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American Home Preservation (AHP) looking to close on their biggest pool of 799 homes

American Home Preservation (AHP) is a sponsor of the Simple Passive Cashflow Podcast. But more importantly, I personally invest money in the fund. It literally pays my car lease!

Watch 40-minute webinar here:

Highlights of the investment

  • You are helping people stay in their homes as AHP buys the loans from the banks and attempts to structure a more manageable payment schedule for the existing homeowner
  • AHP pays 12% a year. You get 1% every month like clockwork
  • I use it as an “Opportunity Fund” holding tank because of the liquidity
  • The interface is sleek… check it out

You can start with $100 bucks and then you can incrementally increase your investment however you want.

InvestinAHP.com

 

Rental #5: Birmingham

This is the first property in a series (1 out of 9) of acquisitions that resulted from a couple 1031 exchanges.  If this is your first time reading this post I suggest you read these few prefaces first.

  1. The inspiration to go for cashflow vs appreciation
  2. The introduction to the 1031-O-Rama: 2 -1031s, 9 properties, in 5 months to convert my Seattle portfolio to cashflowing (low appreciation) boring rentals
  3. Why ladies and gentlemen I went out of state AHH SO SCARY! Sight Unseen SO WILD I KNOW!

This property was put into service in October of 2015 (I know a little behind but I’ll catch up in the next few months). I  acquired the property from a marketer that makes connections with the rehabbers in certain markets and finds buyers such as myself who are typically located in low rent to value ratio locations (this does not necessarily mean high-priced locations) such as California, New York, Hawaii, Seattle, Portland, and basically the coastal areas where all the cool kids what to actually live. Marketers have their place if the buyer is totally clueless but once you purchase a few of these properties the marketer really does not offer much value. The only thing I see that they would offer would be someone to be the bad guy role in a negotiation but many of the marketers are buddy-buddy with the rehabber because of their business relationship and won’t stick their neck out for you. As the buyer, you need to take ownership of the due-diligence process and negotiations because that marketer is not a licensed agent and does not have a fiduciary responsibility to you.

Why Birmingham?

Check out my previous post for a bit more context. My goal was straight cashflow so Memphis and Birmingham were at the top of my list as opposed to Atlanta/Texas which seemed to trade off some cashflow buffer for appreciation potential. I was comfortable going with a seemingly grungier city because I was going for cashflow (rent/value).  A wise mentor of mine told me once “the security of your investment in a market correction is how much cashflow/buffer there is from between your rent minus expenses… when bad times come, how much can you lower the rent to ride out the bad times.” I think most people get wrapped around in analysis paralysis over the plethora of data such as crime stats, employment trends, population trends, etc.  Those indicators tell part of the story but for me the reason I moved forward was just talking to a couple of people who were (not referral based salesmen) investors with disinterested agendas that said “dude, just buy it (from the right people), it just works”. If you have ever heard the saying “stand on the shoulders of giants” that’s what I did – if it worked for these other investors then I’m just going to start where they left off – after all every month I delayed action I lost a potential $200-300 of cashflow.  In the end, maybe it’s just because of my personality, I chose Birmingham because I heard so many podcast ads for Memphis and saw all the investors going there.

Due diligence:

I apologize, it has been so long that it’s hard to remember (again I will get better at this, scouts honor), but I can’t really remember much because there were really no huge exceptions in the due-diligence process.  I did a 3rd party inspector that I got off a referral from other investors. Remember do not take a referral from anyone on the sellers side as that is a huge red flag for their integrity due to the conflict of interest. A big difference in my growth as an investor is running these processes together with the lender’s parallel process and being able to effectively negotiate additional renovations or contract terms. Looking back I probably over paid a few thousand at least more than I would have today with my experience because you just can’t read about this stuff. Also it’s worth noting that you always should connect with a few property management companies and interview them early in this period. In addition, use them to validate your rental numbers and property location.

