My First BRRRR – Lessons Learned

A couple of weeks ago I posted “My First BRRRR: By The Numbers”, which focused on breaking down all the numbers associated with the purchase, rehab, financing, and more for my first BRRRR in Oklahoma City. Now I want to share with you the lessons I learned from the process. 

Photo by Pixabay on Pexels.com

Once you read the article send me a message on Instagram @honorandequity or email me at doug@honorandequity.com and share your thoughts!

Lesson #1: It will take longer than you think.

I estimated 6 weeks for the rehab, and it took nearly 7 months! We closed on the duplex on December 10th, 2020, only two weeks before Christmas. After closing, the focus was on the rehab. I knew from the thorough inspection we had done that the property needed mostly cosmetic updates, such as replacing the exterior fascia and trim, new kitchen tile, a new wood porch and railings, and new gutters. It also needed some minor foundation work. In my optimistic, BRRRR-beginner state, I thought it was possible to get everything done by the end of January. However, because of the holidays, we didn’t even get started on getting bids until the beginning of January. 

Lesson #2: Don’t expect much to get done during the holidays.

The winter holidays caused the rehab to get off to a slow start. In hindsight, I should have anticipated this, but at the time I didn’t think the impact would be so significant. Lesson learned: don’t expect much to get done for the last two weeks of the year! I should have added roughly 2 weeks to my rehab time estimate to account for this, and I will do so in the future. 

Photo by Blue Bird on Pexels.com

Lesson #3: Get bids for everything early.

One mistake I made was not getting a bid for windows earlier in the rehab process. Windows were one of the last things we got bids for and once we decided on a company, they told us it would be roughly 8 weeks until the windows would be delivered. 8 weeks. That’s more than I thought the entire rehab would take! This was partly due to COVID’s notorious impact on the worldwide logistics chain, which I did not even consider at the beginning of the rehab. If I had known this, I would have done the window bid first and gotten them ordered much earlier. 

Lesson #4: Your private lender is priority #1. 

I wasn’t overly confident that anyone would be willing to give me $120,000 to do my first BRRRR. Sure, I had done a copious amount of research on the subject, including reading books and consulting with experts in this area, but this was my first attempt at completing one myself. Someone did though (my sister-in-law), and I knew that whether the BRRRR was a success or not, I would get her that money back plus interest. That was more important to me than anything else. I didn’t want to be known as the person who doesn’t follow through. Leveraging other people’s money is an important part of real estate investing, and I knew I needed to establish a solid reputation from the very beginning. 

Photo by Karolina Grabowska on Pexels.com

Lesson #5: Don’t be too hard on yourself. 

I set pretty ambitious goals for myself on this first BRRRR: 20k rehab (it went 5k over), 3 month rehab time (it took more than twice that long), 156k appraisal (it appraised for 161k! Yay!). As the rehab went over budget and over time, I was pretty hard on myself. I had to remind myself that this is the first time I’m doing this, with a brand new team, in a new location, so it’s totally understandable that I didn’t flawlessly execute my goals. Ultimately, the deal was a success, provided a valuable learning experience, and it wasn’t as difficult as I thought it would be. 

One mistake I did make was not recognizing that the mortgage refinance was not a fixed rate for the duration of the mortgage. It was fixed for 3, then variable. My mortgage broker told me this early on, and for some reason, I thought it was fixed for 20 years. When I was reading the documents at closing, I was caught off guard by this but after searching my old emails and I found that I had just overlooked that fact. 

Whenever you’re trying something new, give yourself some grace. 

I firmly believe that if you aren’t making mistakes along the journey of life, you aren’t setting your goals high enough and you’re not taking enough risks. When you look back on your life, do you think you’ll regret NOT trying big things? We’re capable of so much more than we think, so set your goals big, give it your best effort, and keep learning and improving!

