All Forum Posts by: Kevin Moules

Continued Progress :) Wish I could say I have done all the work myself but must give credit to the contractor and his brother who are doing all the work. Guys have been in the business for 40 years. Place is cleaning up nice!

@Brian Schmidt, thanks for the support. I totally agree with you on the education. Some of the podcasts guests say they have never read a real estate book. That's fine they had a mentor. Some of us do not have the opportunity and so reading is our mentor. Good luck with your first deal!

@Johann Harshman, it was a pain but the hard money cost was something I wanted to avoid if I could. I lucked out that the sellers did not need all the cash up front.

@Drew Solidum and @Andy Bailey thank you. 

Spent the day today with my wife shopping for light fixtures, door hardware, tile for the bathroom and other random items.

Cabinets/doors/door frames and trim are officially painted. Next up will be interior painting before moving on to counter tops and floor install. 

@Anthony Soliveras-torres, thanks for the support and motivation! I know my posts are long but as a newbie I want to know the details of how something came together. That being said I want this thread to be a place new folks can reference on how a flip project came together and show the steps.

So far order of operation has been:

Demo

Plumbing/Electrical

Drywall/taping/texturing

Trim painting

@Scott Scheel, thanks for support! Its been a lot of physical work so far but I love physical work being raised a farm kid. My goal with RE to to allow me back into the Ag world without having to rely on ag to support my family. I want to raise my kids out in the country like was raised. I believe there is no better life! :)

PROGRESS!

We started rehab on the 18th and within a week’s time electrical, plumbing and drywall was complete. Currently moving onto texture and painting of interior as well as door frames and doors. When we ripped up the carpet we found original hardwood floor in most of the house. Plan is to salvage this floor instead of placing laminate on top. Goal is to have this house on the market no later than May 1st! I took floor down to the subfloor in bathroom, kitchen, and dining room. 

Going back together!

I am now focusing on the yard clean up. A lot of trash was hauled in by the homeless folks. Also a lot of wood from tree in the yard. Plan on bringing in our tractor to clean house. 

BTW this is a 3 bed 1 bath home with a dining room and additional family room. Home also has an enclosed patio area. If this home were somewhere else in town I would highly consider adding a second bath but not worth it here. 

My wife and I will be heading to some kind of store that gets overflow and donations directly from Lowes and HD all the time. These are not damaged items, they are brand new. Hoping to pick up tile for the bathroom as well light fixtures, ceiling fans, vanity and if were lucky flooring. 

I did a post about my first rental purchase here (https://www.biggerpockets.com/forums/223/topics/67...) which took place last month. During the time of acquiring the rental property I also came across an opportunity to purchase a property in my hometown. I really wanted to make this a BRRRR property but it would not have worked due to numbers. This thread will follow my journey. I will try to update as much as possible. Enjoy!

HOW DID I FIND IT?

I started a side handyman business several years ago to bring home extra income and have my wife stay home with the kids. One of my customers asked me to meet her at another home to give a bid on stopping some water leaks. When I walked into the house I could not believe what I saw! It was a disaster! The entire kitchen floor was bubbled up due to water getting into the particle board.. No one lived in the place and unfortunately she had allowed some homeless folks to set up camp in the back yard. My gears started turning immediately that this house could be BRRRR or flipped.

I began to ask questions about the place and its story and her plan with the place. I learned that it belonged to her husband and 5 other heirs through a trust. No one had lived in the place for several years but was still full of everything her inlaws had owned. Homeless folks were using it for cooking and bathing. Place smelled wonderful J. She let me know they planned on selling it and were talking to a realtor about placing it on the market. I let her know right then I would be interested in purchasing it and would like to entertain owner finance if they were up for it. I assumed since they were heirs that there was not a mortgage on the place at this point.

PARTNERSHIP:

Since this would be my first flip and learning from the podcasts that most people loose money on their first flip I decided to reach out to a local investor. I wanted to make sure I made something on this deal. I asked if they would be interested in partnering in this deal if it were to materialize. They would help guide me through the process in exchange for part of the profit. They agreed and walked the property with me to give a ballpark rehab number of around 40K. Using this number I learned that trying to use the BRRRR method and pull my money out would not pencil out. Local rent to price ratios are too large, I would have had to keep substantial amount in the deal after Refi for rent to cover mortgage payments. So that was out the door.