Closing:

I paid cash for the property initially because it was the sellers terms. I would never it do it again this way since I basically waived my right to a property appraisal. The next step was to refinance the property with a convention Fannie Mae mortgage to pull out most of my initial investment. We had a lot of trouble getting the property to appraise for the value due to the technical processes of the appraisers. Finally, after the third try I finally got an appraisal number that I was able to live with, but the damage had been done and I had to have all my cash tied up in the deal for 2-3 months. Lesson learned was to always have a financing/appraisal contingency to ensure that the property that you buy appraises and that what you pay is what it is worth. This is another example of a standing on the shoulder of giants, when you are financing from day 1 the bank owns 75-80% of the home via the mortgage and they are doing their due diligence too via the title work and appraisal.  Therefore use the banks process as your friend. I got a lot of help from my lender in this transaction as they were the ones behind the scenes working the appraisal issue. This the difference between going with any big bank lender and a lender that works exclusively with investors. Again the golden rule is to always go by referral by another investor.

After the smoke cleared I was out of pocket $27K and had a $50k mortgage. The interest rate was a little under 5% but that does not matter. Sophisticated investors do not look at interest rate and the amount of debt instead they focus on cashflow and effect on net worth because after all who cares if your interest rate is 8% if the deal is returning 20-40%.

Operations:

After all the closing issues got taken care of everything else went pretty smooth and the property got filled by a nice family. Here are the numbers:

5 Rooms/3 Bed/1Bath, 1 story, 1008 SF

Built: 1967

The Story: A nice suburban home in the Center Point area. The property was picked up as a distressed seller and rehabbed

$875 Rent per month

– 10% Property management

–  In the first 18 months I have less than 400 dollars of repairs total

– $395 Mortgage/Interest/Insurance/Taxes (PITI)

I typically get $300-400 per month after expenses. Please note: Make sure you are saving 30-50% at least in reserves for cap ex, expenses, repairs, vacancy. I have had good luck these first 18 months however the law of averages will catch up.

Knock on wood – it really does not get any better than this property because in the first 18 months of ownership I have experienced no vacancy and only $300 of repairs. 🙂 So yea things are pretty boring on this one.

Link to the lively the BiggerPockets Peanut Gallery

2015 Metrics: 22.4% Total Return = 18+2.7+1.7

  1. Cash on Cash %: 18% = 5000 (cashflow) / 27000 (out of pocket)
  2. Mortgage Paydown %: 2.7% = 750 (principal paydown) / 27000 (out of pocket)
  3. Tax Breaks %: 1.7% = 500(25% x depreciation write-off) / 27000 (out of pocket)
  4. Appreciation = ??? I don’t really care but this can potentially be a lot
  5. Inflation = ??? I don’t really care but with all the bailouts and artificially low-interest rate this can be plenty

SPC GIT ‘ER DONE PLAN:

  1. Just do it. Every month of not placing your money into something you lose a potential $200-300 per month. Homes aren’t getting any cheaper and every day you risk a stock market crash.
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Podcast #49 – Fundamentals – Why not to buy cheap $50K properties

Check out the ultimate turnkey guide here.

Why don’t buy Turnkey under 50k.
1) not worth financing… If your not financing then what’s the point
2) bad tenant quality
3) no exit strategy because no one will want to buy it other than a sucker investor

I am transitioning to MFH syndications and selling my 10 B Class properties in Birmingham/Atlanta/Indy (rents $900+/month). They are going to go up on Roofstock.com for investors to purchase at 1.2M asking. The highs are sorta mediums and the lows are lows 🙁

 

PS: There is no such thing as turnkey. Check out these disaster photos… https://photos.app.goo.gl/R4PZLuOLGHONO5Rl2

And always but with inspection and appraisal.

Let me know if you would like a referral to any good turnkey providers

Also try Roofstock … Where I sold my turnkey properties

 

 

Podcast #48 – Interview – Kenny Wolfe – Got $50K? Move over SFHs!