What lessons have you learned on your real estate journey? Comment below! If you’d like to connect with me, you can send me an email at doug@honorandequity.com or send me a message on Instagram @honorandequity 

My First BRRRR – By the Numbers

Signing the closing documents for the cash-out refinance at First American Title in Edmond, OK.

On August 11th, 2020, I had a conversation with Michael Barnhart of Adventurous REI that inspired me to use the BRRRR strategy (Buy, Rehab, Rent, Refinance, Repeat) to purchase an investment property. I decided on a market, put together a team, and started looking for properties. Four months later, on December 10th, 2020, I closed on a duplex in Oklahoma City that already had tenants and needed mostly cosmetic renovations.

Nearly 7 months after that closing, on June 1st, 2021, I signed the closing documents for the cash-out refinance which was the final step in my first BRRRR. 

I learned a lot from this experience which I will discuss more in-depth in my next article, but first I want to share the numbers! Was it a home run, a base hit, or a strike-out? I’ll let you decide! Send me a message on Instagram @honorandequity or doug@honorandequity and let me know your thoughts!

The Purchase

Purchase Price………….$100,000

Closing Costs……………$2203.02

Agent Commission….$0

I used private money at a 10% interest rate to fund the purchase price. My agent brought me the deal, and she was paid her commission by the seller. The closing costs included title fees, title insurance, the home inspection, the notary’s fee, and other minor administrative costs. I had to pay a notary to bring me the closing documents because I was on a work trip in North Carolina at the time of closing. 

The Rehab

I estimated the rehab cost to be $20,000 and my private lender agreed to lend this amount in addition to the $100,000 purchase price. The rehab went over budget by $5,115.80, and I contributed the capital to cover the additional costs.

 

Foundation

5 Steel Piers Installed……………………………………….$2,875.00

Exterior

New Gutter System…………………………………………..$1,439.67

New Porch including railings…………………………..$3,500.00

New Fascia and Trim…………………………………………$4,000.00

Paint entire exterior incl

new fascia and trim………………………………..$2,000.00

Remove overgrown vegetation……………………….$125.00

Plumbing

Faucet repairs……………………………………………………..$75.00

Water line repairs……………………………………………….$75.00

Kitchen

New tile in both kitchens installed…………………..$2,500.00

Windows/Doors

New windows for both sides, installed……………$5,676.13

New trim, caulk, and paint around

new windows……………………………………………$2,250.00

New storm door…………………………………………………..$300.00

Replace back door threshold on both sides…..$300.00

Estimated Time to Rehab………………………………….3 months

Actual Time to Rehab………………………………………..6.75 months

Total Rehab Cost…………………………………………………$25,115.80

You can see the new fascia, trim, and paint on the exterior of the home. The overgrown vegetation you see here will be resolved this week as one of the final tasks needed to put the home on regular home insurance.

Renting the Property

Thankfully, the property was already rented to solid tenants at closing, so there was rental income from day 1. The current tenants have leases through November of 2021 and January of 2022. They wisely renewed their leases once they heard the property was selling so they could lock in their current rate for another year! My property manager says that because of the work that has been done on the property, we will be able to raise rents $100-200 per side once the current leases are up. 

Current Total Monthly Rental income……………………$1,465

Estimated rental income once current 

leases are up……………………………………………………..$1,765

Total Rental Income from the first close to refi

(December 2020 – June 2021)………………………..$8,266

The Refinance

I worked with a mortgage broker to help me find a bank that would do an 80% LTV (loan to value) cash-out refinance with no seasoning period. This is a key component of the BRRRR strategy, because I wanted to pull as much capital out as possible and not have to wait 6 months for the loan to ‘season’. 

Property Appraisal……………..$161,000

Closing Costs………………………$1,994.44

Loan Term…………………………….20 years

Loan Interest Rate……………….4.75% (Fixed for 3 years, then variable)

Loan Principal………………………$128,942.44

Origination Fees………………….$2,848.00

Appraisal Fee……………………….$600.00

Monthly P&I…………………………$838.15

Total Capital Invested…………$8,365.80

You may have noticed there are a lot of fees and costs associated with these transactions. Real estate has high transaction costs relative to other goods and services. I paid a total of $7,645.46 in closing costs and origination fees for the initial purchase in December and the refinance the following June. This is important to keep in mind when analyzing potential deals. 

