Oklahoma City Duplex – Progress Update

After months of searching for homes that fit my criteria, I finally closed on my first property in Oklahoma City on December 10, 2020. I plan to BRRRR (Buy, Rehab, Rent, Refinance, Repeat) this property, which is currently in the rehab phase as of February 2021. Below, I’ve provided an update on the property itself, rehab progress (spoiler alert: this one is slow-going), and what I have learned so far.  

The Property and How I Found It

The property is a 1300 square foot, 2 bedroom 2 bathroom duplex located in the growing Northwest side of Oklahoma City. My agent, Abbie Davis, actually presented this property to me while it was off-market.  Abbie and her husband own a property management company called The Property Center in OKC, and one of their clients reached out to Abbie saying he wanted to sell this property for $100,000. His property was already rented for $695 per side per month with solid tenants. Thankfully, Abbie reached out to me after recognizing that this property would be a great fit for my OKC strategy. 

Here are the numbers as we estimated them before putting the property under contract:

Purchase Price: $100,000

After Repair Value (conservative estimate): $156,000

Repairs (mostly cosmetic): $20,000

Time required to make repairs: 3 months

Total Monthly Rent: $1450 total (both sides plus pet fees). Once repairs are complete, property would rent for $1650-1850 total

As mentioned, the property was already rented out and cash-flowing, and since the repairs were mostly cosmetic and on the exterior of the property, we felt confident that we could keep the tenants in place while making the repairs. 

After we put the property under contract at the seller’s asking price, we proceeded with a  thorough inspection. The inspector confirmed that the repair costs would be very close to our original estimate of $20,000. I’ve always heard that rehabs regularly go over budget and take longer to complete than you think, so I made a mental note estimating the rehab would be closer to $25,000 and would take 3 months. 

The Northwest side of OKC is very hot right now! The heart marks the duplex

How I Funded the Deal 

I had finally found the property – now, I needed to come up with $100,000 cash to buy it. Thankfully, I had already been telling friends and family about what I was doing in Oklahoma City and sharing my journey via Instagram (@honorandequity), so I had a few different people already expressing interest in lending money to the LLC. My sister-in-law reached out and said she would 100% be on board lending the money. I contacted a real estate attorney in Oklahoma City to help draw up the contract and promissory note to make it all legitimate. She wired the money directly to the title company in time for closing and that was it! Honor and Equity’s first OKC property was in the books. 

My sister-in-law also agreed to fund the rehab (which we estimated at $20,000-$25,000) and we worked that verbiage into the contract. I felt pretty confident the rehab would go over $20,000, and I decided I would just fund any additional repairs out of my own pocket. 

The Molasses Rehab

If you want to get started on a rehab immediately after closing on a property, don’t buy it right before the Christmas holidays in the middle of a worldwide pandemic! The rehab, already moving like molasses, was slowed down even more by the coldest weather Oklahoma City has seen in over 100 years!

Before I get into the rehab specifics, I want to say that I’ve been working with some fantastic people at The Property Center. This is the property management company I use, and they have been kind enough to let me work directly with their folks who handle the maintenance coordination for the properties they manage. Paul and Sally at TPC have been the project managers on this rehab, including scheduling estimates, coordinating dates and times of the estimates with the tenants, and providing me progress updates, pictures, and confirmation that the work has been completed. As an out-of-state investor, I would not be able to do this strategy without great people like this to help me out! 

In order to figure out the must-do items of the rehab, I reached out to my local insurance agent Shane Jones at State Farm in Oklahoma City. He looked over the inspection report and told me which items I would have to fix in order for State Farm to insure the property. I passed this info along to Paul and Sally at TPC. I then chatted with Paul, Abbie Davis, and Eli Davis to determine what cosmetic repairs to make. We sent that info out to a few different companies to provide estimates and decided on a handyman company they had worked with before.

Here’s a list of most of the repairs:

-New porch decking and handrails

-Exterior Fascia and Trim

-New Windows

-Paint exterior of home, including new fascia, window trim, and porch

-New kitchen tile

-Remove overgrown vegetation

-Install new front door on one unit

-Faucet repairs in bathroom

-New Gutter system

New Fascia and Trim were installed on the exterior of the property

A single company has done a majority of the work, whereas the windows will be completed by a window specialist, and the gutter system will be completed by a separate company as well. 

When we got the first estimate for the window repair, the company told us it would be a 6-week delay at a MINIMUM to get the windows delivered. This was due to the COVID pandemic affecting worldwide supply chains, especially for home improvement items. I’m guessing this is because lots of people have been improving their homes over the last year, and many of these supplies come from China. 

