Post: #26

I apologize for missing this post.

- I never lived in this area. I'm a west coast boy, these properties are in Ohio. I had never been to Ohio before flying in to scope out the area prior to purchasing the first home. I lined out all the players in the area that I thought had value before flying in, connected online/over the phone and then met them when I got to town.

- The people I have on the ground, namely the project manager or the contractor will go by properties that I'm interested in and give me a ballpark cost to get it rent ready. That being said, I've never purchased a property that I haven't walked through myself at one point or another. But I wouldn't have a problem doing so.

(06-27-2014 05:16 PM)Menace Wrote:  Sammy, I really like the fact that you're buying these houses cheap. They are literally 10x-15x cheaper than houses where I live. I also notice you work remotely. At one point did you live in the area where you're buying these homes? How do you do your due diligence on the property, or does your PM do it for you?

Post: #27

A general update:

Some five months ago, I started this thread as a brainstorming effort to come up with ideas as to how to scale my business and open up other lanes of profits while continuing my primary path forward of acquiring good, long term rental properties that produce great monthly cash flow.

I've developed a model that does just that and I'll track it's progress in this thread as it evolves. In summary, I utilize 40k of private money (loan), purchase a property at least 75% under market value (after renovation), complete renovation, and lease-option with a mortgage broker who works with the leasee to improve credit and ensure buy-out with conventional financing in 24mos.

Due to the nature of a lease option, the leasee pays all maintenance & repairs...and I bump up their monthly payment to pay for taxes & insur (although I pay the bills directly for this).

At conclusion of 24mos, they purchase the property at absolute top market price (as agreed upon at the start of the lease-option) - and I get a check for having essentially no money in the deal. My private lender makes a return in the form of interest only payments (which I take from the monthly lease payment) and I actually cash flow additional monthly from the lease payments.

-----

The first deal will be closed at the end of this week, renovation to start immediately. Rough numbers are:

Purchase price & closing costs: 30k
Renovation: 8k
Misc Holding Costs: 2k
ALL IN COST: 40K

Lease/Rent: 750/mo
Private Money/Interest Payment: 300/mo (9% interest only payments)
Insur/Taxes/Mgt/Principal Contribution: 250/mo
Net cash flow: 200/mo

End sale (after 24mo term): 65k
Assuming 3k misc fees: 3k
Net sale profits: 22k

NET NET Profit ~ 26.8k (22k sale profits + 200*24mo cash flow).

Lots of room in these numbers. I'm most excited about the following:

- This is very scaleable
- I'm making profits with NO MONEY into the deal
- I have the opportunity to build quality relationships with my private lenders. They are earning 9% annually and are very happy. As I refine the model, I'll be able to lower my borrowing costs.

I'll keep the thread updated, document as we go through the renovation, etc. I'm doing this from 2700 miles away.

Below is a photo of the property...just under 1k sq ft ranch, 1950s build, GREAT school district & surrounded by 110k+ properties. Located in Northern, Ohio in the same area where I own existing long term rental properties.

Post: #28

Excellent thread Sammy.

I'm a buy and hold investor with a small NE based portfolio. My goal is also cash flow oriented, as I work full time and have some other side projects. I definitely commend you for having the cojones to do this remotely. I have a few questions:

- How did you initially locate good contractors? I have had some real jerks cycle through before I could find someone reputable.
- Do you keep reserves for emergency repairs?

Overall, looks like you have the winning formula for success. Time permitting, I am going to be venturing out to Michigan to check out the possibilities.

Post: #29

Sounds good. I dig your username…I was a big e46 fan for a long time, then moved to e90s.

- Contractors…I found my project managers first and used their contractors. Downside = I have to pay for project managers on my renovations. Upside = I'm operating remotely and would have to pay for them anyway. I also get excellent rates. No BS. My project managers own 10-40+ units of their own…their processes are already in place.

- Yep, I keep reserves.

(09-14-2014 11:07 PM)BostonBMW Wrote:  Excellent thread Sammy.

