Introduction and being accountable in 2016
Hello everyone and thank you for taking the time to read this first of many blog posts about my real estate journey. This past year has been very successful but like every good entrepreneur, I want to do more next year. To do that, I decided to sit down and figure out what I am doing right, wrong, and what I can change to get bigger next year. As a lot of you know, I have a full time military career, invest in real estate, and have a wife and an 18 month old at home. Sometimes it feels like I have 3 full time jobs! This coming year I want to reduce my workload on the real estate business while increasing volume and my return. To do that I will need to offload a lot of the tasks I am doing myself and rely on other people in my business. I also want to be accountable for my actions and document what I do on a weekly basis to try and see what tweaks I can make to be more productive and what isn’t working. I’m sure you are thinking “he wants to do less but he is now adding a weekly blog to his to do list?” I agree with you, however I think this will be effective and worth my time as it will keep me accountable for my actions, document my accomplishments/failures, and hopefully get all of you excited about real estate investing and see how much can be done even with a full time job and a family.
I’ll start by going through what I accomplished this past year. Please keep in mind that this isn’t my first year of investing in real estate, but I did make a huge leap from what I did in 2014.
- In 2015, we moved from Southern Maryland to Pensacola, FL for my job in April.
- We bought a personal home using my VA loan and were paid $1,000 to move into that house. It was a true no money down deal with a $1k lender credit paid back to us. I ran all the numbers as a future rental property when we leave here and it will work well.
- The day after I closed on that house, I bought a HUD foreclosure in a beautiful, gated neighborhood cash for $185k to use as a rental. This was my 4th rental house and was purchased well below market value. I got it cleaned up, rented out on a 1-year lease and 4 months later it appraised for $265k. I did a cash out refinance with my online lender using the delayed financing exemption at 70% LTV, I was able to pull out all but $4,500 of my initial investment. Great ROI!
- I started my business, created this website, and started marketing to off market properties targeting motivated sellers. I partnered with a military guy I met here in Pensacola and we sent out 3k letters. He took the calls and we would go look at the houses together. No deals came of this yet…
- I became a licensed FL real estate agent to help in my investing career, run comps, write my own offers, help other investors, etc…
- The day after I closed on the HUD refinance, I used that cash to close on another rental property in another great neighborhood at a price well below market value. This was a new construction and since it was the end of the fiscal year the publicly traded builder needed to get it off the books. It is also rented and I am in the process of doing another cash out refinance now.
- I took on several private money lenders in order to finance the fix and flip I am about to talk about. They will receive a return well above what they are getting in the bank, money market accounts, CDs, bonds, and the stock market this year. All of them are happy and continuing to invest their returns again.
- I found an off market property that I paid cash for and closed very quickly to help out a great family. It was a 5/3 SFR house with a pool on 2.7 acres of land. However, it needed a full renovation to include reconfiguring the interior layout and a major overhaul of the exterior. It was a $95k purchase, $95k renovation, 5 months of my time and a lot of other fixed costs with a sales price of $260k. If this was a flipping TV show they would tell you they made $260k – $95k – $95k – maybe some closing costs $5k = $65k. But since this is real life and there are tons of other hidden costs, I will tell you I made $41k. Still a great return on investment but I spent way too much of my own time on that job.
- I used the flip cash to put some land under contract in a growing area. It includes 7 residential lots and 11.2 acres of wooded land. I am under contract for $120k and plan to sell it off quickly for a profit. I close on this property in a few days.
- I opened a self directed IRA this year and lent that money to another flipper I know for a nice return. Best of all, the return is TAX FREE!
- I wrote a short-term mortgage for another flipper who was wholesaling a property that he had to close on for about 5 weeks before he could sell it again. It was basically a bridge loan for him to get the deal done.
- I was involved in the purchase of a 76 unit trailer park, although the gentleman who was selling it to us died of his illness 2 days before closing so that is still in the process of waiting to close. I will be a 20% owner of that business and didn’t have to do much work on it, just a silent investor (which I love).
- I helped a good friend of mine buy his first rental house and get it closed and rented out. It was a small commission check but it was one of the things I enjoyed doing most this year because he got out there and took action!
- I helped a few family members set up self directed IRAs for themselves so they could get started in real estate investing, writing mortgages, promissory notes, buy rental houses, apartment complexes or invest with my company and enjoy tax free or tax deferred gains.
- Lastly, I went under contract yesterday on another flip not far from the last one I just sold. The due diligence process starts this week and hopefully we will close on that one by the first of the year.
Seeing as how this post is over 1,000 words, I will work on next year’s goals and post them on the next one. Before I go I do want to say a few things now that I have written all of this out. I realized this was all done from April to December, not even the full year. I spent a very long time from January to April learning my new market of Pensacola, FL from my house in MD. That work is what led to a few of these deals very quickly after I got here. Secondly, it is obvious how I planned for where the money was going to go immediately upon closing on a property. I rarely have money sitting on the sidelines and this is very important. Line up that next deal and be ready to pull the trigger when you get it back. Lastly, I am all over the place with this business. Landlord, real estate agent, flipper, private money lender, mentor, etc… I need to focus and hopefully this blog will continue to open my eyes to what I am doing and what needs to be done to get there.
I hope this post opened some of your eyes to the possibilities in real estate. I didn’t post all the specific returns but what I can say is that I love the fact that I am the one who can add value, force appreciation, underwrite my own investments, etc… Instead of what I was doing in the stock market the last 20 years of my investing life. Best of all, the return can be passive or active, you choose.
I hope you enjoyed reading my background and progress this year, if you have any questions about these strategies and want to know more about them; leave a comment, send me an email at firstname.lastname@example.org or just give me a call. I truly enjoy talking about real estate and helping others get involved so share this blog if you think someone would enjoy it. If you have something you would like me to write more on let me know as well. Speak to you all soon!