Getting That First Deal...

After my first deal fell through on Roofstock, I began to reach out to individual wholesalers to learn about more opportunities. I researched quite a few without success when, seemingly out of no where (actually through a targeted ad), I was put in touch with the group I am now currently working with.

This group provides more of the "turn key" approach that I was looking for.  I am interested in turn key because it:

1. Allows me to invest out of state
2. Saves me the most time, which is currently valued at a much higher rate at my software engineering job than any real estate deal would get me (for now...)
3. Allows me to leverage other's experience while still being able to participate in a large chunk of the upside

The approach is simple. 

• Buy undervalued/distressed properties in a very focused area that will cash flow after refi.
• Pay all cash up front to avoid any hard money loans (at least for now in order to greatly reduce risk)
• Renovate or fix up those properties with 2-4 months
• Rent out the unit(s) at a market rate
• Conventionally finance at the after repair value, shooting for an ARV that is 20%+ the original investment so that I can pull out all initial investment at that point.
• Take original investment and repeat

I was in contract for a property with this group, but it ended up falling through again because the wholesaler went behind our back and sold it to a higher bidder after we had entered escrow. This was definitely shady on the wholesaler's part, but all things happen for a reason. In losing that deal, another opportunity for an even more profitable deal opened up, and this is the deal I am currently looking at. 

This property requires more investment, but I like it for several reasons:

• It has much higher appreciation upside. We're getting in earlier on the gentrifying neighborhood, so the medium term upside is significant outside of the forced appreciation we'll be adding through the renovation.
• It is a duplex, so I have higher cash flow and more doors, reducing risk slightly.
• The repairs will be much less substantial, so I'll be able to purchase, renovate, and finance within 6-10 weeks, meaning I'll be quicker to the next deal.

In order to raise the money for this purchase, I ended up taking out 2 small personal loans with excellent terms on them. I ended up raising $70k at around 6.35% APR with no money or collateral needed. I was also able to procure these funds within 2 days, thus significantly expanding my purchasing power while also avoiding any sort of high interest hard money loans. Also, because the rates are so low and for fairly long terms, I'll most likely be able to roll these funds into multiple deals before paying them off. First payments have been sent, so we should be closing on this deal in the next few days. The numbers for this deal are as follows:

Acquisition, Construction & Income Overview
Purchase Price					$90,000.00
	Estimated ARV			$135,000.
Estimated Closing Costs					$4,445.00
	Builder's Risk			$750.00
	Transfer Taxes			$1,845.00
	Title Insurance			$1,350.00
	Misc. Fees			$500.00
Construction Costs					$25,000.00
Total Investment Cost					$119,445.
Income Details		Monthly	Annually		$19,000.00
	Rent	$1,600.00	$19,200.
	Other Income	$50.00	$600.00
	Vacancy	$66.67	$800.00
Target Annual Gross Income					$19,000.00

Income, Expenses & Cash Flow
Expected Annual Gross Income				$19,000.00
Operating Expenses				$12,985.17
	Licenses & Inspections		$50.00
	HOA Fees		$0.00
	Utility Expenses		$50.00
	Property Insurance		$750.00
	Property Taxes		$1,285.00
	Leasing		$800.00
	Management		$1,330.00
	Repairs/Maintenance		$950.00
	Refi P&I		$7,770.17
Net Operating Income				$6,014.83
Net Operating Income Per Month				$501.24
Total Investment (less interest)				$119,445.00
Total Initial Cash Investment Required				$121,540.22
Refi Cash Profit				$13,459.78
Refi Down Payment				$27,000.00
Cash Remaining In Investment				$13,540.22
Months to Recover All Investment After Refi				27.01
Years to Recover All Investment After Refi				2.25
Annual Cash-on-Cash Return				44.42%