To make matters even worse, in February Oklahoma City saw some extremely cold weather. Because of this, they couldn’t work on the paint and they couldn’t install the gutters until the weather got back above freezing. The city saw below-freezing temps for about 2 total weeks! 

Now that temperatures are back to normal in OKC, we’re making more progress. The biggest delay now is the windows, which still haven’t arrived. Once the windows are installed, the handyman company will update the trim and paint around the windows and most of the work will be complete by that time. We will do a final walkthrough to address minor issues, and then we’ll be on to the appraisal and refinance portion of the BRRRR process.

The new porch being installed!

Lessons Learned So Far

  1. You must have fantastic people on your team! I already knew this one, but the process so far has just reinforced it. If I did not have Paul and Sally at TPC to help project manage this, I would be in a real bind. Also, Abbie and Eli have been extremely helpful with advice on what work to do and what not to do, based on the condition of the home and the neighborhood. 
  1. The rehab will take longer than you think! Thankfully, I had always heard this on BiggerPockets episodes so I knew to expect it – and it is definitely true. The holidays, combined with COVID, compounded by super cold weather have caused the project to take at least twice as long as it would have otherwise. Typically, these longer rehab times would really annoy an investor like myself since I’m paying high-interest rates, but the money is going to my sister-in-law! So the longer the rehab goes, the more money she makes and at least we’re keeping it in the family!
  1. Take Action! Investing from out of state can be stressful. I’m not able to personally see these properties before putting in offers. I’m not able to evaluate all of these contractors in person, and I’m not able to personally inspect the work. This would paralyze many people into inaction. You have to trust your team and accept that you will make mistakes along the way. It’s much better to take action, make a mistake, learn from it, and move on than to be completely paralyzed and do nothing. Successful people take massive action!

I hope you enjoyed this article. Please share your thoughts and questions in the comments below, and make sure you follow @honorandequity on Instagram! Feel free to email me directly at doug@honorandequity.com

My Favorite Books of 2020

Reading is one of my all-time favorite activities. In 2020 I read a total of 44 books, and I thought I would share my favorite non-fiction books from last year, in no particular order. I’d love to hear your thoughts on these books and your recommendations for new books I should read. Please send me a message on Instagram (@honorandequity) or send me an email at doug@honorandequity.com!

Shoe Dog by Phil Knight

Phil Knight, Nike’s founder, goes back to Nike’s beginnings in Oregon before Nike was the world’s leading fitness apparel company. Autobiographies are one of my favorite book genres. Especially about successful entrepreneurs, and this one delivers. It’s comforting to hear about how difficult his journey was and how many obstacles he overcame to find success. The book focuses on his upbringing, ups and downs as a collegiate athlete, and Nike’s early years. I would love for Mr. Knight to write a second installment covering Nike from the 1990s to the present day. This book is a must-read for any entrepreneur. 

Atomic Habits by James Clear

I’ve read many books in the ‘personal development’ genre, and I’ve found that most of them are just two or three concepts spread out over 300 pages. Atomic Habits is not one of those books. James Clear provides some excellent insight into how habits work and he provides actionable steps you can implement immediately to get more done and improve your life. If you have big goals for 2021, start with this one so you can implement some healthy habits right off the bat. 

Total Recall by Arnold Schwarzenegger

Did you know that Arnold was a millionaire from real estate investing before he became a famous actor? Did you know that he was a tank operator for the Austrian Army before moving to America? I didn’t either! Total Recall is one of the best autobiographies I’ve ever read, mostly because Arnold has lived an extraordinary life thanks to his super-human ambition and persistence. This book is a case study in setting enormous, crazy goals and working extremely hard to achieve them.

Wealth Can’t Wait by David Osborn

David Osborn is a badass. He’s made a gazillion dollars from real estate, and he’s a co-founder of Gobundance – an organization of dudes who “grab life big” and are obsessed with improving all aspects of their lives. David does a great job of stressing the importance of getting your personal finances squared away, putting your money in places that will make you more money, and focusing on passive investments so you can live your life. He spoke to our mastermind group via Zoom earlier this year. When he dialed into the call, he was playing golf in Steamboat Springs, Colorado, with his wife, just dropping insightful pearls of wisdom on life and business while teeing off and driving around in a golf cart. It was inspiring! He wasn’t sitting at his desk grinding out 80 hour work weeks – his life is set up to make a ton of money passively so he could do whatever the hell he wanted. Wealth Can’t Wait is a must-read book for anyone who doesn’t want to be an employee their entire life. 

