As you can imagine, flipping 31 houses at
once was a bit of a challenge.
Thank God I had been a logistics officer in the
Marine Corps for ten years and knew how to manage
logistics under pressure because that was pretty much my life
for four months to get this deal done.
Stay tuned for the whole story.
Welcome to the Mastering Real Estate podcast.
This podcast is for real estate investors
and professionals looking to take their real
estate game to the next level.
Each week, I review the industry's leading real estate
books and break down the main lessons that you
can apply to your life and business.
Then, every other week, I review my own personal
lessons learned from flipping over 100 houses and being
a full time real estate investor since 2018.
Stay tuned each week so that we can
all become masters of real estate together.
Welcome back to the Mastering Real Estate podcast.
This is episode 20.
In episode 18, I began the story of
purchasing a 42 property portfolio in Birmingham, Alabama.
However, figuring out how to buy
this monster was just the beginning.
Now I had to figure out how to fly,
flip all these houses, pay back my investors, and
hopefully keep a few houses for our own portfolio.
Signing the purchase papers at the closing felt like a big
milestone, but it was just the start of an all out
sprint for the next four months to follow through on all
my promises and really make this deal work.
Before we get into it, I'm your host, Maura McGraw.
I've been a full time real estate investor since 2018.
I've managed over 100 flips, founded and grown a
real estate investment firm, and I live and work
in the real estate industry every day.
If you follow this podcast, you know the drill.
We have two main show formats.
We do real estate book reviews, and I share
my own lessons learned from the real estate trenches.
If there's a certain book you want me to review, just
send me a message and I'll add it to the list.
As for today, let's dive into some big lessons learned
from one of my most complex real estate deals.
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YouTube channel where you can watch the
video versions of this podcast on YouTube.
You can see the before and after photos
and videos that go along with each story
and really see what I'm talking about.
Just search for the mastering real estate podcast, or
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Okay, so in episode 18, I talked about
everything required to get to the closing table
to purchase this 42 property portfolio.
Well, we signed the papers, clinked our champagne
glasses and had a nice little celebration.
Then I woke up the next morning and realized
that we had just arrived at the starting line
and we had a whole race to run before
we could declare victory over this deal.
Here's a quick review of what we
bought and what we had to do.
We purchased 43 single family houses
scattered throughout Birmingham, Alabama, and they
were mostly all tenant occupied rentals.
The average year built for all the properties was 1966.
The average square feet of all the properties was 1600.
The average mix of all the houses was
three bedrooms, one and a half bathrooms.
The year was August of 2019 and our timeline it took
us two months from signing the LOI to close, and then
it would take us an additional four months from purchasing all
these houses to flip and sell all of them.
We ended up purchasing the
entire portfolio for $2.25 million.
We had an 80% loan to cost loan from Bryant bank.
Thank you, Bryant bank.
And that made us have a down payment of $630,000.
We afforded this by doing 210
31 exchanges valued at $130,000.
And then we had to raise $500,000
from private investors to fund the deal.
That we followed to make this whole deal work was
that we quickly flipped and sold 31 out of the
43 properties to other investors for $1.6 million.
This allowed us to pay back our
investors and pay back the bank.
Then we had eleven properties left over
valued at approximately $500,000 that we could
keep, flip, or divide among ourselves.
So we set to work flip, flipping 31 houses
and coordinating the sales of all the houses.
Flipping 31 houses at once
was challenging in many ways.
As you can imagine, some of the main challenges
were, number one, finding and managing good contractors.
Basically, we had three contractor crews working around
the clock to fix all the minor issues
with these houses and prepare them for sale.
For the most part, they were fixing all
the items that came up on the home
inspections and doing relatively minor jobs like paint,
plumbing, siding, and roof repairs.
However, as some of you know, organization
is not usually a contractor's strong suit.
So keeping all these guys organized, on task,
outfitted with the necessary supplies, and properly documenting
all the repairs, was a full time job.
There was the challenge of coordinating
logistics between the tenants living in
the properties and the contractors.
These houses were almost all tenant occupied,
so we couldn't just go in and
conduct repairs whenever we wanted.
We had to coordinate all the repairs around each
tenant's schedule and carefully schedule everyone, only to have
last minute issues come up pretty much every day.
Thank God I was a logistics officer for
ten years in the Marine Corps and was
very comfortable managing logistics under pressure because that
was pretty much my entire life.
For about four months doing all these flips,
when I wasn't coordinating the logistics of managing
schedules, materials, and payments relating to flipping 31
houses, I was lining up 31 sales.
Luckily, I was able to work with RP Capital,
which is a great turnkey rental company that we
worked with a lot in the early days.
