    Property #5 Equity Earned:  (forecast $77,000)  Monthly Cashflow:  (forecast $400)

    Property #6 Equity Earned:  (forecast $40,000)  Monthly Cashflow:  (forecast $450)

    Equity Earned vs Goal (including forecast): $376,000/$200,000

    Monthly Cashflow Earned vs Goal (including forecast): $2275/$1625

  • Rental Property Investor · Houston, TX · Member since 2018 · 174 posts · 100 votes
    7y
    @Sam B. Are these cash flows after all expenses? What percentages are you setting aside for capex, repairs, maintenance? What are you paying for mgmt?
  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    @Ryan Johnson Correct.  

    You'll see cashflow vary as I've left more equity in some (only 60% LTV or 70% LTV), thus my mortgage payment is lower on some vs others. Property #1 is very little at $250/mo because I took the maximum out (80% LTV) and I'm carrying a $180k note with only $1800/mo worth of rent. Property #4 will cashflow a lot better as I'll only take out a ~65% LTV (approx. $140k note) and it will be carried by a $2,000/mo rent.

    My capex & repairs are also pretty thin as these rehabs nearly all-inclusive - some may argue this approach and that's fine.

    I'll post a detailed breakdown of the cashflow analysis and how I come up with my numbers at a later date.

    Management fee is 6% due to the number of properties I have under their management.

  • Developer · Houston TX · Member since 2018 · 423 posts · 400 votes
    7y

    @Sam B. Great work. Nice to see fellow Houston investor producing high quality rentals versus slumlording. If you ever come across a contractor worth passing on their info Im always looking to add to my list in order to help keep projects moving forward. Also always happy to pass on some I have come to trust and like their work and love their prices.

  • Realtor · San Francisco, CA · Member since 2017 · 408 posts · 361 votes
    7y

    This post is fantastic.

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    Thanks for the feedback @Luciano A.  will do.

    Thanks @Ernesto Hernandez

  • Houston · Member since 2018 · 8 posts · 2 votes
    7y
    Such an amazing work! Well done, Sam.  Really appreciate you share so much details with us.  Do you mind to share where you found these properties? Wholesale or foreclosure?

    Thanks,
    Celine


    Originally posted by @Sam B.:

    Update

    Property #1 Rented at $1800/mo


    Property #2 Rented at $1595/mo


    Property #3 Finally done, except for a couple of HVAC grills. Property management now has possession as of this weekend, appraisal was completed yesterday, I'll know the results next week. Really swinging for $150k but I need my funds back asap so...I probably won't fight a low appraisal. Final photos below.

    Property #4 New garage door installed, some additional drama with the electrical that I'll share later but it's going. Drywall start won't start for another 10ish days due to electrical delays. Progress photos below.

    Property #5 Title paperwork is in process. Loan paperwork to be submitted next week. Then appraisal.

    Property #6 I really didn't want another property but it was hard to turn down the equity capture with this one. I'll post more details later but the core numbers are below.

    Purchase Price: $65k
    Estimated Rehab: $40k
    Estimated After Repair Value: $150K ($86 sq ft)
    Estimated Monthly Rent: $1400
    Source: MLS (Fannie Mae Foreclosure)
    Funding: Financing w/local credit union.
    Schedule: Unknown.

    Initial photos shown below.

    Property #3 Final Photos Below

    Property #4 Progress Photos

    Property #6 Initial Photos Below

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    Thanks @Celine Liu

    To answer your question re: where I found the properties...

    Property #1 @ MLS from the sellers

    Property #2 @ Wholesaler

    Property #3 @ MLS via Auction (foreclosure)

    Property #4 @ MLS from the sellers

    Property #5 @ Off-market via network

    Property #6 @ MLS via Bank Foreclosure

    The MLS purchases were captured using cash, no inspection and fast closing terms.

  • Houston · Member since 2018 · 8 posts · 2 votes
    7y
    Originally posted by @Sam B.:

    Thanks @Celine Liu

    To answer your question re: where I found the properties...