Open by Andre Agassi

I’m not a big tennis guy at all, but when I researched “best autobiographies,” this one was on nearly every list – and for a good reason! Andre Agassi is an extremely accomplished professional tennis player who retired only a few years ago. Open is the story of how a regular kid from middle-class Las Vegas became one of the world’s best players. It goes into great detail about growing up on the junior tennis tournament circuit and all the struggles of being a professional athlete. If you’re a tennis fan, you’ll especially love it, because he describes many of his tennis matches in great detail, how he prepared for them, his emotions during the game, and how he dealt with both success and failure afterward.

Buy, Rehab, Rent, Refinance, Repeat by David Greene

I have recommended David Greene’s first book Long-Distance Real Estate Investing, more often than any other real estate book, and his second book blew me away even more than the first. Multiple times during the book, I thought to myself, “why isn’t everyone doing this strategy?!” If you have spent any time in the Bigger Pockets universe, you will probably be familiar with this real estate strategy. If you’re not familiar with it, and you have any interest at all in real estate, you must pick up this book today. It’s a phenomenal strategy for long-term wealth generation that I am currently using to grow my portfolio. Here’s the gist: buy a property that needs some work for well below market value, fix it up, rent it out, do a cash-out refinance to a long-term mortgage, repeat!

The Millionaire Real Estate Investor by Gary Keller

“Anyone can do it. Not everyone will.” If I could only recommend a single real estate book, it would be this one. Gary Keller (founder of Keller Williams Realty) has had enormous success in real estate, so he has a lot of wisdom to impart to the reader. In this book, he hits many important macro concepts and addresses many different strategies people have used to become wealthy. He also talks about how crucial it is to have a great team, build systems, continually strive to improve yourself, always do the right thing and many other vital concepts for wealth creation via real estate. One of my favorite takeaways from this book is from the section on building your network. He recommends asking two questions when you chat with real estate professionals: “Who do you know that I should know?” and “What would you do if you were me?” I try to ask these questions whenever I’m chatting with someone who knows more than I do about real estate – which is almost all the time!

I hope you enjoyed this article. Make sure you follow me on Instagram @honorandequity, and if you would like to connect, you can email me at doug@honorandequity.com!

Oklahoma City: Progress Update

Photo credit: Justin Prine from unsplash.com

Nearly three months ago I decided to start investing in Oklahoma City (OKC). I’ve learned a lot and made a lot of progress since the L.L.C. was established in OKC on August 24th, 2020, so I decided to write an article and update everyone. 

The Criteria

I decided to focus on the northwest side of OKC because that area has the right balance of good schools, affordable property, appreciation potential, and cash flow. It’s also a large enough area to offer a good supply of homes. Within the northwest OKC sub-region, I rely on my team’s local knowledge to ensure a potential property is in a C or better location. 

My focus is on single-family homes and duplexes, with 2 or 3 bedrooms, 1 or more bathrooms, and some value-add potential. I’m not looking for a full rehab on my first few properties, but I want a property that needs some cosmetic work at least. Ideally, the properties would qualify for conventional financing which should weed out most regular home-buyers. The goal is to find properties to BRRRR (Buy, Rehab, Rent, Refinance, Repeat), but I’m also considering flips as well to help fund the business. I’ve learned marketing can get pretty costly so a flip here and there will help pay for those expenses! 

I’m looking for properties that will cost no more than $150,000 including the purchase price and rehab. Most cosmetic rehabs for the homes that meet my criteria will run $15,000-$25,000 (roughly $20 per square foot). 

The Team

Photo Credit: Matteo Vistocco via unsplash.com

“Bring people along with you. No matter how smart your strategy, success, or failure usually comes down to one thing: the team.” Those wise words by Indra Noori, former Chairman and CEO of PepsiCo, capture the importance of having a great team around you no matter what you’re trying to achieve. Real estate is no exception, so I spent weeks researching, interviewing, and vetting key members of my real estate team. 

The Bigger Pockets forum was the best way to find people. One of the key finds was when a local OKC real estate investor named Alyssa suggested I contact Eli Davis at The Property Center in OKC, a property management company. I set up a call with Eli (an Army veteran) and had a great conversation discussing what his company does, the local market, and much more. He told me that they not only have an impressive property management operation, but they have great relationships with local contractors whom I could use to do the rehabs on my properties. Also, his wife Abbie is a real estate agent who could help me find deals, AND he knows a great wholesaler. I did my due diligence by following up with all of the references he provided and checking out TPC’s online reviews and website. 

Through one connection on Bigger Pockets, I was able to find a property management company, two deal finders, and a network of contractors. Amazing! I love Bigger Pockets.