To get roughly half of the 31 houses under contract
before we even closed on the purchase of this portfolio
was crucial in proving to the bank that we could
follow through on our strategy and pay everyone back.
So once we closed, my first priority was to
get the first 15 houses that we had under
contract flipped and ready to close again.
Then I had to work with RP Capital,
along with some other buyers, to get the
remaining 16 houses under contract for sale.
Now, if you've ever bought or sold a house, you
might know that every sale involves a lot of back
and forth between the buyer and the seller, their agents,
inspectors, and the lenders on both sides of the transaction.
A few buyers bought more than one house, but
my phone was flooded with calls and emails nonstop
for four months so that I could keep everyone
informed and get to the final closing tables.
It was an adrenaline fueled four months, fueled by
a burning need to deliver on all my promises
and get everyone paid back, and, of course, prove
that Deratus was a force to be reckoned with.
It was an emotional rollercoaster.
But by the end of January 2020, we had flipped
and sold 31 houses and were left with eleven houses
to keep between the three partners, which was pretty cool.
They were valued at approximately $500,000 and
cash flowed about $5,500 per month.
I don't think that I clearly explained this
at the beginning, but the three partners were
myself, Aziz Shannara, and Danny Gonzalez.
And we actually formed a separate LLC with
a whole separate partnership agreement and operating agreement
specifically for this portfolio deal, which was a
very good idea because we didn't necessarily all
want to be partners forever.
As many of you know from past episodes,
Aziz Shinar and I own and operate deratis
properties and Derades Academy, and Danny Gonzalez operates
freedom Ventures property Management company.
In the end, once everything was paid off,
we divided the eleven houses among ourselves to
add to each of our own rental portfolios.
And I just want to say that it is
completely okay to just be partners for a specific
deal and then go in different directions.
In fact, it's probably the best way to operate until
you're absolutely certain that you want to work with someone
and be partners with them for the long term.
Anyways, at the end of this portfolio adventure, this
was just the beginning of an entirely new chapter,
because, as we discovered, once you have all these
houses, you need to be able to properly manage
them in order to safeguard your investment.
After working with the property managers, we
were not 100% satisfied, so we decided
to start our own property management company.
Thus, Freedom Ventures property Management was born.
But the full story behind starting and
running a property management company will come
in a future podcast episode.
Okay, in summary, my key takeaways from this crazy
portfolio deal are number one, you can partner on
a deal without having a long term partnership.
In fact, it's probably advisable to do this
before entering into a long term partnership.
That way you have a chance to see how you
work with someone else, make sure that you're on the
same page, and maybe once you've done a successful deal
or two, then it would be a good time to
consider entering into a long term business partnership with someone.
Number two, if you want to flip houses full time,
you need to be decent at logistics and project management.
I've never been more grateful for my experience as a
logistics officer than I was during this crazy time.
Something is always going wrong in construction, and when
you're flipping houses, and especially if you have an
insane number of flips, 31 flips going at one
time, you need to be able to calmly manage
logistics under pressure all the time.
So I was very grateful to have learned this skill set
in the Marine Corps, and I think it's a really important
skill set if you want to succeed as a flipper.
Number three up.
And there is always a solution.
As you can probably tell, the four months
that it took to flip and sell 31
houses were a crazy emotional rollercoaster.
Some days everything went wrong.
The contractor schedule would get messed up,
a house would fall out of escrow,
a major unforeseen repair would come up.
You name it, it happened. Then.
There were some days that we would get lucky breaks.
The one day that we met a
buyer who decided to buy seven properties.
Through the highs and the lows, you can never give up.
There's always a solution to every problem.
Sometimes it's just a little harder to find.
To succeed, you must endure and never give up.
And this is not just an important takeaway
from this deal, but from business in general.
I want to give a quick shout out to
our sponsor, Deratus Academy, which makes this show possible.
We have a bunch of free investor resources,
including all of our podcast show notes an
awesome masterclass about how to get started in
real estate investing the right way.
All available on our website, duratisacademy.com.
One very cool free tool that I recommend
you check out is our property analysis tool.
This is the actual deal analysis spreadsheet that we
have honed over time and my team and I
actually use this every day to analyze all the
deals that come into our business and you can
download it for free on our website, adoratusacademy.com.
So make sure you check that
out and check out our Masterclass.
Next week we're diving into Amanda Hahn
and Matthew McFarland's book on advanced tax
strategies for real estate investors.
As you may remember, we covered their first book which
reviews tax for real estate investors in episode 17, so
I thought we might as well try to get a
little more advanced when it comes to taxes next week
and dive into their second book.
Again, thank you so much for listening.
I so appreciate you.
If you like our show, make sure that you
give us a follow wherever you listen to your
podcasts and I'll see you in the next one.
Thank you so much for listening.
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