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!

My First Investment Property – Pensacola, Florida

My first home purchase – Pensacola, FL

Many people have horror stories about their first investment properties, but fortunately my first property has performed really well so far. I’ve made money from the home via Airbnb (short term rental) and renting to tenants via a 1-year lease (long term rental). I thought I would talk about how I acquired the property, how it has performed so far, and lessons I have learned.

Moving to Pensacola

I moved from Tokyo, Japan to Pensacola, Florida in September of 2015 on three-year orders to be a flight instructor. I didn’t know very much about real estate at the time, but I knew I wanted to live in a particular neighborhood called East Hill. It was (and still is) a great neighborhood, and I had a number of friends living there. There weren’t many homes for rent, so I started calling real estate agents that had homes for sale in the area asking if the owners would be willing to rent. This worked pretty well, and I found a place to rent for $1,500 per month. Over the next 8 months I listened to the Bigger Pockets podcast, learned more about real estate, and learned more about my neighborhood. I realized that I could purchase a comparable home to the home I was renting and pay much less per month!

I hired a real estate agent to help me find a home. My budget was right around $200,000 which would mean a mortgage payment of around $1100 per month – just under O-3 BAH (Base Allowance for Housing) for Pensacola. I did not use my VA home loan since the price of the home was relatively low and I had enough to put 20% down on a conventional home loan. I figured at the time that I would save my VA loan to purchase a home in the future in a more expensive area.

The Deal

We found a home that was newer, larger, and more updated than the home I was renting with a listing price of $208,000. The inspection revealed that the home would need a new roof within a few years so we got $10,000 knocked off the purchase price and closed at $198,000.

Purchase Price: $198,000

Bedrooms/Bathrooms: 3/2

Square Footage: 2,134

Interest rate: 3.625% (conventional)

Down Payment: $45,902

I put 20% down ($45,902 total with closing costs) and lived in the home for about a year and a half before I started doing Airbnb.

Short Term Rental – Airbnb

My girlfriend at the time (now wife), and I wanted to live together and we decided her condo in Pensacola was a better option than my house. The problem is, I would now have this large home going unused. Thanks to my budding real estate knowledge, I had the idea to offer up my home on Airbnb starting in the spring of 2018. This was very successful and I quickly became a “superhost”. I used a local house cleaning company to turn the home over between stays and profited roughly $1,500 per month over that summer, which more than paid for the mortgage and other expenses. I enjoyed managing the short-term stays via Airbnb, but summer was ending soon and I was moving to San Diego in the fall. I toyed with the idea of continuing to rent the home via Airbnb, but ultimately decided stop renting it on Airbnb. The summertime demand for Airbnb’s in Pensacola is strong, but I was concerned the demand would decrease at the end of summer. So I decided to find long-term tenants for the home.

Renting to Flight Students

Roughly 6-8 weeks prior to my move-out date of the house, I put up the Zillow ad to test the rental-price waters. I listed the home for rent for $1950, not thinking it would rent for that much, and I would have to drop the price until someone agreed on the price. To my surprise, I received a lot of interest in the property within a few days, and two flight students agreed to rent the property for $1950! I used Cozy.com to run a background and credit check on both tenants. Then I used a simple lease template that I got from a buddy of mine, and we signed the lease in person.

My mortgage at the time had decreased to about $1,050 due to lowered property taxes, so I would make roughly $900 a month before non-mortgage related expenses! I decided to self-manage the property so I saved a lot of money there. They ended up being great tenants and stayed for an entire year.

Those tenants had each of their girlfriends living with them, and both couples wanted their own place so they didn’t renew the lease. I reactivated the same Zillow ad with the home listed at $1950 again, but I didn’t get many responses for some reason. So I dropped the price to $1850 and got a response within 24 hours. Flight students again! They were about to head down to Pensacola to start flight school and wanted to live in East Hill. I went through the same process to ensure they had the necessary credit, and got them to digitally sign the lease since I was in San Diego at the time. These tenants should be staying through December of 2020.

For the 2019 tax year, my total profit on the Pensacola house was about $9,200 which makes for a 20% cash on cash return! Also, the value of the home (using the Zestimate on Zillow.com) has increased by 50% in 4 years to over $300,000! Needless to say, this home has been fantastic as a rental. The cash flow numbers are high, it attracts great tenants, and it has seen enormous appreciation well above the national average.

The maintenance and repair expenses have been minimal and my vacancy has been 0% since I started renting to long-term tenants.

Photo courtesy of Morning Brew via unsplash.com

What Have I Learned?

  1. I should have used my VA loan. This would have preserved more capital for future investments, and I would have gotten a lower interest rate. Hindsight is 20/20 though, and I don’t really regret using the conventional loan. I’m still hitting great metrics on this house even with the conventional.
  2. Home warranties are not worth the cost! I used a home warranty for the first couple of years, and it just wasn’t worth it. You have to pay a flat yearly rate (which was around $500 for this house) plus $75 every time someone comes out to repair something. This home is in great shape and I’ve saved money by cancelling the home warranty.
  3. Sometimes it’s better to be lucky than good! My real estate knowledge was limited when I purchased this home. However, I knew that I would be able to rent the home for at least $400 more than the mortgage, so I’m glad I pulled the trigger and bought the home. I could not have anticipated that it would rent for almost double my mortgage payment, nor could I have anticipated that the home would go up in value by 50% in only 4 years! Sometimes you just get lucky with the timing.

Hopefully this article inspires you to take action and buy your first rental property. There are so many ways to acquire your first property, and it can be done no matter your experience level, net worth, credit score, or personal background. You just need a positive attitude and a desire to get that first property no matter what! I’d love to chat more about your real estate journey. Send me an email at doug@honorandequity.com or send me a message on Instagram!

I hope you enjoyed this article about my real estate journey. Please share with a friend and follow @honorandequity on Instagram!