In today’s episode of Discount Property Investor Podcast, David Dodge and Mike Slane did a walkthrough to a property they just bought without using their own money. It's a 3-bedroom 1-bathroom with a little carport house. Check this episode if you’re planning to buy a rental property.
David: All right guys, welcome back to the discount property investor podcast. This is a house that Mike and I just bought, we’re standing right in front of it, and what we’re gonna do is we're going to walk through this property and we're going to talk numbers, we're going to talk how we found it, how we purchased it, what we plan to do to fix it up and how we're going to be able to add this to the portfolio of rentals that will cash flow, have equity and the coolest part, we're going to have none of our own money invested in this deal.
Mike: Hell yeah man. So this is my favorite thing about real estate investing.
David: It's awesome. This is awesome.
Mike: I like wholesaling. I like wholesaling, I love-
David: We just bought this house.
Mike: -buying properties without actually using any of my money because we're creating wealth Dave. What's cool about creating wealth guys, you don't pay taxes on it.
Mike: Those big wholesale checks, those big wholesale checks that we make, we're paying taxes and that is not my favorite thing to do is giving that money away. So let's talk about this one. This is 830 Mullanphy and it's up here in Florissant Missouri, it's a 3-bedroom 1-bath-
David: Love this house.
Mike: -with a little carport. Dave, what'd we pay for this, I think we paid like 80 thousand?
David: We paid 80 thousand for it. Here's the cool part-
Mike: Oh this was a funnel one.
David: The lead source. We're always talking about the lead source right? So the lead source was one of our lenders buddies that was a landlord and the tenants were here for 4, 5 years and they moved out and it was more than just like your 700 to a thousand dollars worth of work, it was like 3 maybe 4 thousand like nothing crazy. Is that right?
Mike: Yeah that's pretty accurate.
David: Maybe 10 actually.
Mike: But he didn't want to do the work.
David: He didn't want to do the work.
Mike: It was just too much for him so he said you know what? You want to buy it?
David: about 10, yeah. It's been a while.
Mike: And we said yeah, so he actually, the lender, was like I'll loan you the money to buy it so we didn't have to come close with any money, then the lender said you know what? I'll even loan you money to fix it up and great. And he saw a-
David: Oh, I forgot about that part.
Mike: He saw more rehab than we did so he's like what do you need? Like 20, 25? Like nah, we only need 10 or 15, how about 15? So we borrowed 95 to buy this, it's going to appraise for 120, 130, when we're done with it. We'll be able to refinance and get all the money back.
Mike: So let's check it out. Dave I know you're-
David: Let's go walk it. Yeah yeah, we got a few. So basically we're looking at a 3 bedroom house, right? Carport. Hey I saw on a show, my buddy Jamil the other day where they cut these cracks out whenever there's big cracks like this and then they just fix the crack which they just tried to patch it versus having to do new driveways.
Mike: Redoing the whole thing, yeah.
David: Holy cow, I have never thought of that. It's such a great idea.
Mike: It is a great idea.
David: And really this isn't the best concrete but when you have nicer concrete like this.
Mike: Yeah, and there's a big crack.
David: And it's cracked and it's all like shifted. Oh my God such a great tip, very cool. Alright let's check this place out.
Mike: So outside we actually literally rolled up on this one. The first day we closed on it, there was a notice to clean the trash out on the door. It said clean up the yard, clean up the trash, so Jason came up like the next day, got the guys, cleaned up outside, made the city happy with that. Walking through, you've got a little dining room/living room area, opens up into the kitchen and these cabinets were in okay shape, they're actual wood so we're trying to save them, we'll probably have them do a coat of stain on them and clean everything up and keep it pretty well in the same shape.
David: The floors of this place weren't really terrible so I would imagine we're just cleaning these up.
Mike: Yeah, just gonna clean them, maybe.
David: Anew grey?
Mike: Anew grey.
David: Paint coat, anew grey. Simple. Baseboards, we'll probably clean them up, maybe hit them with a little white paint. I think they got tape on them, do they?
