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in Real Estate Investing, Series: Here is the Deal - The Breakdown · August 5, 2020

Here is the Deal #2 – Purchasing Little Mermaid

Our second investment property is an interesting one. We found this house through a wholesaler and because it was located in North Miami Beach, the city where I grew up and worked as a property manager for a couple of years, I was sold.

This seemed like a perfect deal. This house is a 1B/1B house which is pretty rare in Miami. It was spacious and needed very little work. 

I had never bought from a wholesaler before, so I was nervous. We had 24 hours to decide whether we wanted or not and put $10,000 in escrow with their title company. The money would become non-refundable immediately, so if we were to back out of the contract, bye-bye money.

As scary as it was, we took the risk. We didn’t even get a chance to get an inspector or appraiser before locking it down. I have to tell you, we got lucky! The house seemed a little too good to be true.

The plan was to hold off from buying additional properties until the duplexes were refinanced. However, once you are in that investor high, you can easily get excited about every deal that seems amazing. This is where it is important to be careful about not jumping into the next deal without finishing your first. 

Financing The Purchase of The Property

This deal was a “cash” deal. Now, mind you. We didn’t have that kind of cash just sitting in our bank accounts. We barely had $2,000 in savings.  We barely made this one. 

  • $20,000 business line of credit from Moonstone Realty Group LLC (10.48% APR)
  • $50,000 personal loan from SOFI (15.24% APR)
  • $5,000 Cash advance from WF credit card. ($150 Fee)
  • $85,000 Purchase Price

We were able to cover closing costs with rent payments that came thru and immediately paid off the cash advance with money we got from move-in fees from the duplexes. 

Before we signed the deal, we made sure we were able to qualify for the loans in addition to a detailed analysis to make sure that the interest fees were not going to eat up our margins. 

If done right, we would still profit. 

Rehabbing the Property

We spent $9,500 in rehab costs all in with materials. 

The main issue with the house was unleveled flooring and the HVAC system. The rest was cosmetic. Some of the work performed:  Replaster and Paint exterior, demo, level the floor, new tile, and baseboards, texture the interior walls and paint, repair ceiling, replace broken doors, change lights, replace A/C unit, water disposal.

We were in and out within 2 weeks. We had the housed appraised and it appraised at $110,000 which resulted in about $16,000 of built-in equity. 

Refinancing the Property

We had a mortgage broker that told us about a loan program called the Fannie Mae Delayed Financing Program. This program allowed an investor to add value to the property and immediately refinance the property without a waiting period. Most programs require you to wait at least 6 months to a year before being able to get money out. 

We bought this property in March 2020 which is when the outburst of the COVID situation become apparent.  At the same time, we were trying to purchase our home in Georgia. We were using the same lender (PRMG) for both transactions. This was a big mistake. Everything seemed great, but the moment we introduced the purchase of our home, our refinance suddenly sat on a desk and did not move.

We weren’t even able to close on our home with that lender and had to move both files to other lenders. We ended up using Fairway Independence Mortgage and refinanced all three properties (including the duplexes) at the same time. 

Given the inconvenience of having to switch lenders, we ended up paying more interest in the personal loans than anticipated, but thankfully we had enough room in the deal to still profit from long-term cash flow and equity pay down. We were able to secure a tenant in April so we had cash coming in to help pay the debt service. 

The refinanced loan paid the following: 

  • $50,000 SOFI Loan
  • $10,000 Personal Line of Credit 
  • $13, 456 Business Line of Credit
  • $73,456 Total debt pay-down. 

In total, we ended up leaving $20,000 of our money in the deal once set and done. The property cash flows about $250/month which is a home run in our books. That’s 12.5% cash on cash return.

Lessons learned

The big takeaway from this transaction was to consider insurance costs upfront and ALWAYS look for alternatives.

There was a point where I was ready to sell this house and take the loss. When I initially quoted the insurance, I was quoted $5,000 by a couple of insurance brokers. The flood insurance alone was $2,500. That was $416 per month! That would take all of the profit and put us at a loss!  We freaked out and we were ready to put this house for sale and take the “L”, but then I decided to look further. I googled and googled into I came across an alternative option for Flood Insurance. In my search, I came across nationalfloodinsurance.org and got coverage under the National Catastrophe Insurance Program (NCIP)for flood (alternative to FEMA) and RealProtect for general liability. Total insurance cost ended up being $2400 which is $1700 for general and $700 for flood insurance. 

Overall, I love this property. It’s super cute and people love it. The only downside is that is in an area that floods a lot. Hence, the name “The Little Mermaid”.

This post may contain affiliate links. I may get commissions for purchases made through links in this blog.