I'm a buy and hold investor with a small NE based portfolio. My goal is also cash flow oriented, as I work full time and have some other side projects. I definitely commend you for having the cojones to do this remotely. I have a few questions:

- How did you initially locate good contractors? I have had some real jerks cycle through before I could find someone reputable.
- Do you keep reserves for emergency repairs?

Overall, looks like you have the winning formula for success. Time permitting, I am going to be venturing out to Michigan to check out the possibilities.

Post: #30

(09-14-2014 11:38 PM)sammybiker Wrote:  Sounds good. I dig your username…I was a big e46 fan for a long time, then moved to e90s.

- Contractors…I found my project managers first and used their contractors. Downside = I have to pay for project managers on my renovations. Upside = I'm operating remotely and would have to pay for them anyway. I also get excellent rates. No BS. My project managers own 10-40+ units of their own…their processes are already in place.

- Yep, I keep reserves.

(09-14-2014 11:07 PM)BostonBMW Wrote:  Excellent thread Sammy.

I'm a buy and hold investor with a small NE based portfolio. My goal is also cash flow oriented, as I work full time and have some other side projects. I definitely commend you for having the cojones to do this remotely. I have a few questions:

- How did you initially locate good contractors? I have had some real jerks cycle through before I could find someone reputable.
- Do you keep reserves for emergency repairs?

Overall, looks like you have the winning formula for success. Time permitting, I am going to be venturing out to Michigan to check out the possibilities.

I appreciate the response, Sammy. I am all about the e90s right now.

If you don't mind, I'd like to ask you a few additional questions either here or over PM sometime in the future? Definitely have a thing or two to learn from your experience.

Post: #31

Surely. Here or PM, whichever suits you.

(09-17-2014 10:10 PM)BostonBMW Wrote:  

(09-14-2014 11:38 PM)sammybiker Wrote:  Sounds good. I dig your username…I was a big e46 fan for a long time, then moved to e90s.

- Contractors…I found my project managers first and used their contractors. Downside = I have to pay for project managers on my renovations. Upside = I'm operating remotely and would have to pay for them anyway. I also get excellent rates. No BS. My project managers own 10-40+ units of their own…their processes are already in place.

- Yep, I keep reserves.

(09-14-2014 11:07 PM)BostonBMW Wrote:  Excellent thread Sammy.

I'm a buy and hold investor with a small NE based portfolio. My goal is also cash flow oriented, as I work full time and have some other side projects. I definitely commend you for having the cojones to do this remotely. I have a few questions:

- How did you initially locate good contractors? I have had some real jerks cycle through before I could find someone reputable.
- Do you keep reserves for emergency repairs?

Overall, looks like you have the winning formula for success. Time permitting, I am going to be venturing out to Michigan to check out the possibilities.

I appreciate the response, Sammy. I am all about the e90s right now.

If you don't mind, I'd like to ask you a few additional questions either here or over PM sometime in the future? Definitely have a thing or two to learn from your experience.

Post: #32

(09-17-2014 10:54 PM)sammybiker Wrote:  Surely. Here or PM, whichever suits you.

(09-17-2014 10:10 PM)BostonBMW Wrote:  

(09-14-2014 11:38 PM)sammybiker Wrote:  Sounds good. I dig your username…I was a big e46 fan for a long time, then moved to e90s.

- Contractors…I found my project managers first and used their contractors. Downside = I have to pay for project managers on my renovations. Upside = I'm operating remotely and would have to pay for them anyway. I also get excellent rates. No BS. My project managers own 10-40+ units of their own…their processes are already in place.

- Yep, I keep reserves.

(09-14-2014 11:07 PM)BostonBMW Wrote:  Excellent thread Sammy.

I'm a buy and hold investor with a small NE based portfolio. My goal is also cash flow oriented, as I work full time and have some other side projects. I definitely commend you for having the cojones to do this remotely. I have a few questions:

- How did you initially locate good contractors? I have had some real jerks cycle through before I could find someone reputable.
- Do you keep reserves for emergency repairs?

Overall, looks like you have the winning formula for success. Time permitting, I am going to be venturing out to Michigan to check out the possibilities.

I appreciate the response, Sammy. I am all about the e90s right now.