Mike: And he is saying anew gray, that's the color and we just painted it gray. A new grey, that's the actual color.
David: Anew, one word.
Mike: Anew, yeah.
David: That's right. All right, let's check out the bathrooms and- bedrooms and the bathrooms. 3 bedrooms.
Mike: And holla when you're walking through, always be careful when they're working cuz you get could get paint on you.
David: Yeah true.
Mike: So just don't leave-
David: And we'll go to the .5 thing on the camera too. So we've ran wires which Chase is doing now to put ceiling fans in these bedrooms. Whenever you have lights in the bedrooms and fans that you can hit a switch versus having to go do the thing.
David: It makes it so much more convenient, it raises the value of the property, people wanna live in it. This bathroom actually looks pretty good. We painted it already. We really don't need to swap out the vanity or the toilet. Are we leaving that?
Mike: Yeah, leave it.
David: Yeah, looks good. We cleaned it up real nice, we'll probably fix that.
Mike: I mean I don't love the roses on there but the tile's in good shape too you know?
David: The tile's in good shape. This is a rental guys, we're not trying to rehab this thing to our liking, it just has to be able to get rent, right? So this- you know, pretty basic, pretty simple house which is great. Next let's head on to the basement.
Mike: So it smells like dogs and you can also see there were dogs chewing up there.
David: Yeah, look at that. It does smell like dogs, very much so. Running some electric, that's good.
Mike: Von running wires, thank you sir.
David: So the water heater's in good shape guys, we're not gonna touch that. HVAC also looks like it's newer, very cool. Plumbing stack, always want to be [inaudible] the plumbing stack. The house that we were just in next door, which we'll talk about the end of this video or the podcast, had barnacles coming off of it and it was iron, this is PVC so this will last an eternity. This iron will get you, you know, maybe 80 to 100 years so whenever you see a new PVC, that means it's been updated which is awesome. And then lastly you wanna look for in the basement typically is the electrical panel. This panel is newer which is good. It has fuses or I'm sorry, breakers not fuses. The one next door has fuses. So this is good, we don't have to- we don't need to mess with it which is awesome. They also had water down here and electric 220 for washers and dryers, there's one over there actually in the corner. They did run lines along this wall which is great, we don't have- you don't typically see that. So [inaudible] as a- as an office or a tv area. And having this basements [inaudible] is super super common. You know, 95% of homes typically have basements and whenever they're not done like this and it's a rental, we just clean them up. That's the goal. It's a bonus, they can do whatever they want with it, some people even put bedrooms down here but for us, we just wanna make it clean and it just adds extra square footage and living space for those tenants. Let's go outside and do numbers.
Mike: Let's talk about the numbers.
David: Yup, and then let's talk about the word next door that I'm being hopeful to buy in the next 2 months.
Mike: Let's go.
Mike: I wanna replace that door. So this door's all chewed up, it's a wood exterior door.
David: Yeah, this door doesn't look to good so we'll fix the door, we'll put a new light on there cuz it's rusted out and it looks like crap. All this stuff are getting removed. I do like the way we have this little pad right here plus the little [inaudible] there.
Mike: And the water or the slope is away from the house which is good.
David: Yup, always wanna be up, that's great. Our condensing unit right here is actually in pretty decent shape, probably looks about 10, 12 years old like looks good. All right, so let's do numbers here.
Mike: Cool. Alright so like we said, we bought this one for 90 thousand, we're only gonna have to spend-
Mike: 80 thousand.
David: Plus another 15, 95.
Mike: Plus 15, we only have to spend about 10 to 15? We might spend all of 15.
David: But it'll appraise for 120 plus, that's the thing. We'll be all in at less than 80% of 120 which is awesome. What that means, what that allows us to do, that allows us to borrow money from a private lender or a hard money lender and we've worked with both, and they're going to lend us 100% of the purchase and the rehab, right? Sometimes they don't lend us 100% of the rehab and we have to use some of our money but ideally we don't use any of our money, right? That's the coolest part. On this one, they let us both and in fact the lender is the seller, right? Get creative, just ask questions. If you never ask, the answer is always no like that's a great lesson, right? The seller is the lender and he- so not only did he say: here, change the deed from my name to your name, he gave us a check for 15 grand to fix the house up. Are you freaking kidding me? This is awesome.
