Your Network Is Your Net Worth
This was the first deal I did with a partner which didn’t quite go according to plan but still turned out good!
A good friend of mine and fellow investor had been wanting to partner together on a deal and he had mentioned the Fayetteville market being good for rentals. Historically its just about recession proof due to the Fort Bragg military base being located there and keeping the rental market strong. I found these pair of side by side duplexes from a wholesaler and we got an offer accepted.
The process of buying it actually went relatively smooth, with the biggest discovery being my own strengths and weaknesses along with my partner’s. I learned I was way less of an analytical numbers person than he was, but I was more of the relationship builder and people person. This contract was extremely useful to use working well together, but we both still agreed on the same core thought processes of investing.
We closed on these properties in May of 2020, smack in the middle of the Covid-19 pandemic. Both were fully tenant occupied and cash flowed as is even with our short term hard money loan. Our original plan was to make minor repairs and updates to the properties, raise rents and refinance. This BRRRR strategy would allow us to recoup all of our funds that we had into it and pull out a little extra cash, however just like my Winston-Salem Duplex, Covid-19 changed that plan.
We raised rents and made updates and attempted to refinance but was only offered 70% LTV. This deal didn’t have a massive amount of room and with the new loan amount, the 5% different in LTV from the expected 75% made a big impact on our plan, as now we were going from pulling money out to leaving money in the deal. We both came to an agreement that having more cash on hand to continue to reinvest into more deals and scale our mutual and individual businesses was more important, so we decided to sell the properties and cash out.
Harping on the 1% Rule which states that a good rental property should have rents that equal 1% of the purchase price, we listed them as turnkey investment properties and after a few weeks we got a solid offer.
The Numbers:
Purchase: $126,500
Rehab: $4500
Rents: $1780/mo raised to $2,400/mo combined
Selling/Carrying Costs: $25,000
Sold: $213,000
Lessons Learned:
Pick your partnerships wisely! If you’re going to partner with someone on a rental property, you need to remember its going to be a long term relationship. Find your common ground of investing strategies and solidify it, then focus on your strengths and weaknesses so that you don’t butt heads. My partner and I have great business chemistry and are still partners and good friends today.
Prepare for obstacles when dealing with tenant occupied properties. The main thing that delayed progress was working around the tenants. Hard to argue with them when theres a global pandemic going on and everyone is cautious, but it slowed down the process of the inspection, the appraisal, the photos, the showings etc. Definitely something I forgot to account for!
Be someone people want to work with! Building relationships and connecting with people is by far my biggest strength and something I enjoy. It not only helped me develop a good partnership with a very talented investor, but also paved way for future business. I was the one in main contact with the seller of these properties and due to building great rapport with her, she promised to refer any other deals to me in the future!