THE DEAL:

I learned from my customer that her brother in law was the trustee of the trust. She had talked to him and they indeed were willing to do owner finance. SCORE!! I would use my HELOC from my personal residence to fund the rehab. ARV is 245,000. The Terms were:

Purchase price: 155,000

Down payment: 5,000

Interest rate: 4% (interest only)

Loan to be paid in full within 1 year

No prepayment penalty

Purchased as is

I was stoked!! Creative financing on my first flip! We opened escrow and were on our merry way. UNTIL, I received a phone call from Title Company stating that the trustee did not have the power to make a loan with this trust. There was no language on the trust that allowed business to be carried out in the trusts name and so title would not issue title insurance for the property. DANG!! I would have to get signatures from all 6 heirs stating that they were ok financing the loan to proceed. I talked to owners about this, they were on board but unfortunately one of the heirs had been MIA for several years and no one knew where he was at. Last they heard he was living on the streets or on a farm somewhere. After two months of asking questions and looking around we finally found him. His family members tracked him down and I got a notarized signature. THANK GOD! Couple weeks later we closed escrow and the place was ours!

JOB SCOPE:

Home is located in a C or C+ neighborhood. With the low price point we planned to do as little rehab as possible. Job scope included:

Haul off all trash on the place

New kitchen

New bathroom

Laminate floor in kitchen/dining room

New carpet in bedrooms

Complete interior paint

Complete exterior paint

New vinyl windows

Clean up shady electrical work

GETTING STARTED:

Being handy myself I thought about doing as much of the work myself to save money. However I also know time is money and the market is slowing down here. I want to get this thing on the marked ASAP. I work full time and run a handyman business on the side so my time is limited to Sundays. I decided to let go of the reins and let the contractor do what he does best.

I hired two friends and within 2 days time 90 percent demo was complete and the house was pretty much cleared out. I hauled three 16’x8’ trailer loads to the dump to start with. By the time its all said and done I will have 10 trailer loads of garbage between inside demo and cleaning up the homeless camp outside. I enjoy doing clean up jobs, beats sitting behind a desk for 8 hours a day and I am a neat freak. Just watch out for those drug needles!

WHAT IT LOOKED LIKE:

@Jacob Friedrich, thank you. CA in general is not the best for cash flow unless you by outright. I would love to self manage and put that extra 10% in the bank. However, would need to find one heck of a deal to make it work. 

@Jeff Zimmerman, thanks for helping us on the journey!! Hopefully there will be another one sooner rather than later!

@Mark Silva, thanks! Just kept looking but took a while. Wanting to purchase another one ASAP but money is going toward the rehab instead and possibly a new primary residence if we can find one. I think I am going to start a diary on this rehab for folks to follow along. I just need to find the right forum to post in. Any ideas? 

First, thanks to BP community and the amazing people here. I have made contact with folks from CA all the way to NY and down to AZ. Thanks to all the BP Podcast hosts and all who have been interviewed, thanks for taking the time to share your knowledge, it’s so valuable to newbies like me!

MY RE STORY

My RE story begins with immigrant parents who invested in rental property in their early 20’s here in the states. Rentals are very attractive to immigrants as compared to the stock market because property is easy to understand, you can touch it, you buy it and someone rents it. That being said I grew up working in my parents rental properties, they owned 4. My father has always been a staunch believer in real estate and his saying is “God only made dirt once”.

Growing up he instilled in me that paying rent is a waste of money and you should own a home as soon as possible. So, at age 20 I cut the largest check of my life for 20K (from saving and working since I was a kid) and we purchased a home together when I went away to school as an investment and a place to live. Idea was that upon finishing school we would sell it and I would get my money back plus some, home was purchased summer of 2006 and planned to sell in 2009. I had no RE experience, didn’t know anything about cash flow and my father was betting on appreciation. Well 09 came and we could not sell the place and could not drop price fast enough to chase the market. Long story short we had to do a short sale on it, and it was hell for my folks. My father felt bad and did not want me to lose my money so he gave back what I put in and not a penny more.

Got a real job in 2012 after grad school and after doing mission work traveling the midwest and east coast spending about 2 months in OH. I bought my primary residence in 2013 but REI still attracted me.

In 2015 I got married which really put a damper on my REI ideas since my wife wanted nothing to do with real estate and saw it as a very large risk compared to traditional retirement accounts. Her folks never messed with it so it was foreign, yet for me my folks never touched retirement accounts so that was foreign to me. And so goes the meshing of married life and spouse backgrounds.

