All Forum Posts by: Kristopher Kyzar

Investment Info:

Single-family residence fix & flip investment in Hampton.

Purchase price: $50,000
Cash invested: $27,000
Sale price: $172,000

Contributors:
Jonathan New

This was a joint venture flip brought to me by a colleague. The house was already mostly gutted by a previous investor. We opened up a wall downstairs, added a bath upstairs, a half bath and a laundry room downstairs. Completely redid plumbing and wiring to make it like new. There were some challenges with the appraisal for the sale, but it all worked out. It sold within a couple of months of listing. Turned out great!

What made you interested in investing in this type of deal?

Flipping as a means to build capital for buy and hold investing.

How did you find this deal and how did you negotiate it?

Brought to me by JV partner.

How did you finance this deal?

Hard Money with cash down payment.

How did you add value to the deal?

New wiring and plumbing, added bathrooms and laundry room, and opened up the floor plan. Basically a brand new house.

What was the outcome?

Sold!

Lessons learned? Challenges?

Appraisals are challenging sometimes. Also, hard money eats into profits.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Erica Osborn and the Think Real Estate Team. They are true professionals!

@Katherine Sherrit there is a great group of investors headed up by Erica Osborn. We meet as often as 2-3 times per month, and the Think Real Estate Team is a great group of agents that specializes in working with investors, especially military. I’m active duty, too. 

@Lauren Salvani ultimately, taking action will get you there. Whatever route you choose to take, learn it, analyze deals, partner with an experienced investor, and do it. I procrastinated for 15 years, and wish I hadn’t. Now I’ve done 3 deals in the last year, working on #4 and 5. 

@Jacob Trimble Weighing all options without bias toward one or the other is key.  Math is rough, so don't quote me.

Option 1: Sell.  Since the house has been rented for the last 2+ years, there is without a doubt some work that needs to be done to get it ready to sell at retail price (probably close to $265-270K).  If nothing else, at least paint, flooring cleaning/refinish, and possibly some hardware.  Then you'll list it, and assuming the usual situation exists, you'll pay 6% of the purchase price to agent commissions, and about 1.5-2% toward your closing costs.  Your buyer will likely want closing cost assistance, so another 2.5-3% there.  If it sold for $270K, you're looking at about $240K before paying off your existing mortgage, netting you around $40K that you could then use to invest in Hawaii.

Option 2: Continue to rent.  Not knowing what you consider "all expenses", let's assume you got them all...  Continue to rent with your $100/month cash flow.  Take advantage of all available tax benefits including depreciation.  You're netting $1200 in cash flow, about $1500 in returned taxes, and an equity build-up of about $4500/year (not accounting for appreciation) for a total of $7200/year.

Option 3: Refinance and rent.  Assuming all things equal except for percentage rate and balance, cash flow goes to $200/month, and equity build-up would drop to about $4380/year (not accounting for appreciation) for a total of $6080/year.  Net for the year goes down slightly, but net monthly (actual cash flow) goes up, creating a bit of a buffer.  You could even stash a little more back for contingency.

Again, the numbers a rough, but I wanted to lay it out there a little more clearly for you.  Ultimately, it's about what your goals are with the investment.

The Long-Distance Real Estate Investing book is what got me moving again after I had stagnated.  It opened my eyes to possibilities, and because of taking action on what the book talks about, I have made relationships and partnerships that are proving fruitful.  I went from no deals in 14 years to 3 deals in 3 months. 

Charleston is a great place, and a very competitive market.  If you can afford down town, it's a great place.  You just have to be aware of the flooding during heavy rains.  I would recommend something elevated.  I recommend Ian Smith of the Topher Kauffman Group.  He's a great agent for an investor, and the group is the #2 group in the area.  FYI, the #1 group never returned my calls. @Parker Stiles is a great wholesaler.  There are others including @Russ Scheider and TurnPro as well that provide great wholesale deals.

@Patti Robertson it’s a 3/1.5 renting for $1350. I’d love to check out the landlord association. Not free this Wednesday, but if there is a meetup/Facebook page I’ll check it out. 

@Chris Wheelus loved Hawaii. I was there from ‘99-‘03. Look into ADUs while you’re there. Great opportunities on Oahu. 

The key to all of this is that with the exception of catastrophic failures caused by forces of nature or economics, Real Estate is like a wave.  Most areas will look like this:

There will be corrections in the market.  This isn't a crash.  In good times, when confidence is high, demand will drive the market upward.  In bad times, people get scared, and the market turns back down.  It's because of this natural ebb and flow that Real Estate is able to remain attainable to the middle class.

There will always be those who will never understand RE, and they will rent for their entire lives.  There are those who will give it a shot at the wrong times, and they too will go back to being life-long renters.  Those are the short sighted.  They take a snapshot of what RE is, and make a generalized assumption that it will never work for them.  Then there are those who take a 40,000 foot view.  They get a better sense of the whole scope of what RE has to offer, and they take action.  BP is full of those kinds of people.  The ones that really make it are the ones that look at RE not only for what it can do for them, but what it can do for those with the short view.

If your goal is to provide quality, affordable homes or places of business for those without your ability to see the bigger picture, then we all benefit. Businesses grow, more jobs are provided, more people are employed, more people need homes to live in, more homes/apartments are built, providing more jobs for more people, and so on. It's a virtuous cycle, and those of us who truly care about our communities will strive to make them better. Those who go into REI with the quick-buck mindset are no better off than if they played the lottery. Sure, they may hit the mother-load once or twice, but eventually, they'll buy another lottery ticket because they've squandered their resources. They aren't going to put in the effort of understanding their community, and therefore understanding the socioeconomic forces at work within them. It's because of this they will likely not see the issues driving the community to the proverbial cliff.

Investment Info:

Single-family residence buy & hold investment in Norfolk.

Purchase price: $60,000

Contributors:
Jonathan New

Purchased and rehabbed as a joint venture. Currently rented to Section 8 tenant. Refinanced in December. This is a perfect BRRRR with all 4 Rs. We're rolling the cash out from the refinance into another property.

What made you interested in investing in this type of deal?

The property had the right price for the area, and was ripe for a BRRRR deal.

How did you find this deal and how did you negotiate it?

Joint Venture partner brought the deal to me. All negotiation was done by him.

How did you finance this deal?

Hard money with some cash down. Actually took out a personal loan for the down payment.

How did you add value to the deal?

Upgraded kitchen, stainless appliances, granite counertops, new flooring.

What was the outcome?

Rented to Section 8 tenant after the rehab. Refinanced 4 months after purchase to pull all initial cash back out. Appraisal came back $15k higher than anticipated, so we were able to pull extra cash out, and still cash flow nicely.

Lessons learned? Challenges?

Section 8 inspection takes a while.

@Dennis Hajan I would look around to see if someone is selling a package of investment properties.  You'd be able to 1031 your returns from the sale of your current property into the package deal.  There's also roofstock.com where you can buy performing assests with your 1031 money.