    Property #1 @ MLS from the sellers

    Property #2 @ Wholesaler

    Property #3 @ MLS via Auction (foreclosure)

    Property #4 @ MLS from the sellers

    Property #5 @ Off-market via network

    Property #6 @ MLS via Bank Foreclosure

    The MLS purchases were captured using cash, no inspection and fast closing terms

    Thanks for the quick response! Cash and network are so powerful! 

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    @Celine Liu  No problem and yes they are!

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    Update

    Property #1 Rented at $1800/mo

    Property #2 Rented at $1595/mo

    Property #3 Refi complete, funds disbursement today. On the rental market for $1700/mo as of this weekend.

    Property #4 Electrical mostly complete, drywall started. Paint should start next week and flooring right after that. Progress photos below.

    Property #5 Title paperwork clear. Bad news from my lender - his boss left the bank last month, new guy coming in is changing things up and going with a far more conservative approach. They've asked a whole lot more questions about me, my financials and this property. Still not yet approved but it's looking promising. However, after this one, I'm cut off from this credit union for about six months.

    Too much, too quickly, for them. They are a very small bank and my cap was initially set at $1mm (I'm at $550k-ish after this next one). So onto engaging a new credit union.

    Property #6 This one is turning into a pile of crap. Buying sight unseen is risky and my best hope is that out of 5 houses, I only get 1 really bad one and the 4 others make-up for it.

    Finally got inside this one and we have two major roof leaks, errr....holes. Roof replacement was already captured in my scope of work but I need to now look at full flooring replacement as the original wood floors, which I hoped to use, are rotten in two of the bedrooms and the hallway. More drywall repair also required.

    A couple pictures below that surprisingly weren't included in the listing. Estimate is still in process but I think I'll be closer to $50k on the rehab, all-in around $115k. Still making some good equity but not as much as intended and a whole lot more work involved.

    Step one is to get a new roof on...pushing to get this going next week.

    Property #7 Another deal that I couldn't pass up. From a local wholesaler and good friend. Great neighborhood in town, great schools. Mostly cosmetic - floors, paint, bathrooms and kitchen. Minor siding repairs.

    Purchase Price: $82k
    Estimated Rehab: $30k
    Estimated After Repair Value: $153K ($93 sq ft)
    Estimated Monthly Rent: $1600
    Source: Wholesaler
    Funding: Financing w/private lender then refi direct with local credit union.
    Schedule: Start mid-Jan, finish early Feb.

    Property #4 Progress Photos

    Property #5 Progress Photos (Waiting for formal loan approval to close & start rehab)

    Property #6 Progress Photos Below

    Property #7 Photos Below

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    Update

    Property #1 Rented at $1800/mo

    Property #2 Rented at $1595/mo

    Property #3 On the rental market for $1700/mo. Steady interest but it's a bad time of the year to find a tenant and this one may sit vacant for a few weeks as I want to screen carefully.

    Property #4 Drywall complete, paint on-going, floors will start late next week. I'm working on the refi packet this week to get started with the new credit union.

    Property #5 Finally got the loan approved yesterday, sigh. Appraisal to occur first week-ish of Jan. This will be my last loan with this credit union for the time being.

    Property #6 The saga continues with this dog of a house. Roof replacement is complete but we had to replace a lot of rotted out framing in the process (see below pictures). Drywall repair, floor demo & paint to start first week of Jan.

    I'm motivated to really make this one shine, given how rough it is and I'll need top comps to keep my equity margins.

    Property #7 Closed last week using cash and the refi was approved yesterday with the new credit union, which is great. So probably 6-8 weeks out from getting my funds back on this one. Can't start until mid-Jan when the seller vacates.

    Property #4 Progress Photos

    Property #6 Progress Photos

  • Investor · Great Neck, NY · Member since 2016 · 5 posts · 1 vote
    7y

    Good work and thanks for sharing. Do you need building permit for drywall installation, plumbing and electrical work?

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    @Eric Wang  Thanks.

    I will not pull permits for drywall and minor plumbing & electrical work.  Yes for major plumbing and electrical.  