If you don't mind, I'd like to ask you a few additional questions either here or over PM sometime in the future? Definitely have a thing or two to learn from your experience.

Sammy, much appreciated. I'll put up my questions here, for the benefit of the board, however if you feel uncomfortable answering, please feel free to PM me. I also know that your time is limited so I'll limit it to some key questions:

1. Background: I'm a buy and hold investor with a portfolio scattered throughout New England. Similar to you, I am trying to chase IRR/ROI, however my part of the country does not seem to have the returns that I am looking for. The Midwest, particularly Michigan, is on my radar for investments. I am just concerned about buying, fixing, and renting out remotely. Although my current properties are not located in Boston, NE is a compact region and all of my portfolio is with 3 hours drive, so I feel secure in hopping in my car and driving out there in case I am needed.

Question: How did you get started? What was your research process? It looks like you have a fairly good handle on Northern Ohio, know the markets, rents that your investments can command. What did you research in order to make that first long distance deal?

2. Background: Maintenance has been an a concern for me. My rehabbed properties tend to hold up better but with tenants there is always wear and tear. I have handymen for each properties that I own. For the most part I have not had to deal with an major repairs (yet), however I am setting aside funds for reserves.

Question: Have you had any horror stories with tenants? Any significant issues/repairs which have required you to drop everything and either get on the phone or the next flight to OH to fix a mess? I am looking for a case of your worst situation and how you dealt with it.

Post: #33

@BostonBMW:

I like what you've done with spreading out a bit. Honestly, most people are afraid to own properties more than a 30 minute drive away. You've already taken a huge step in long distance land lording IMO and already possess some experience on what it's like.

Michigan certainly can offer some great cash flow deals. I would also check into parts of Pennsylvania as those would be within a 3-4 hour drive yet cash flow well. Perhaps not as well as Michigan/Ohio but maybe a good middle ground that wouldn't require you to fly to see them.

I started reading up on many of the "turnkey" companies, that sell a renovated home with a tenant already in place for X amount. That got me focused on some of the cities that cash flowed well. Then I took the bullshit turnkey business out of the equation and started looking for homes on my own sans middle man. Etc. I was really interested in Indiana for a good while but had been reading up on Cleveland and other Ohio cities. I caught a few posts on the BP forum from Northern, Ohio and I connected online with the local investors there.

http://www.biggerpockets.com (BP) is the number one spot for online RE and I owe a huge amount of my success to that forum. I was able to chat with investors (I'm talking dudes that own 20-40-120+ units in MY area of interest) and really understand the market, the players, good areas, bad areas. Anyway, I set up a few dinner meetings when I flew in, really hit it off with a couple of the guys and sort of went from there.

If you're not on BP already, join today. Huge value, no bullshit approach, no fluff, no guru crap, great podcasts and great access to other investors.

Re: my first deal, I walked a ton of houses during my first trip and then started writing offers. I bought two homes after that trip, both of which I had walked through but I wasn't physically present for the close. One home's keys went straight to the property management company while the other went to my project manager, who started renovation. I was able to get him in home before making an offer to get a bid.

No horror stories yet. Although I'm still new. We'll see how bad things get when I go through my first eviction...or when I have my first leases up this coming March. I do have one section 8 property, the 11k home, which I suppose most people would consider higher risk. However, aside from some new toilet parts, I haven't heard a thing out of her. I spent a good 30 minutes chatting on the neighbors porch this last trip, everyone is quiet and happy. It's also a good street, decent owner occupant ratio, pride in ownership kind of area.

The home next door just went into foreclosure...I'll buy it as soon as it hits the market. Probably lease-option this one. I figure a 18k purchase price, 7k reno, 45k resale w/monthly payments of $750. Can't beat it. Have a look at lease options if you haven't already.

I have two project managers now, both of which I consider good friends. One of which happened to be the first dude I met for beers when I landed. On my last trip, I was grilling burgers on his back deck with his wife and two kids, cigars and beers later in the evening. This guy built a 250k annual grossing business in five years and like myself, still works full time. Amazing. Anyway - I have two project managers, two property managers and other good people on the ground - networked investors, agents, mortgage brokers, etc...people who I can call if I need anything. There shouldn't be a situation, short of serious legal trouble, where I would have to drop everything and hop on a plane. We'll see though, still early in this business.

