I was faced with a choice there after we were now at least five months into the deal.
Either walk and start over OR get a lawyer to just see if we can get something done.
I asked one of my friends here in Chattanooga who he would recommend for legal advice and assistance. He gave me the name of a great lawyer. We started legal proceedings. We're actually getting ramped up to take it to court while I had to decide if I was willing to sue them and I was! I had that much in the deal and I was that engrossed in that I was willing to sue them to get this deal done.
Another month passed and we were into June now and he calls me. I remember where we were we were in the parking lot, and he calls me and said they decided to settle they're going to close we're closing with cash tomorrow.
I couldn't believe it! It was insane!
We did not get all nine properties that we had under contract, but we did get two of them which ended up being five units total. It was supposed to be the the quad was supposed to be fully occupied and paying rent. There was one vacancy because the tenant had died previously at the hospital not in the unit.
One of the other tenants was not paying any rent, and she let me know that she was not going to be paying rent. So we learned how to evict someonr within a month of taking ownership of property. We learned how badly that property have been treated. It had needed thousands of dollars worth of Renovations and work and things when we finally did it get that tenant out the
One who is not going to pay rent? She destroyed the place tore the whole total of walls up flush newspaper down the toilet kick the doors in it needed a lot of work. The building was she did some damage to the building.
It's the unit will to the unit to the building to because she flushed newspaper down and we had to do we had to do a lot of Plumbing major Plumbing issues the single family house the other one that we bought it was bacon. It had a lot of rot and things we didn't really get it inspected. We didn't really have a chance to but we got a really good deal on it. So I there was no way I was going to pass it up. I'll send done there was way more rot and way more work that went into it than we use.
Counting forever and we still stayed in budget and we still stayed pretty close to our budget regardless, even even though all that happened what ended up happening with this whole portfolio December 6 months actually almost to the day six months after we closed on all five units. We refinance the quad it was fully leased and we got the Cash out refinance. We're able to pull a
hundred and fifty five thousand dollars out of the Quad which paid off about 6065 percent of the money back to the investors our house got finished in the last two months. It has been rented. Our new renters are loving the place. They're paying rent. We're able to rent it out for much higher than what it was rented for our refinance on that.
One is well under way we expect everyone will be paid out in full. We have a quad that is castling $2,000 though. I guess the whole portfolio is Cash flowing about $2,000 a month of both deals. Also put cash in our pocket and gave us two lines of credit with which to do other deals and we're rolling forward. We have more under contract. We're going to look at more it
All started with that very first deal. So it's definitely possible to buy property with no money takes a lot of work. And as you just heard in this video, it was not easy. It's a lot easier to have money but it's possible and I would encourage you just to jump in with both feet. Maybe even die then if you're if you're trying to get into this, this was our first deal and how we get started. Thanks for watching.
How do you buy real estate with no money and no job? Specifically, $350,000 worth of real estate with no money and no job.
We always tell this story over and over again with friends, family and at networking events. So we wanted to share with our viewers how we bought $350,000 worth of real estate with no money and no job.
So how did it happen?
Well, John heard about wholesaling back in the middle of 2018 and he thought it would be a good way to get into real estate. He worked for nine months on his first wholesale deal... getting it under contract, driving out to show it to people, and marketing it. Finally, he got it sold nine months later and made a couple thousand dollars, so not a whole lot of money. But what he did with that money is the important point to key in on. John used that money as an earnest deposit on a portfolio of properties.
We found these properties by writing letters. We wrote letters and got them under contract and went about trying to figure out how I was going to buy $785,000 worth of real estate with no money and no job.
So like any rational person would do, we started exploring all avenues. We went about finding any creative way so I could to purchase this portfolio. We started off by with my friends and family. We went through our contact list went through our contact list. We made a list of anybody that we knew and had any decent relationship with whether they have money or not. We started talking to them to see if they'd be interested in partnering and investing in the portfolio. We probably asked two dozen people if they wanted to invest in this first deal of ours and got twenty one "No's" but we got three yes's and that was all it took. All it took was 3 yes's to piece $170,000 together. We structured it as a loan. We didn't sell Equity or anything.
I didn't really include much rehab budget in there. I was just trying to get what we could get. We had $170,000, which was supposed to be the down payment for the whole $780,000 package.
We went to Banks started loan process. We found a bank that was so willing to do it for us, almost too eager it seemed, to start going about the process. While we finished raising all the money, we told them we had it all and that we were ready to close.
The loan was declined 5 days before we are supposed to close in April, but nonetheless I got up the next morning and I got on the computer. I called every single hard money lender on the Bigger Pockets website.
