All Forum Posts by: Jay Helms

Ive been a REI since Jan 2010 when we acquired our first distressed property, a SFH, with the sole intention of rehabbing the house and converting it to a rental. Prior to this I knew NOTHING about being a REI. But I had been a general contractor/home builder for 13ish years, so there was no scenario that was going to pop up in rehabs that would scare me.

Now I have 4 SFH's that have been purchased, rehabbed and rented out. Here is what I do and I am hoping someone can tell me if I found the magic formula or if I am doing this wrong.

I have a $100k line of credit under my LLCs name. I use this money to auqire properties after I have done all of my due diligence which I do myself. Currently I buy only distressed properties that have been foreclosed on.

Every offer I make is Cash/no contingencies. again i due all of my due diligence myself and I am very educated in what I am doing. I rehab the house with a combination of my own money and my LOC funds. My wife and I do all of the work, occasionally hiring out certain trades like drywall and roofing. But we have the skill set and tools for this.

Once the rehab is complete, I rent the home out, w a 1 year lease, and I am diligent about tenant background checks, most of my tenants are 750+ credit scores.

I then turn around and hand my bank a copy of the lease, along with all the other paperwork and I get these houses financed ( at this point I own the house w cash from the LOC and my own reserves). I am currently getting 25yr ams at 5.125%, 5 year balloons at 80% of ARV.

With this process I literally have $0 invested in the property other than my equity and I have always received cash at closing. My best deal gave me 18k over my total cost, but since I supply all of my labor, Im simply paying myself to work.

I have 4 properties now, the 4 combined properties cash flow over 1k/month and they have $101k in equity after the 80% financing.

The cash outs at the end are my income to pay bills, along with the monthly cash flow from the properties. I want to move into small multi's soon, and my banker wants me to do the same. My goal in 5 years is to have all of my personal expenses paid by my rental cash flow. I need 4k/month to do this.

Ways I can improve?

All comments appreciated

Hi @Dan Pohlman and @Ryan Dossey   

I’m a representative with TransUnion SmartMove. To add a quick clarification – the recommendation provided by SmartMove is based on the applicant’s credit and income profile and how much risk you’re willing to accept in a tenant. We combine these criteria to deliver a custom recommendation for each applicant. 

@Jay Helms We partnered w/ a GC on a flip. The challenge we ran in to is we had to fire the GC as they weren't performing. It was potentially going to be rather messy but we were fortunate in having a JV agreement where it was understood that just because the GC was a partner didn't mean that he could get away w/ not performing. So even as a partner he had to sign a GC contract w/ the same caveats that go in to a regular GC contract, penalties for being late, lien wavers...... We tied the JV agreement to the GC contract w language that reduced the GC split for failure to perform & the ability to fire the GC & get no split if the failure to perform significantly impacted the profitability of the job.

We're convinced that partnering works.  W/ the right GC it can reduce the cost of the job & increase the incentives for the GC.