A few months ago, I posted an article in which I outlined my goals for 2012 (HERE). Since we are a little more than halfway through this year, I figured it would be a good time to share how things are progressing.
This has been a bit of a challenge for me. The main reason for this is that my access to conventional loans has all but dried up. Unfortunately, over the past 12 months, I’ve taken on 5 new loans, had my credit run about 14 times and refinanced two of my rentals (more on this later), all of which has taken a major beating on my credit score.Goal #1: Purchase four investment properties
As a result, I’ve had to get creative with financing. By creative I mean I’ve taken on private investors, used HELOCs and as mentioned, refinanced two properties to keep acquiring new properties.
Over the past several months, a few of you have emailed me asking how I am utilizing these three strategies in my current acquisitions. I’ve highlighted them below:
Private Capital: I recently wrote an article about how I’ve been actively marketing my rental business to generate interest from outside investors (HERE).
The goal in using private money is to continue acquiring property while recycling our capital. I do this by purchasing a house below market value using a combination of my cash and my investor’s cash, with the exit strategy of refinancing once I can qualify for better financing.
Here is how the numbers looked for our recent deal:
- First Property of 2012: Purchase Price: $65K, Rehab cost: $7K
Market Value (after repairs): $90K
Mortgage (private note): $375 for 5 years with an option to extend to another 5 years (no prepayment penalty)
Monthly rent: $1125
**Goal: Refinancing in 12 months at 70% LTV. This means that our new mortgage would be for an amount of $63K. This would pay off my investor, get most of my capital back out of the deal and still provide a nice monthly cash flow. Again, this might not exactly work out as planned, but either way I’ll get 80% of my capital back out of the deal and I can reinvest it back into purchasing more rentals.
- Second Property of 2012: I’ve found a local bank in my market that is very eager to lend on properties that qualify. Since they don’t charge any points or processing fees (except the appraisal), I decided to use a HELOC as a way to temporarily finance my next few deals.
Here is what my current deal (as of this month) looks like:
Market Value: $67K
Mortgage (HELOC payment): $288
**Goal: Refinancing into a conventional loan at 70%. This will still leave $12-15K of my capital in the deal, but I am ok with this as I project my monthly cash flow will still exceed 30-40% cash on cash return. Another option is to just slowly pay down the HELOC over time.
- Third Property of 2012: I don’t have a property under contract yet. However, I have a few bids out on short sales and REOs. I expect this will likely close September or November. I will most likely utilize another HELOC or private capital, if I can line up another investor in time.
- Fourth Property of 2012:I plan on purchasing a mobile home and reselling it with owner financing. I’ve never done a deal like this before, so I’ve enlisted the help of John Fedro (If you haven’t seen John’s recent posts, check them out HERE and HERE). I’m going to document the whole process for our readers, so it should be chalk full of solid content.Now, back to the rest of my GOALS…
Goal #2: Speak four times as a guest speaker (anywhere)
So far this year, I’ve had the good fortune of speaking at 2 real estate clubs and I got to introduce BP founder Joshua Dorkin at the BiggerPockets conference. I was recently asked to do a guest presentation at another club in Southern California, so I should be on
track to hit this goal.
Goal #3: Become a leading voice in real estate investing in the PF blogging sphere
I have a confession to make: I’ve fallen short on this goal. Although I have been able to do several guest posts on a few reputable personal finance blogs like MoneyUnder30 (HERE and HERE) and the Financial Uproar (HERE), I don’t think this goal is in line with the direction I wanted to take this blog. I want to use this blog as a way to educate other aspiring investors, to connect with other investors and to build credibility to anyone looking to invest their private capital.
Considering the time and effort it takes to make connections within the blog world, I figured my time was best spent writing for a blog I really believed in and one that will further a few of the goals I mentioned above. As a result, I’ve taken a monthly column writing articles for the BiggerPockets blog (you can read my previous articles HERE).
Goal #4: Help the Buy and Hold Guys’ viewership meet their goals
This is an area I can improve on. The last few months have been so busy juggling my day job, networking for the rental business and trying to be a good husband that I haven’t been as proactive reaching out to this blog’s viewership (which is now up to 4,700 visits a month – thanks!). Stick around and you’ll see a few changes in the coming months.
Goal #5: Raise capital from private investors
I’ve had three promising conversations over the past two weeks with private investors looking to get a steady return. I’m not sure these conversations will funnel into real deals, but it’s a start. In addition, I’ve connected with a local real estate investor who’s agreed to help me formulate a business/marketing plan. I’ll keep you posted.
Goal #6: Take two newbie investors under my wing.
There have been a few people who’ve connected with me on a bi-monthly basis. I’m not exactly sure what I was expecting, but I am leaving myself open to anyone who wants to connect with me. So please feel free to contact me HERE.
I hope this article wasn’t too long, but I figured it’s been a while since I wrote a post like this, so I hope it was worth the wait!
Readers – How are your goals coming along? Any updates, revisions? Also, please let me know if you have any questions or comments.