Hope this helps.

Post: #34

(09-22-2014 10:30 AM)sammybiker Wrote:  @BostonBMW:

I like what you've done with spreading out a bit. Honestly, most people are afraid to own properties more than a 30 minute drive away. You've already taken a huge step in long distance land lording IMO and already possess some experience on what it's like.

Michigan certainly can offer some great cash flow deals. I would also check into parts of Pennsylvania as those would be within a 3-4 hour drive yet cash flow well. Perhaps not as well as Michigan/Ohio but maybe a good middle ground that wouldn't require you to fly to see them.

I started reading up on many of the "turnkey" companies, that sell a renovated home with a tenant already in place for X amount. That got me focused on some of the cities that cash flowed well. Then I took the bullshit turnkey business out of the equation and started looking for homes on my own sans middle man. Etc. I was really interested in Indiana for a good while but had been reading up on Cleveland and other Ohio cities. I caught a few posts on the BP forum from Northern, Ohio and I connected online with the local investors there.

http://www.biggerpockets.com (BP) is the number one spot for online RE and I owe a huge amount of my success to that forum. I was able to chat with investors (I'm talking dudes that own 20-40-120+ units in MY area of interest) and really understand the market, the players, good areas, bad areas. Anyway, I set up a few dinner meetings when I flew in, really hit it off with a couple of the guys and sort of went from there.

If you're not on BP already, join today. Huge value, no bullshit approach, no fluff, no guru crap, great podcasts and great access to other investors.

Re: my first deal, I walked a ton of houses during my first trip and then started writing offers. I bought two homes after that trip, both of which I had walked through but I wasn't physically present for the close. One home's keys went straight to the property management company while the other went to my project manager, who started renovation. I was able to get him in home before making an offer to get a bid.

No horror stories yet. Although I'm still new. We'll see how bad things get when I go through my first eviction...or when I have my first leases up this coming March. I do have one section 8 property, the 11k home, which I suppose most people would consider higher risk. However, aside from some new toilet parts, I haven't heard a thing out of her. I spent a good 30 minutes chatting on the neighbors porch this last trip, everyone is quiet and happy. It's also a good street, decent owner occupant ratio, pride in ownership kind of area.

The home next door just went into foreclosure...I'll buy it as soon as it hits the market. Probably lease-option this one. I figure a 18k purchase price, 7k reno, 45k resale w/monthly payments of $750. Can't beat it. Have a look at lease options if you haven't already.

I have two project managers now, both of which I consider good friends. One of which happened to be the first dude I met for beers when I landed. On my last trip, I was grilling burgers on his back deck with his wife and two kids, cigars and beers later in the evening. This guy built a 250k annual grossing business in five years and like myself, still works full time. Amazing. Anyway - I have two project managers, two property managers and other good people on the ground - networked investors, agents, mortgage brokers, etc...people who I can call if I need anything. There shouldn't be a situation, short of serious legal trouble, where I would have to drop everything and hop on a plane. We'll see though, still early in this business.

Hope this helps.

+1 from me. A lot people talk about RE, even fewer take action, however you have taken RE investments to the next level by doing it remotely.

You have answer all my questions and more. I had set up a BP account a while ago, just never used it. I think it's time to start being active on that message board as well.

I appreciate your detailed response - its both inspiring and helpful.

Post: #35

Sure, no problem. Feel free to shoot me a PM any time, keep me posted on your research and where you end up buying.

Post: #36

Update on my lease-option-flip...

The property: a small, 920 sq ft 3br/1ba home in Northwood, OH. It's located in a good school district, surrounded by 80-130k+ properties. The perfect starter home.

- Actual purchase price at closing was 29.5k. I budgeted for 28k
- Holding costs thus far have run ~$500 (first interest payment + utilities). I've budgeted for 2k.
- Renovation budget was 10k. I'm tracking to just under 8k, including project management fees, etc.