Private Money Lending

I used private money (a loan from an individual to another individual or entity) to fund the purchase price and rehab. I like this funding strategy because I’m able to provide value to the lender via interest income, and the lender makes a solid return on a low-risk deal. The loan is collateralized by the property itself, meaning that if I did not pay her back she would be able to take ownership of the property. 

Lending Costs

Principal………………….$120,000.00

Interest rate……………10%

Lending Period……….6 months 23 days

Total Interest Paid….$6,750.00

So was this deal a home run, base hit, or strike out? Send me a message on Instagram @honorandequity or an email to doug@honorandequity.com and let me know!

How I Built My Oklahoma City Deal Funnel

“You make your money when you buy,” says every savvy real estate investor. Buying the right property at the right price is such a crucial part of the investing process, and it can also be the most challenging, especially in a hot seller’s market like we have in America right now. So how do investors find deals? What’s the trick? Like many other areas in life, there is no easy button or magic sauce. It requires confidence, patience, and, most of all: persistence.

In the Oklahoma City market, I’m trying to acquire deals in multiple ways, and I’m always trying to improve my “deal funnel” via networking and technology. It’s incredibly challenging to find these deals when you don’t live in the market you invest in, but I promise it is possible.

Real Estate Agents

Utilizing an agent is the easiest and most common way for people to find properties. I found my first Oklahoma City property via my real estate agent. An owner approached her, saying he wanted $100,000 for his duplex. The agent recognized that the property fit my criteria and she sent it to me. It was a win all around: my agent made a commission on the deal, the seller got his asking price in cash, and I got a cash-flowing duplex with appreciation potential in an up-and-coming neighborhood. All of this was accomplished without the property ever going on the market!  

However, many agents don’t seek out off-market deals because most of their clients aren’t investors.

What is an Off-Market Deal?

An off-market property is a property for sale that is not listed on the MLS (multiple listing service). Why would someone sell their home directly to a wholesaler or investor rather than listing it through a real estate agent? Many of these homes have been neglected or abandoned for years and wouldn’t qualify for a conventional mortgage. So if they tried to sell the house on the MLS, many people wouldn’t be interested because their bank will not finance a home in below-average condition. The owners of these properties may be people that can’t afford to update the houses, or maybe the home was owned by a parent that recently passed away, and the surviving family members don’t want to deal with the home. Major life events are frequently the catalyst for someone needing to sell a house quickly.

People also sell to wholesalers and investors because they are likely to get cash for the property. When you purchase a property in cash, it usually means the closing process will be much shorter because you don’t have a bank getting involved with a lengthy due diligence period, inspections, and appraisals. Investors usually have lines of credit or private lenders providing the funds to pay cash for these properties. 

Sometimes people need to sell homes for cash quickly!

Wholesalers

Wholesalers are the true hustlers of the real estate world. When you see “We Pay Cash For Your House” signs around a neighborhood, they were probably put up by a wholesaler. When you get text messages and phone calls and postcards from people wanting to buy your house, they’re probably coming from a wholesaler or one of his/her employees. Wholesalers find off-market properties owned by “motivated sellers,” put the property under an assignable contract, and sell the deal to real estate investors. 

I’m on email lists for many different wholesalers in the OKC area. It’s a great way to find off-market properties that need some improvement, but you have to be very careful. Many wholesalers will overestimate what a property is worth once it’s improved and underestimate the amount of work it needs. As a result, wholesalers have a bad reputation in many markets. This deception is why it’s essential to have a good relationship with wholesalers and only work with the honest ones who will give truthful assessments of the property’s condition. I do not rely on the wholesaler’s estimate of a property’s worth once repaired. Instead, I have practiced analyzing properties on my own to get an accurate estimate of the property’s value. My real estate agent helps me with this value estimation, and she also tells me how much rent I can expect to receive each month.