Kenny Wolfe is an apartment syndicator today but it was not always like that
At 33 years old he left his CFO position and went full-time REI
2016 might have been the peak (100 deals, 10 look ok, and one offer)
5.25% interest rate at early 2017, 1.25 DSCR is a hard underwriting figure
At 24 years old bought and failed at a tanning salon
MFH Property Management is much more responsible
Treating investing like a business with an office and professional documents
If you need a VA I am a partner of a VA firm that offers super qualified staff for a variety of tasks. Get creative and send me an email if interested in a free 10-hour trial.
www.Wolfe-re.com

 

Podcast #47 – Fundamentals – City Fines, Special Webinar Announcement, Dealflow

I am opening the kimono and getting naked… I am hosting a free webinar showing my 2017 results from my 10 SFH personal portfolio.

WHEN: 6PM, Monday April 3, 2017

It is only available to those who have signed up for the HUI Deal Pipeline Club. Click here to sign up!

Complete Private Form to get on the Guest List:
https://docs.google.com/forms/d/1gulyiaz7_gb8koqGl91bGPz-mdwlBVz-PcvXDOXOL5Y

You will learn the following:
-See how I use excel to track each property performance per the Schedule E
-See how I track overhead ie meals and other fun purchases like my beloved Apple AirPods
-What metrics I keep track of
-How much money I made last year
-What was my average returns
-How many of the properties actually lost money
-This may never be seen again! – I do not know if I will release/record this to the public for obvious reasons so this may be the only chance for you to see this.

Please reply back to me to unsubscribe and I will not email you again.

Check out the first few foundational podcasts and then start on this checklist:
https://docs.google.com/document/d/1HE9pEJU9s8IZWvQJ-rNOH8qPxCtr9100i9GFiaeVaYQ
And if you need help starting a SFH portfolio or Turnkey Rentals…
https://docs.google.com/document/d/1AuiPk8ABaA3vu1VzbUsfRiFQLEt-LXtUfI6GcwxgnsE

Commentary of the market from my crystal ball:
The Fed and Executive branch are in conflict. Both want control and want to wrestle control away from the other and make the other look bad.

Look out for instability in China as it might be the trigger for economic weakness.

Podcast #44 – #LaneHack – Automate your meeting scheduling

Assistant.to handles scheduling one-on-one meetings directly from your Gmail and Google Calendar. Select the days and times you’re available and then share those slots with your contacts. The app continuously monitors your schedule to eliminate double bookings and time zone mistakes. Invitees can select their desired meeting time simply by clicking in the email, and the event will sync with their calendars on Outlook, Google, Lotus Notes and more. No need for recipients to open a website or create an account. Integrates with GoToMeeting, Cisco WebEx and more. Comes as an extension for Chrome users. Free.* 

Calendly integrates with Google, Outlook, iCloud and Office 365 to create a personalized email or embedded URL where contacts can select and schedule appointments based on your customizable availability and time limits. Helps eliminate double bookings and time zone issues. Free for a basic package. Premium plans start at $8 per month per user.* 

Rallly helps you collaborate with others by creating a simple event URL page to share with friends, clients or coworkers. Attendees can discuss the agenda as well as vote on the best time for a meeting. Works great for bigger groups, masterminds, book clubs or even social gatherings. Free.* 

YouCanBook.Me connects to your Google, Microsoft or iCloud calendar and shares your pre-selected meeting times and durations with your customers and contacts via website, Facebook or email. Customizable branding, confirmations, reminders, and follow-ups for you and your customers help reduce no-shows. Free for basic plan. $10 per month per calendar without branding.

Make scheduling headaches a thing of the past with one of these amazing apps. 
#LaneHack #JustTheTip

Looking for a passive fund that invests in distressed notes?

SimplePassiveCashflow is proudly sponsored by www.investinahp.com

Once you have gone through the majority of podcasts feel free to sign up for a chat! And be let into the Secret Hui Facebook Page.

https://calendly.com/simplepassivecashflow/20