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New Blog Post 🚨 In this week’s blog post I am New Blog Post 🚨 In this week’s blog post I am going over why we bought a short-term rental, our experience so far. Plus what we did prior, during and after purchasing our first short-term rental in March 2022, a Cabin in Blue Ridge, GA.

Check it out at www.beyondjustnumbers.com or link in bio @beyondjustnumbers
I can’t stress this enough. Some investors are l I can’t stress this enough. Some investors are looking to make money from day one, but that’s not always the case. It wasn’t for us and I’ve talked to a lot of rookie investors who have told me “Thank God I have my personal finance situation together.” 

This is just my opinion. Do you agree? Let me know in the comments!

Want to join a free community of like-minded individuals? Join our REI Coffee Chat Community where we talk real estate investing, personal finance and financial freedom, and much more! Link in bio @beyondjustnumbers

Want to learn more about investing in real estate? Read my blog www.beyondjustnumbers.com

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I used to think that investing in real estate was I used to think that investing in real estate was for the rich. I became in love with real estate while working for a real estate investment company that owned hundreds of units. This was back in 2011 and I was 20 years old at the time. I had less than 5 years permanently living the US, so I had no idea about anything. I grew up in Colombia and the only talk of money we ever had was the lack of it. 

The investors I worked for were a wealthy family, so naturally, I thought… Real Estate requires wealth. I don’t have wealth. Therefore, I cannot invest. 

I figured… well shit, I need become wealthy so I can invest in real estate. Eventually, after educating myself I realized how wrong I had it. You can build wealth BY INVESTING in real estate.

Took me a couple of years to figure it all out. Hence, why I didn’t start investing until 2019. I wish I had figured out earlier, but it is what it is. In just 3 years of investing in real estate, I was able to accumulate more wealth than I ever thought possible. 

Just to give you an idea…Did you know you could invest in real estate with as little at 3.5% of the purchase price? For a $150,000, that’s only $5,750. Buy a duplex that needs a little bit of work, fix it up, rent one side and live in the other. This will reduce your monthly expenses significantly, save the money and do it all over again.*

Of course it’s not that simple, but it’s also not that difficult. There are some particular steps and considerations which is  why I recommend doing further reading on the subject. 

Book Recommendation:
✅“The House Hacking Strategy” by Craig Curelop and ✅“Investing in Real Estate with No (and Low) Money Down” by Brandon Turner. 

#realestate #realestateinvesting
🚨 New Blog Post! Continuing the “Getting Star 🚨 New Blog Post! Continuing the “Getting Started in Real Estate Series” 

You’ve found a property either on your own or through a realtor, you’ve run your numbers, you’ve got a lender and now you are ready to make an offer. What’s next?

In this post I want to discuss a few items:

✅Key components of a real estate contract
✅How do you make a compelling offer to ensure you get the property you want
✅The main contract contingencies and how they work
✅Communicating with your realtor

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Check it out at www.beyondjustnumbers.com

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#mindset #realestate #firemovement #realestateinvesting #realestateinvestor #rentalpropertyinvestor #rentalproperty #cashflow #motivation #financialfreedom #financialindependence #financialindependenceretireearly
We see a lot of advice around hiring a real estate We see a lot of advice around hiring a real estate friendly CPA. However, when you look up  CPAs that specialize in real estate, they can be pricey.  However, that doesn’t mean that other CPAs or tax professionals aren’t good. They might not be particularly aware of certain items, but they can research and collaborate with theirs peers. Perhaps it may require you to do a little of work to compensate. Things you can do:
✅ listen to The Real Estate CPA podcast or join the Facebook group
✅follow social media accounts of the pricey Real Estate CPA and take notes of what they are saying
✅attend free educational events 
✅read BiggerPocket book on Real Estate taxes 
✅if you know anyone working with a really good Real Estate CPA firm, ask them what they are doing

Then use that to go your CPA or tax professional and be like “Hey, is this something we can do for me?” They’ll probably say, “Let me look into it”. 

If they are good, they are going to research it and/or ask their CPA peer group. (CPAs and tax preparers also have Facebook groups where they collaborate with each other).

Here is a piece of advice, if they tell you “No, we can’t use this loophole or no, you don’t qualify to use this strategy” —> Ask WHY and “How can I qualify in the future?.” This way you confirm they did their homework and aren’t just being lazy. Don’t just take no for an answer. You can then get a second opinion by asking a question in a forum or to your peers.

So don’t panic if you don’t have a real estate CPA or tax professional. 

Next video I’ll be answering the question… “Can I skip the tax professional altogether and do my own taxes?”

#realestate
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