On the financial side, I’ve made a few contacts with commercial (a.k.a. hard money) lenders to help fund the deals. They can provide the capital for both the purchase price and rehab very quickly, but that convenience comes with high fees. I learned that I can save thousands of dollars per deal by going with private money instead. I reached out to my network of friends and family and was pleased to find that as many as half a dozen people would be interested in lending me the necessary capital for deals! This was a big win, as it means people believe in me and the process. I also love that I’m able to provide a great return to these people and help them make money! 

A mentor of mine recommended I reach out to a title company in OKC to make sure I have the private lending documentation squared away before I do the first deal. Each state has different paperwork requirements for private lending. I reached out to my OKC network and found a title company that said they would draft the necessary paperwork whenever I do the first deal with private money. This is another huge plus to having a great network! The last thing I want is trying to figure out the right documents to use in a hurry with someone who is trusting me with a large sum of money! 

The final key member of my team is one that may surprise you. I used Upwork.com to hire a virtual assistant in the Philippines to handle most of the marketing. I pull lists of properties from Propstream (software that pulls MLS data on properties) and she cold calls the owners asking if they want to sell. I’m currently working on a plan to send text messages to these owners as well since most people don’t answer calls from numbers they don’t know. 

The Tools

I have started using 4 key software tools since starting this process:

Upwork – Upwork.com is a freelancing platform that connects enterprises and individuals in order to conduct business. I used Upwork to find Lexi, my virtual assistant who specializes in real estate cold calling. I also used Upwork to find the social media management team that creates some of Honor and Equity’s social media content on Facebook and Instagram. 

smrtPhone – smrtPhone.io is a dialing and text messaging software that allows you to call and text people within your web browser. I created an account and gave access to Lexi. She spends about 20 hours per week calling and texting people who own homes in OKC that fit my criteria. My favorite part about smrtPhone is that it syncs well with Podio, another critical tool I use every day.

Podio – Podio is a web-based platform for organizing team communication, business processes, data, and content in project management workspaces. Podio has been invaluable for staying organized. Lexi has access to Honor and Equity’s Podio workspace, and she is able to do her cold-calling and text messaging directly from Podio because it syncs with smrtPhone. For example, I upload potential sellers into Podio, including their name, mailing address, phone number, property address, etc., and Lexi can go straight to that contact in Podio and call them from Podio with one click. It’s pretty awesome.

Propstream – Propstream is Zillow on steroids. It’s a real estate data aggregator that provides up-to-date information on mortgages, tax liens, property ownership, plus everything else you can find on Zillow or Trulia like square footage, the number of bedrooms and bathrooms for a given property, recent sale information for an area, and lots more. 

What’s Next?

As of the publishing of this article, I have submitted 5 total offers on properties in OKC, and one was finally accepted just a few days ago. I will send the earnest money this week and begin the due diligence process. Follow @honorandequity on Instagram to see the progress! Supply is overall very low in OKC due to a super hot seller’s market, but I’m continuing to analyze properties, fine-tune my systems, and improve my deal funnel. I believe there will be more properties up for sale soon as the forbearance period ends and the COVID pandemic becomes more under control. I think 2021 will be a fantastic year for real estate in OKC, and Honor and Equity is poised to capitalize on these opportunities!

Thanks for reading! Make sure you follow @honorandequity on Instagram and send me a message there or send me an email at doug@honorandequity.com if you want to connect!

Why I Decided to Invest in Oklahoma City

Downtown Oklahoma City
(photo credit Gerson Repreza via unsplash.com)

About a month ago, I was having a conversation with a guy in my mastermind group. He lives in England and was in the process of doing his first BRRRR (Buy, Rehab, Rent, Refinance, Repeat) in Iowa. Up until this point, my real estate goal had been to purchase 1-2 single family homes per year via turnkey properties. When I learned this guy was living in England and had put together a team to invest in Iowa, I thought: why am I not doing this? The lightbulb moment. This is the beauty of a mastermind group – you are inspired to do more than you thought you could because others around you are crushing it. You don’t want to be left behind! 

After the conversation, my mind was whirring with the thought of

putting together my own team and buying distressed properties, rehabbing them, renting them out, and refinancing to get my capital back. Why was I not doing this already? Am I an idiot for not doing this already? No, but needless to say I was motivated. 