I’ve had success generating leads using REIReply.

Organic Deal Funnel

When I first started looking for properties in Oklahoma City, I quickly realized the properties for sale on the MLS were priced much too high for my strategy. I needed off-market properties owned by motivated sellers, which led me first to wholesalers (since real estate agents don’t typically have much access to off-market deals). Eventually, I realized that I needed to create my own deal funnel. After researching and having conversations with successful wholesalers, I hired a virtual assistant in the Philippines to cold-call property owners and ask if they wanted to sell any of their properties. This process was expensive and didn’t yield many leads at all. 

After some more research, I learned that SMS (text message) marketing was becoming a very effective way to reach more motivated sellers. Many people do not answer calls from numbers they don’t know, but people are much more likely to read a short text message even from an unknown number. 

One of my wholesaler contacts told me about a marketing software platform called REIReply. This software allows you to reach out to potential sellers using SMS, ringless voicemail, cold-calling email, Facebook messenger, and more for a flat monthly rate of $49 (which is way less than I was spending before!). Since signing up for REIReply two months ago, I have gotten one property under contract and have acquired many quality leads! I will continue to use REIReply as my primary source of lead generation. Send me an email at doug@honorandequity.com if you have questions about REIReply.

Goals 

Ultimately, I want deals to be brought to me by people in my network. Brandon Turner (of Bigger Pockets fame) is an excellent example of this concept. He started Open Door Capital, which purchases mobile home parks via syndication deals. Brandon has a massive Instagram following and uses that audience to bring in leads for mobile home parks. I’ve talked to real estate investors who have reached high-levels of success, and when I ask how they find deals, many reply, “People bring deals to me.” 

I will achieve this by continuing to grow my real estate network and provide as much value as I can. If someone in my network hears someone else talk about real estate in OKC, I want them to think about me and connect me with those people. So if you know of anyone who owns property in Oklahoma City they may wish to sell, please let me know! 

I hope you enjoyed this article. Please follow @honorandequity on Instagram and reach out to me via email at doug@honorandequity.com. I love connecting with new people and chatting about real estate!

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

Honor and Equity 2020 Year in Review

What a year! I started 2020 in Iraq – halfway through a 6-month deployment. Neighboring Iran attacked our base with ballistic missiles, which was a significant moment in U.S./Middle East relations. The COVID pandemic soon overshadowed the attack. Thankfully the pandemic didn’t delay our return from deployment in late March, but we came back to a very different America. 

I was excited about not having to go to work for the first month or so after returning. This freedom meant more time to read, relax, and spend time with my soon-to-be-wife, Caitlin. I enjoy reading, but I was voraciously consuming books, sometimes reading over 100 pages per day with all that downtime. We had planned to be married on May 9th in Miami (we live in San Diego), but like many people in 2020, we had to adjust our life plans. We were married here in San Diego, with only a few family members in attendance. It wasn’t the wedding we expected, but it was pretty fantastic, to be honest. Getting married to Caitlin was, without a doubt, the happiest and most significant moment of the year for me. 

Joining A Mastermind Group

The second most significant moment was when I decided to join a real estate mastermind group for military members and veterans. A friend and mentor named Stuart Grazier (of Storehouse 3:10 Ventures) co-founded the War Room mastermind with David Pere (From Military to Millionaire). I was inspired to join a mastermind group after reading “Tribe of Millionaires,” an allegorical book produced by the founders of Gobundance outlining the benefits of joining a mastermind. (Check out my article about mastermind groups here). Being surrounded by motivated individuals with goals that align with yours is critical for personal growth. I started virtually meeting active duty service members who own multiple properties – and not just single-family homes; I’m talking apartment complexes, RV parks, and mobile home parks. I thought, “Wow, I need to up my game!” So I did