  • Houston, TX · Member since 2018 · 6 posts · 5 votes
    7y

    I love the detailed write-up's and pictures for each property as it paints the entire picture on how the flip is going. You mentioned a few of the properties were in the same neighborhood; are you primarily sticking to one area or going wherever the deals find you? I'm in the Houston market and have been studying the neighborhoods, while trying to find a good place to get started. 

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    Thanks @Cullen Hairrell

    I'm glad you've found these posts useful.  I stick to a few specific neighborhoods - I think I've purchased in a total of (4) zip codes during this challenge.  I have turned down good deals that were outside of my target area.  Specificity is important for me at this time.

    Please note, I'm investing about 90miles East of you, in SETX.  Far better returns for rental properties although probably less long term appreciation and some may argue more prone to extreme weather.

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    Update


    It’s been a crazy last few weeks, juggling some extensive business travel, a new project assignment with my W2 job, relocating from Mexico to NE Maine USA, while still making business trips back to Mexico.

    I love the travel and being constantly on the go – proving that I can manage these rehabs while maintaining a heavy W2 work schedule, albeit not without mistakes, is a fun challenge.

    I flew back to Texas for a couple days this weekend to check on the rehabs, understand an evolving (growing) scope of Property #6, pay contractors and catch up with some local investor friends.

    Property #1 Rented at $1800/mo

    Property #2 Rented at $1595/mo

    Property #3 Still on the rental market for $1700/mo.

    Property #4 Floors are in, kitchen is in, appliances are in. Finishing the bathrooms and cleaning the place up. Should be done-done in another two weeks. Working through the refi process now.

    Property #5 Appraisal took place on Friday. Looking to close end of this month. Again, this house will be rented back to the owner until May and then I’ll take possession and start a light cosmetic rehab.

    Property #6 The **** show continues with this one. After the roof was completed, I had to take down a couple of massive trees that were rotted out and were one windstorm away from coming down on the new roof. This cost $4.5k. Afterwards, as I obviously had a termite problem, I had remediation performed and during this, we started pulling back some drywall & siding to find multiple studs crumbling.

    I haven’t completely nailed down the impact yet but I’m budgeting about $12k as we’ll be replacing at least some studs on every exterior wall that isn’t brick (the house is only ¼ brick).

    Also, salvaging the old HVAC was a fail and I’ll run a completely new system for about $6.5k.

    That said, we are moving forward with what we can. The rotted hardwoods have been demo’d out, house is dried out, and the mold has been removed. New flooring has been ordered and I’ve locked down the paint color. Granite quote came in well below estimates as I’m finally seeing some better pricing due to repeat business.

    The action now is to finalize the scope growth numbers and get on the replacement of framing where required. Then treat for termites. Then insulation, drywall, exterior siding (where required), paint and floors.

    Property #7 Seller was moving out this weekend, verified in person by myself. I took possession of the keys and my contractor will get in there Tuesday or Wednesday. Going to try hard to keep this rehab under $30k.

    Property #4 Progress Photos

    Property #6 Progress Photos

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    Update

    Property #1 Rented at $1800/mo

    Property #2 Rented at $1595/mo

    Property #3 Now rented for $1700/mo.

    Property #4 Completing bathrooms and trying to find an in-stock rear French door that fits.

    Plan is to have this one on the rental market by the end of this month.

    Property #5 Appraisal came in well above what I needed, will only have to bring about $10K to close this deal. Appraisal also noted I was short about 250 sq ft short on my initial estimate (county records are also off). This equals about a $27k increase in overall value, a nice bonus to an already great deal.

    Closing will be scheduled for approx. end of next week

    Property #6 Exterior repairs completed, termite treatment completed, HVAC install on-going and we’ll start insulation and drywall installation this week, paint to start end of this week.

    Property #7 Contractor went through Wednesday and it looks like I’ll be right about $30k all-in, perhaps a little less. Drywall repairs start this week, followed by paint, flooring and the new kitchen.

    Property #4 Progress Photos

    Property #6 Progress Photos

Join the conversationCreate a free account to reply, vote on answers and follow this thread.