Where would I invest? I own properties in Milwaukee, WI and Pensacola, FL and I like those markets, but I also like the concept of geographic diversification. I would need to find a market with solid cash flow, room for appreciation, while also landlord-friendly. What other factors would I consider? I bought my first in Pensacola because I was stationed there, and I lucked out because it ended up being a great market. I bought in Milwaukee (and will buy a third property there this year) because thats where Storehouse 3:10 Ventures operates their fantastic turnkey model. But where to invest next? I turned to the most reliable source for real estate information: BiggerPockets.com

Learning About Real Estate Markets

I started reading member blogs and forum posts about choosing a market, and I went back and listened to older podcast episodes that discussed markets. The best source for this info ended up being the articles within BP Insights: the area of BiggerPockets reserved for Pro and Plus members. (Oh yeah, I also purchased a Pro membership because I wanted access to as much top level real estate info I could get my hands on!)

These articles discussed things I had not yet considered such as population growth, rent to income ratios, and rental growth. I knew I wanted to avoid the coasts, as price points tend to be higher there. I wanted a large, diverse city not reliant on any single industry. After significant research into markets all over the country and conversations with more experienced investors in my mastermind, I decided on the market: Oklahoma City, Oklahoma

Why Oklahoma City?

Growth and Progress in Oklahoma City
(photo courtesy Gerson Repreza via unsplash.com)

OKC has been aggressively investing in itself since the early 1990s. Before then, the city was struggling because it was so reliant on the oil and gas industry. In 1993, the city approved what would be the first iteration of the MAPS (Metropolitan Area Projects), a visionary new capital improvement initiative designed to create and improve sports and recreation facilities, schools, cultural centers, and much more.1 The initiative was so successful, more MAPS were proposed and approved over the last three decades, resulting in the fourth iteration of MAPS which was approved last year. 

These programs have brought businesses, people, and JOBS to the area. If you’re looking for a healthy real estate market to invest in, these are the metrics you want to see. OKC has created an increasingly desirable city for businesses and people to migrate to. 

Oklahoma City Is Not Reliant on a Single Industry

Everyone knows the Detroit story: it was completely dependent on the automobile industry, and when those companies struggled, Detroit struggled too. The oil and gas industry has always had a big presence in Oklahoma City, but it is no longer the only show in town. Thanks to a friendly business environment, OKC continues to attract businesses from various industries. The Aviation and Aerospace industry makes up the largest sector in both employment and economic impact.2 The other major private sector economic contributors include Bioscience, Energy, Healthcare, and Manufacturing. 

The local economy is further buoyed by federal employers including the Federal Avation Administration, and two local Military bases. These make up roughly 20% of the local jobs.3 

Without businesses and jobs, you can’t have tenants. OKC has a diversified economy supported by a welcoming and friendly business environment, which has directly contributed to an influx of jobs and people seeking an affordable place to call home.

Homes are Affordable in Oklahoma City

The state of Oklahoma has the nation’s 4th lowest median home value. Oklahoma City’s median home value is $158,3374 which is significantly lower than the national average of $295,300. This means you can purchase investment properties for much cheaper than other markets around the country. Also, many properties in B and C class neighborhoods in Oklahoma City meet the 1% rule, which means the property’s monthly rent is 1% or more of the purchase price (for example, a home that sells for $100,000 and rents for $1000 per month meets the 1% rule). 

Oklahoma City National Memorial (credit Jack Finnegan via unsplash.com)

OKC has a Healthy Rent-to-Income (RTI) Ratio

RTI is a lesser known but useful metric for a market’s overall health.5 To determine a market’s RTI, you simply divide the city’s median rent by the median income. Housing experts recommend individuals spend no more than 30% of their income on rent, and you’ll see many property managers using a number around 30% when evaluating if a prospective tenant can afford to rent a particular property. 

For example, New York City has an extremely high cost of living, and boasts a 68% RTI. That means many people are spending around 68% of their income on rent! Oklahoma City, on the other hand, has a much healthier RTI of 21%. It’s an extremely affordable place to live which is a big reason why so many people are migrating there from higher cost of living parts of the country. 

Oklahoma City is Landlord-Friendly

Landlord-Tenant law in Oklahoma CIty favors landlords. If a tenant fails to pay rent, or is involved in illegal activity on the property, the landlord must provide a 5-day notice to pay or vacate. Once that period is over, the landlord can file an eviction which is usually a 7-day process (under normal, non-COVID circumstances). 

This is a factor many investors don’t consider before buying property in states like California. You are much more likely to have “professional” tenants in tenant-friendly states who know they can live for free in a property for 6 months or more before the courts catch up to them.

Many people turn their noses up when places like Oklahoma and other “flyover states” are mentioned, but states in the South and Midwest can be fantastic locations to invest your money!

Do you think Oklahoma City is a good place to invest? Send me a message at doug@honorandequity.com to discuss more, and make sure you follow @honorandequity on Instagram!