All Forum Posts by: Jesse Flores

Hello,

My name is Elijah. I’d like to share my real estate story with you all:

At 17, I drove to Los Angeles from my small hometown in Vermont. I arrived with $200 in my bank account and all my belongings in an old Toyota. I had recently been accepted to the University of Southern California (USC) and I couldn’t wait.

School began, but my $30k tuition bill for the first semester never got paid. My parents had fallen on tough times and weren’t able to come up with the money. I needed a quick solution, so I joined the Reserve Officer Training Corps (ROTC) on my sister’s recommendation. This program allows students to train while in college, commission as a military officer upon graduation, and serve an eight year commitment in exchange for a full tuition scholarship and living stipends.

Late one night during my junior year, I stumbled upon the BiggerPockets YouTube channel. After spending the next two weeks watching every real estate video I could find, I was determined to purchase my first rental property.

By this time, I had been eating free meals at the school dining hall, saving my ROTC stipends, and working three part-time jobs (campus taxi driver at night, finance internship two days per week, and ice hockey referee on weekend mornings). I had saved up $20k.

I realized that $20k was not enough for a down payment and that I would not qualify for a loan. I called my best friend Larry from Vermont and my cousin Jake. I pitched them my crazy idea and sent them some of the YouTube videos that inspired me. Against all odds, they each agreed to invest $10k and co-sign the mortgage.

I was about to leave for Army camp when we found a perfect three bedroom house in Orlando for $140k. We had still not closed escrow the night before I was due to report, so I quickly signed over power of attorney to Larry. I had my phone turned off in my ruck sack while in training. If caught, I would be kicked out. Late one night, I snuck into the port-o-john and turned my phone on. Larry and Jake had successfully closed escrow on the house!

I knew I had to do it again. I was so hungry.

During my senior year of college, I won a small worker’s compensation lawsuit against USC from an accident I was victim of while a campus taxi driver. My $20k portion of the settlement, in addition to a USAA career-starter loan only available to ROTC cadets, meant I could buy another rental property.

After graduation, I had not secured a full time job, so I moved to Hawaii to live with my girlfriend’s parents while job hunting. I spent half of my time running a semi-legal Airbnb operation with a condo I rented month-to-month on Oahu. The other half I spent looking for a second rental property in Orlando. I spent very little time applying for jobs. After a few months of house searching, I tied up a property in Orlando under market value and immediately called Larry and Jake to gauge their interest. We closed on the second house in August 2018.

Shortly after, my employment recruiter, Ryan, finally called me about an asset management position at a commercial real estate firm in Irvine, California. I flew back to California from Hawaii and have been with the same company since then.

The great thing about working for a real estate investment company is that at least one of the other employees is a real estate investor. I networked like crazy and convinced a few of my co-workers to invest with me in two more Orlando houses. We closed on house number three in January 2019 and number four in June 2019.

I was having tremendous fun executing deals in every hour of my free time, but I quickly realized I needed to scale into multifamily. I sent out a Google survey to 25 of my co-workers and a few close friends. I asked if they would be interested in buying an apartment complex together and how much they would be willing to invest. I was able to raise $112.5k that week from ten incredibly trusting individuals.

I worked closely with my broker to find, negotiate, and close on a six-unit apartment complex in Orlando that I planned to renovate to increase rents. Finding a bridge lender and coordinating an SEC Regulation D offering was the most stressful experience of my life apart from Army training. I had to replace investors at the last second, and the lender who finally agreed to give me a chance was the 39th bank I applied to. There were also issues with the inspection, which required me to personally meet with the seller. We closed escrow in October 2019.

I spent the next 7 months evicting squatters and renovating each apartment one-by-one via my team of contractors and property managers in Florida. We refinanced the property in October 2020 with a 60% higher valuation than the purchase price.

After spending two years renting a Southern California apartment with my co-worker Kevin, I became obsessed with the house hacking strategy and began searching for a primary residence in Southern California that I could renovate and hack. I was convinced that COVID-19 would send home prices to the moon and also create enough buying opportunity with all the layoffs. My broker Thomas found the perfect four-bedroom fixer-upper in Orange County and I opened escrow with my 30% partner Patrick.