Major scope of work items...

- Paint
- Some carpet
- Removal of awful front porch/step and installation of built-up replacement
- Installation of base boarding throughout the interior
- Rectifying a sloping issue in the kitchen - removal of all flooring, installation of joists as required, installation of new plywood + flooring.
- Minimal paint and interior work on the detached garage.

17 day schedule, start to finish (10-Oct through 27-Oct). We're tracking to be wrapped up this coming Tues, 21-Oct with a professional photographer scheduled for Wed 22-Oct.

Before Photos

Post: #37

Progress photos, front porch replaced, baseboards installed, kitchen slope fix on-going...

Post: #38

Kitchen floor sloping issue mitigated, new flooring installed.

Post: #39

Final pro photos...just signed the sales agreement, this is going on the market end of this week at 65k. I'm right about 39k all-in costs (not including selling/closing costs).

Post: #40

Reading this with great interest. sammy, since you're remote, what's to stop you from just living in Mexico, or something like that, while maintaining your income stream. Or Cambodia, or wherever. Any plans on something like that?

Post: #41

That's kind of the end goal, to have that ability. Right now, I have the income and reserves to do Mexico/Thailand comfortably. But I want to continue to scale at this point. My career is high paying with paid, rotational travel so I do get time off....and to be honest, I'm addicted to the money for now

But I'm on your same page...that's always the direction I'm headed. Location independent is absolutely essentially.

(11-05-2014 05:28 AM)Menace Wrote:  Reading this with great interest. sammy, since you're remote, what's to stop you from just living in Mexico, or something like that, while maintaining your income stream. Or Cambodia, or wherever. Any plans on something like that?

Post: #42

A general update...

I've continued to use private money to scale up with lease option flips while also buying long term rentals on the side. Just put single family #7 under contract yesterday, due to close 30-April. I'm not sure if I'll flip this one on a lease option flip or keep it for a long term rental.

I completely underestimated the strength of private money when I started this thread nearly a year ago. But I'm finding more and more, private money leads to more individual private money investors, and existing private money will pull together additional monies to reinvest. It's been great. I've yet to deal with a bank (although I've been in talks with several)...way less headaches.

My goal is to get gross rents up over the $5k mark by end of May this year and above 7k by close of business 2015. I've been fortunate to continue my career lifestyle, recently accepting a promotion and new assignment in Southeast Asia. So from 2700 miles away to 9300+ miles away from my properties - should be interesting.

I flew in for a few days last month and met with my team. All is well, folks are in good spirits and the rents continue to come in with little issue. It's funny how I started this business buying all the beers and steaks but these days, more beers & steaks are on the other parties tabs. My value has grown considerably, folks see me as someone who can make offers, close, renovate and rent and that's pretty fucking cool. I attribute less of this to any sort of career/lifestyle/persona I lead and more associated with A) clear communication - especially with the tough news B) doing what I say, saying what I do

That said, I'm pretty careful and continue to keep two separate project managers on the hook, two separate property managers on the hook (with a third in reserve), etc...I'm prepared for someone to fuck off and deal with it accordingly with little interruption.

Re: @Menace and his post...I know by the end of this year, if I have to (rather if I wanted to do so), I can take time off work and truly live, chase womenz, work on personal development, etc. For the rest of my life. I have that equity in place and income coming in. That's pretty fucking cool. However, like many of us on this forum, it's the chase that really makes us feel alive and I'll continue to scale up while working 80+ hours a week because...it's what makes me happy right now. Settling isn't in our DNA, at least not that this point...and not for the foreseeable future.

Knock on wood, thus far, there has been little bad aside from some minor maintenance issues, taxes rising and good deals becoming harder to find.

Cheers, all. Home #7 is shown below - as I understand it, this was a flip gone wrong...the seller is getting out with minimal losses but certainly isn't making any money. I will though. $31k (cash) purchase, $500 budget for miner touch-ups, will resale for $53k on a lease option flip ($650/mo lease payment) or straight rental for $700/mo.

It's on a great little street a couple of blocks down from an existing rental of mine.