Mike: And he's a super nice guy, super nice guy. We're not- we're not- I'm not laughing at him, like he just didn't want the- he didn't want it anymore.
David: No, not at all. Here's the thing.
Mike: He's a great guy.
David: I'm not saying that in a negative manner, this is a win-win. He doesn't want the property anymore, he's in the lending business. We said let's solve two problems at the same time. Get rid of the property, lend some money Mike. That's- it's amazing.
Mike: Well that's what I told Nick in our office earlier Dave is I want problems.
David: Yeah. We solve problems.
Mike: Find me problems man. I want the problem properties because that's where we make our money, that's where we acquire that equity, that's where we get that equity.
David: [inaudible] if you don't mind.
Mike: I already did.
Mike: I already did. [inaudible]
David: All right, so we're gonna hopefully get an appraisal around 120 to-
David: Yeah, I think 125. It's got a big basement.
Mike: Times .8.
David: Times .8, that puts us at 100 thousand. We borrowed 80 to buy it, 15 to fix it, that puts us at 95. If you include some closing costs and miscellaneous items.
Mike: Some interest.
David: And interest, right. We're basically going to be able to take 100% of that refinance and pay him back, use none of our own money. The cool thing is we have great relationships with banks, right? We've been doing this for about 4 years at scale with BRRRR, you know, using this strategy and we can essentially refinance this in 2 to 2 and a half months, maybe 3 months, it won't have to wait 6 or 8, we don't necessarily have seasoning which is amazing. So the amount of interest we're going to pay on that 95 thousand is going to be like 2 grand not even, right?
David: It's going to be-
Mike: 2 thousand dollars.
David: 2 thousand dollars.
Mike: And why would the lender do that? Because we're going to give him another property to finance right after this one.
David: Right after. We're going to give all that money back and he's gonna give it to us to buy something else, it's amazing. All right, before we wrap up today guys, the house across the way here right? This blue one right here, we got a call on this 2 days ago from another investor wholesaler and they said hey we got one on Mullanphy we want to sell you. I got confused thinking they're trying to sell us our house. So all of the emails that you guys were sending, I was like what is going on here? Then I realized that it was a different house and it was that one. Holy cow, right next door.
David: Unbelievable. So we went and walked it and I actually got a little video of it maybe we can splice it in there, send it over to the team and see if we can do it and it's basically a grandma house, right? It is-
Mike: It's a hoarder house though too.
David: It's a hoarder but here's the thing, it's like- it's like neatly hoarded.
Mike: It is.
David: Like there's you know, but regardless it is a hoarder house, it's a grandma house, it needs 25 grand worth of work. Coolest part is they're willing to sell it for around 50 thousand. This one needs 15 grand, we paid 80. That one is going to need 25 grand, we're going to pay 50. That's even gonna be a better deal assuming we can buy it than this one. They're both going to appraise for 125 thousand.
Mike: That's the one we should have bought.
David: That's what we should have bought. But here's the thing, we took the risk, we bought this one, it was an amazing deal.
Mike: Well the risk, it was our lender partner.
David: And because we're out here and we're active in the field and we're networking with other investors. They want to work with us, well we want to work with them and hopefully we can get this thing under contract in the next 48 hours.
Mike: Yeah. What's cool is though [inaudible] shows up, I pull into the house next door, oh yeah we bought that one, yeah we want that one. Like talk about credibility right there too.
David: Love it.
Mike: Like come on man, that's awesome.
David: I love working with you man.
Mike: Let's fucking buy it.
David: Let's buy this one.
Mike: Let's do it.
David: We already bought this one, we're going to buy this one next. Adding rental properties to our portfolio is our favorite thing to do guys. Come check us out live sometime at brrrrmethodmastery.com. Thanks for listening.