We talk to a bunch of people. I learned a whole lot about hard money lending. Connected with someone in Texas at a company that turned out that he was the son of the seller who is living in Florida. I thought it was serendipitous that he was going to help us get this this deal and was trying to help us close his Mom's property.
Well, it turned out that he was not as transparent as we thought. He was not submitting our loan requests. He was not communicating with us, rather he was talking to his mother convincing her out of doing the deal with us. All said and done a month later, she tried walking from the deal, even though we were trying to close with a bank when she denied the appraiser and then cash which she refused to sign.
I was faced with a choice there after we were now at least five months into this deal. Hmm either walk and start over or get a lawyer and just see if we can get something done.
We have Part 2 coming tomorrow
Check out our video of this by clicking here
What can partnerships do for you?
I'm going to talk about Partnerships real quick. So I have learned in this business that working together with other professionals is the BEST way to achieve any goal that you're going after. I definitely don't know everything, and rather than learn and master every facet of this business. I would rather share part of a deal with those who can do what I can't. I would rather leverage their skills. The net result is more deals for everyone.
As an example. I'm working on a deal right now with someone who reached out to me about investing here in Chattanooga. He really wanted to get into a deal in this market even though he doesn't live here. He also doesn't have a lot of experience investing in real estate and thought that we could partner together.
It just so happened that I had a deal in my sights that fit what he's looking for the best part about it is that I was about to pass on it because it's not exactly what I want to do. So because of this us partnering together, I believe that we are going to partner on this deal that I otherwise would have passed on and it allows him to do deal that he never would have been able to do by himself.
The net result is each of us does end up with a smaller portion of the deal, but if we both get to be part of a deal that we would never have done otherwise, I would say it's a net positive thing.
I'm not saying that all Partnerships are good thing. Of course just like anything else in this business you have to do your due diligence. You have to trust who you're going to work with. You have to bring something to the table. You can't expect to jump into a partnership and bring nothing to the table. So whether that is the funds or the knowledge or you bring a deal or you bring a professional like attorney or real estate agent, or maybe you just bring expertise. You have to bring something to the table in order for it to be a meaningful partnership.
There are a million different ways to partner and structuring it is just as simple as having a conversation with the person you are wanting to do the deal with. Maybe they bring all the money and they want 90% of the deal. Well, if all you have to bring them is a solid deal and being the boots on the ground is ten percent of the deal worth that to you. Maybe, maybe not. I don't know, but it would be a good way to get into a partnership.
Having money is definitely not a requirement when you're going to partner on a deal Partnerships can be really powerful way to get more done than you would otherwise be able to do yourself. Money is not a requirement to get started in real estate, but you do need to bring something to the table. Like I said, whatever your specialty is knowledge, boots-on-the-ground, relationships. I would definitely explore getting started with real estate by forming a partnership with someone that you know.
What is a cap rate?
I wanted to talk briefly about some important, but scary sounding concepts. If you have entered into the commercial real estate world at all, then you know all about what a cap rate is and what it means for valuation of a commercial asset.
If you have not entered into the commercial real estate world and would like to or at least want to know a little bit more about it... Cap stands for Capitalization Rate and as complex as it sounds, it's pretty simple. This means it is the un-leveraged return-on-investment. The way you find out what the cap rate is by knowing the net operating income for the the amount of money the property is making - all of the expenses except for your mortgage. So you divide the Net Operating Income by the total purchase price. For example, if you have a million dollar property that makes $100,000 after expenses, but before your interest for bank payment, that would be a 10 cap because the un-leveraged rate of return is 10% of that. However, what gets confusing is it's actually a way to Value various properties.
So a broker may come to you and say you know broker may come to you and say there's a property and it's trading for an eight cap. That means that whatever the purchase price of the may not even tell you what the purchase price is. They expect you to figure it out with a little calculation. Whatever the Net Operating Income is divided by 8 percent, that will give you the purchase price. That is a little foray into commercial real estate.
A lot of people are talking right now about how cap rates are compressed. That means that people are buying commercial real estate for a lower cap rate, which sounds like a good thing, right? The cap rate is going down, but because of that calculation, the price is going up exponentially, not just as a factor of one to one. It's a multiple. The lower the cap rate, the way higher the price is going and that's what's happening right now. There's a lot of money out in our economy right now where a lot of commercial real estate is trading hands and the price is going up dramatically. So that's what they mean when they say the Cap Rate is compressing whereas things used to trade for 9-10 caps today. Those same assets are trading for 6 to 7, or 5-6, and in some markets like San Francisco and New York things are trading as low as 3-4, which means they are very expensive and not producing a great return. This doesn't mean that real estate is not a great investment still, it's all about buying a good deal and they're still out there. Just got to find them.