I distinctly remember a post that Stuart Grazier made in our War Room Facebook group in which he challenged everyone to create a ‘thought leadership platform.’ This platform could be a blog, a YouTube channel, a Twitter account – basically any medium through which you can talk about your journey and experiences in real estate. I knew this was something I had to do, so I took action and created Honor and Equity, a personal finance and real estate blog for military members, veterans, and their families. I didn’t know how to design a logo, start a website, create content, or dance in TikTok videos, but I figured it out (minus the TikTok vids!) with the help of family, friends, and fellow War Room members. I’ve always enjoyed talking with anyone who will listen about personal finance, investing, and real estate. The platform would help me share what I have learned with others and document my journey. 

Investing in Oklahoma City

Photo credit Gerson Repreza via unsplash.com

I try to connect with a different War Room member every week because each person has a unique military and investing background. I enjoy hearing about what everyone is working on and what they have done in the past. One of these conversations inspired me in a significant way. Michael Barnhart is an active duty Navy officer like myself currently stationed in England. He told me about how he and his wife were aggressively pursuing real estate in the Midwest utilizing the BRRRR strategy (Buy, Rehab, Rent, Refinance, Repeat – a must-read book by David Greene, by the way). This conversation was my lightbulb moment: if this guy is doing the BRRRR method from England, why am I not doing something similar from San Diego? Almost immediately, I started researching markets and eventually decided on Oklahoma City (check out my article about why I decided on OKC). I re-read Long-Distance Real Estate Investing by David Greene and read his BRRRR book while carefully putting together a team of real estate professionals in OKC to help me achieve my goals. 

Progress has been slow, but I write down my goals every day to stay focused and stay in the right mindset. We finally closed on the first property – a duplex – on December 11th, and everything is going smoothly so far. The home is already rented and needs mostly exterior cosmetic work. We are going to do all the rehab work with the tenants in place and the work should be complete in January/February after which we will do a cash-out refinance. My goal is to acquire two OKC properties per quarter, so if you know of anyone involved in real estate in Oklahoma City, send me a message! I post updates occasionally via the @honorandequity Instagram page, so make sure you’re following to get the most up to date information.

Beyond OKC, we also own a single-family home (SFH) in Pensacola, and we just closed on our third SFH in Milwaukee, Wisconsin. We closed on this home in Milwaukee and the duplex in OKC within about 4 days of each other, which doubled the total number of doors we own (3 doors to 6 doors)! Back in April of this year, we invested in a mobile home park (MHP) syndication in Cañon City, Colorado (check out the article here). My favorite part about that MHP investment is I know about half of the other investors (who are also on active duty). The team who put the deal together is led by a husband and wife team (both Army veterans). You may have noticed a theme with my network: I like to work with fellow military folks! I think that someone with 10+ years of service in the military tends also to be someone you can trust that communicates well and has grit and integrity – the same type of person with which you want to invest.

The Milwaukee turnkey properties we own are performing better than expected (thanks Storehouse 3:10 Ventures!), and I hired a new property management company back in May, which was a fantastic decision. The Pensacola property is the star-performer, though: of the properties we own, it has the highest cash-on-cash return and has appreciated the most since it was purchased in 2016. 

Honor and Equity in 2021

Photo credit Immo Wegmann via unsplash.com

H&E has grown a lot since its inception in the summer of 2020, and we will experience substantial growth in 2021. This growth is driven by a desire to help fellow military members and veterans in their personal finance and investing journey. One of my favorite parts about doing this is connecting with people, so if you want to connect or know someone who might want to, please reach out!

Priorities

  • Grow Honor and Equity via the creation of content designed to inspire and educate others within the scope of personal finance, real estate, and investing. 
  • Grow our portfolio in OKC via flips and BRRRR’s. Partner with others to scale and expand with the long-term goal of providing investment opportunities to other military members and veterans.

Thanks for reading this article! Please send me a message on Instagram @honorandequity or send me an email 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!