One week after opening escrow, I was called to active duty to complete a period of military training in Arizona. I quickly signed over power of attorney to Patrick and packed my bags. While in training, I closed escrow with only 5% down and convinced the lender to loan additional cash for a renovation. Patrick and I hired a contractor to execute while I was absent.

Arizona was a blast, and managing a full home renovation in additional to my other properties was certainly stressful; however, I couldn’t stop thinking about the next big deal.

Training was only Monday through Friday from 6AM to 5PM, so I spent nights and weekends hunting for deals in the Tucson market. After a few months, I found a decent five-unit apartment building on Loopnet and negotiated incredible seller-financing terms.

By this point, Larry and I had formed our own management LLC. Larry, who is now an accomplished CPA, has been an invaluable asset, especially when my other life commitments drag me in other directions. Larry helped us bring larger equity dollars to the table for the Tucson deal and we closed escrow in October 2020.

I returned from Arizona ready to get back to my girlfriend and begin renovating our Mercedes Sprinter van that we had purchased one weekend while I was in training. I had rented out all the bedrooms in my California house, so house hacking was no longer an option. The van would allow us to live rent and mortgage free, and also have the freedom to travel.

COVID-19 was getting bad in California, so my girlfriend insisted we move back in with her parents in Hawaii for a few months. I wanted to work on the van, but Hawaii didn’t seem like a bad proposition.

As soon as we arrived in Hawaii, I got the deal bug again. I decided to explore the Bigger Pockets forums, and stumbled upon Michael, who was syndicating a 54-unit value-add deal in Denver, CO. I asked Michael to send over the details and I reviewed them with Larry. No doubt, it was a killer deal. Larry and I agreed to join Michael in raising capital. That deal closed in February 2021.

I’m now at 70 units and looking to grow the portfolio exponentially. I’m also writing a book that I hope to release within the next few years. I’m more than happy to answer any questions and I’m always looking for a great conversation.

Elijah

@jesseflores I'd look at investing into stocks where you can get some pretty safe dividends ~5% and would likely yield a better return than buying a property all cash. However an all cash property should be a safer investment if you think you'll need to access the majority of funds in next 5 years

i know im jumping in late, but have you considered cash securing a loan and then refinancing once the property is generating income?

@Jesse Flores If you have a self-directed IRA you can buy the property with it and the property stays in the IRA as an investment. You can do the same with a solo 401k.

The Carrington Investor Advantage Program

Qualifiy using property cash flow

Carrington’s new Investor Advantage Program, which doesn’t require personal income for qualifying, could be the competitive edge you need . First-time investors are allowed, and there’s no cap on the number of investment properties the borrower can own (max five with CMS). Only three years of seasoning is required on foreclosure, short sale, bankruptcy, or deed-in-lieu.

No employment or income documentation required. The borrower only needs to have a Debt Coverage Ratio (DCR) greater than or equal to .75.

Set up a recurring draw from  your retirement for the exact amount you need to qualify for the loan.  Show evidence of receipt (only need to show one month), show balance of account you are drawing from, as long as there are enough funds for 3 years you qualify.  Fannie/Freddie.  Cancel the draw post closing.  Also look into lenders who allow asset depletion to qualify.  But the 1st option is the easiest one.

@Joe Splitrock

i dont think commercial loan would work here since its considered residential due to only beeing a duplex. there are many banks who will lend based on the property's DSCR (Debt Service coverage ratio, the income of the property), look up mbanc for starters, but there are many "non qm" lenders that will do a scenario like this in your market 🤞🏼

good luck!

Hey @Jesse Flores If you have no income getting a loan is going to be a challenge for a traditional lender. You should be able to find some long term private money rates starting as low as 5%-6%. You could buy it all cash but that might not be your best play either. It is easier to own a property outright and refi later but when you go to refinance it later you will still have no income. Also if you are living off of this money using it all to purchase the property in cash puts you in a tough spot if you run into a financinal emergency with little money left behind. In this case if it is a great deal I would consider private money.  

Hope this helps,

Jason