EDUCATION IS KEY!!

My thought was, how am I ever going to get my wife on board with this? RE is so powerful and amazing. I spent all of 2017 reading and listening to podcasts about traditional retirement accounts. We were putting money in a ROTH IRA and my 401K but I did not actually understand how it worked and where my money was going. I did not like that, so I set out to learn as much about retirement accounts as possible. Ended up learning our investment person had us in front loaded funds with the ROTHs, which ticked me off. So ended that very fast and took my money to Vanguard and I manage it myself now.

2018 came along, I found and joined BP in March and read Rich Dad Poor Dad. MY RE FIRE WAS RELIT!! This time around I started devouring BP articles, RE info, and listing to podcasts every single day traveling to work. I am only now at number 275 starting from 1. As I listened to the success stories I also started sharing what I was learning with my wife and when I found a podcast guest that was female or a couple I would listen to it with her. Over time she became more comfortable with the idea of buying a rental property. She saw that I was doing my home work and that I was not blindly leading us to utter destruction. SHE WAS ON BOARD!

THE SEARCH!

Oh where to look for property, well my own backyard of course!! So I began looking online and running numbers on an analysis spreadsheet I built. I connected with an agent and was being sent MLS listings. As time went on I began to realize that my county was not a candidate for cash flow even with 20% down. My own home has increased 70% in value since my purchase. Average home price is around 300K with a rent of 1200-1500. Great for bay area folks, bad for me! I took out a HELOC on my personal home just as a tool to have for cash offer if I came across it, NOTHING! The idea of self managing a property and seeing it every day was losing its battle in my mind.

I kept thinking where else can I invest with cheap homes and cash flow? I know, let me look in OH since I spent 2 months there. What I found online was blowing me away. Homes for 50-100k that I could buy outright and cash flow from day one. I reached out to several people in the area and even posted a thread and got a lot of great input. Spoke with Michael Swanny who was a podcast guest to get his input as well. Was planning a trip and kept talking about it with my wife. The more we spoke the more I realized I was not ready to buy my very first RE property out of state. It took a long time to get my wife warmed up to the idea and I did not want to blow it on something so far away we could not see. If I was single I probably would have pulled the trigger.

So where to next, well after listing to 100 podcasts I kept hearing over and over that if your marked is too hot start looking further away. They kept saying there is usually something within a 2 hour drive from your location. So that’s what I did, I began looking north where my wife was originally from about 2 hrs away, same story as our town as far as rent/price ratio so that was out. Next I started to look in the southern central valley and lo and behold, there it was 1.5 hrs away, FRESNO!!

THE DEAL!

I decided to zero in on Fresno. I also wanted to jump into multifamily properties 2-4 units. The reasoning was to acquire more properties with fewer loans. I started connecting with folks here on BP in the Fresno area and continued to analyze deals there. I found an amazing realtor, give a shout out to @Jeff Zimmerman who works with investors and understood what they are looking for. He was awesome to work with.

In December of 2018 we closed on our first rental property! A 4 Plex in a C class neighborhood. They are all 1 bed 1 bath units which was not my preferred choice but will do. To make the down payment I used money from my handyman side business I started in 2016. This deal is not a home run by any means but it puts us on the playing field out to first base. I spent the week after closing on it making repairs found by the home inspector. Some of the rents have not been touched for 8-10 years so I plan on raising those this year as well to help increase my cash flow. 

I still have ideas of investing out of state but plan on learning the the ropes locally first. 

FINAL WORDS

YOU CAN DO THIS!! If you can buy a personal house you can buy a rental property. If I were to do it over I would have truly looked for an opportunity to house hack my primary residence and purchased a multifamily instead. As it is though, the HELOC will be paying for the rehab on our first flip properly currently in process. I'll save that project for another thread!

THANK YOU FOR READING and if you have any questions please let me know. Sorry about the long story but what we have to share are our stories. This is how folks connect with each other. I hope this inspires 1 person to start looking somewhere other than their own backyard and start your journey to FI because that is why my wife and I are doing this. 

@Jonathan Blum, I like your idea as well. That makes them feel like they have a say in it and ends up what you were looking for in the first place. Awesome strategy! If I lived closer and was self managing I think I would employ this technique as well. thanks for sharing.