Hans + Frans will pump you up!
We want to talk to you about fitness, did you work out today?
I just worked out actually. I was feeling groggy and sluggish and I
realized I hadn't worked out today. So we took a pause on our filming in
the studio and I did a quick little workout. During my workout I did
dumbbell cleans, press thrusters, kettlebell cleans and burpees. I also
did the ab wheel and medicine ball Russian twist. I basically only had ten
minutes and three pieces of equipment and graciously lent to me by James,
our marketing guy! So I just did everything I could think of.
The reason we are wanting to talk about fitness is because it's really
important that you get your workout in whether it is a 10-minute workout,
quick hardcore to get the blood flowing. Going out and going for a hike or
going canoeing or taking your dogs for a walk. Whatever it needs to be try
to make it 30 minutes and just try to get out and do something, get the
blood flowing and that's really what it's all about.
Maybe we want to perform at our highest level. I mean, we're Real Estate
Investors and you got to be pretty smart to be in the game. We want to be
top performers and that means that our minds need to be active our bodies
need to be active and we need to be using oxygen efficiently and
effectively. As well as be healthy and that includes the foods we put into
Like us, Real Estate Investors, we don't normally just sit behind the desk
all day. We are behind the desk. We may be walking our dogs, making check
lists for our current properties. We will be out driving for dollars,
walking through houses, meeting with contractors, meeting with potential
investors. Whatever it may be, our day is never the same. It’s important
for us to have our morning routine and our workouts in the morning so we
can guarantee an energized and focused day!
Crystal and I challenge you to workout out for 30 minutes everyday! Again,
whether it is walking the dogs or hiking or whatever 30 minutes of working
out means to you. Just go get it done. Be sure to share your experience
and that you got it done!
See our video by clicking here
Today I want to talk about something that's very near and dear to my heart, Real Estate Syndication. I know, that word sounds crazy and complicated but it really isn't. So, what is syndication? Well, the word syndication actually just means a pooling of resources and ideas to get a goal done. In real estate it means people pulling leadership skills and resources to purchase an investment property that is bigger than an individual may be able to do themselves.
There are a lot of people doing syndication right now. Some of the big ones you may have heard of are Grant Cardone and Joe Fairless. They're really out there right now talking about raising private money and they buy commercial assets and operate them using other people's money to provide a stable return.
Why did we, Bugay Investments Group get into syndication? It's like that adage, “the end result is greater than the sum of its parts.” This is so true with syndication, you can get more done by pooling funds and resources, ideas and knowledge together. So we got into syndication because a) we are able to provide a stable return that beats the stock market for our investors and b) to be able to achieve greater returns than we would be able to do by ourselves.
Our very first deal was a syndication. We raised private money to buy two properties and we will continue to do syndication on all of our deals from here on out. I love being able to provide huge returns to investors and I love how happy I make them with the checks they get back from us. As well as being able to grow our business quicker than doing it ourselves.
What are the different ways to structure a syndication? It encompasses a lot of different ways to do the same thing more or less. There's two big main ways of structuring it. One is by selling equity or selling ownership in the company which owns the asset. You can think of that kind of like the stock market when you buy a share of stock you actually own a fractional piece of the company.
The second way to structure it is through debt. You can think of this kind of like the bank except the private lenders are essentially the bank. They lend the money for a set rate of return and they will get their money back. No matter what happens if the syndicators failed to pay, the investors have the right to foreclose on the property and take ownership.
Now going one way or the other it can get very complicated. I'm going to preface this by saying I'm not giving any legal advice, you need to consult your SEC attorney before you proceed down this path any further. This is for educational purposes only.
Typically, selling equity in a company is for the bigger deals. It is tied to the performance of the asset more so than by raising money through debt. Debt is a very good way to get smaller deals done and once you get into the larger numbers, it can make more sense to sell equity. Equity tends to be a longer-term hold whereas debt can be short term.
Those are two different ways you can Syndicate a deal to raise the money needed to purchase real estate. As a recap a syndication is a way to leverage people's resources and knowledge to get more done. It can be great for both the operator, the operation company and the private investors as it will beat out typically any other investment there is right now, especially the stock market. That’s what syndication is in a nutshell.
John is the owner of Bugay Investments Group. He loves Real Estate Investing and wants to share his thoughts and knowledge with you!