058: Refinancing Rentals, Flipping 19 houses in 2016 and Investing in Florida

On this episode of the InvestFourMore Real Estate Podcast I discuss my real estate investing. I go over my flipping business (should sell 19 flips in 2016), my rental property plan (still looking to invest in Florida), my attempt at starting a subdivision, and refinancing some of my current rentals. This has been a busy summer and year for me. I have slowly been rebuilding my flipping business after a project manager I hired did not perform very well.

I have got my team working on the flips now and things are going much better. I would love to be buying more rentals, but the market in Colorado keeps going up! I am not buying rentals here, but I do want to buy more rentals in another market. I also found a new bank to refinance some of my rentals. By refinancing four rentals and selling a couple this summer, I have gotten all the cash back I spent buying and repairing my rentals.

What is happening with my flipping business?

I spent a lot of time  in 2015 finding a project manager so that someone else would handle all the contractors on my flips. Things started out well, but slow. It was apparent after a few months that properties were not getting repaired any faster than when I was managing the flips myself. More problems came up with my project manager and I decided to go a different route in 2016. I have been working closely with my team and things are going much better in 2016. We have found new contractors, we are buying more houses and selling more houses as well. So far in 2016 I have sold 9 flips and we have two more under contract to sell. I have 9 flips in my inventory currently with two more under contract to buy. Of my 9 flips in my inventory, three of them should be listed for sale in the next month.

Although the market in Colorado has made buying rentals tough, I am still able to get great deals on houses to flip. The biggest reason I can still flip, but not find rentals is I am not worried about cash flow with my flips. I have historically made over $30,000 on each flip after all costs (including financing). The really awesome thing about my current flipping business is my profit margins have increased! Part of the increase is from the market appreciating and having a couple really big deals. On the podcast I talk about a high-dollar flip I am working on that I should be able to tell everyone more about in a few weeks. I bought the property for about $500,000 and it will be worth over $800,000.

What is happening with my rental property plan?

I have a goal to purchase 100 rental properties by 2023. I am way behind on that goal! I had 16 rentals a few months ago, but now I am down to 14. I sold two rentals, which had tenants leave this summer and were not my favorite properties. One of the rentals was a duplex that could be used as a college rental. The other was a single family home that was hard to rent due to a weird floor plan. I was able to get about $190,000 in cash back from the sale of those two properties. I also did not do 1031 exchange and I talk about why on the podcast.

I am not buying more rentals in Colorado, because prices are so high. Rents have not increased nearly as much as prices have and it is really hard to find good cash flow anywhere. I want to buy more rentals, but I need a new market to invest in. I have talked a lot about investing in Florida in the past and I still feel that is a good market. I just wish I had more time to research the different areas, find great lenders, and find great deals. It will happen, just not as quickly as I hoped it would. Part of the reason things have been slow to develop is I have been focusing on the flips and getting systems put in place so that I have more time for other activities. I hope to buy more rentals in a new market sometime this year. In 2017 I hope to really ramp up the rental property business and buy a lot more.

How has the refinance of my current rentals gone?

Another reason I have not bought more rentals, is it takes a lot of money to flip 8 to 12 houses at a time. I was counting on refinancing 7 of my rentals with a national lender, to get more cash to invest with. I had been in talks with Jordan Capital for many months to get a refinance done, but it never worked out. I had not used my local portfolio lender to refinance properties, because I had hit 2.5 million in loans with them and they were hesitant to lend me more money. By selling two of my rentals and slowly paying off loans on my other properties, I had dropped below that 2.5 million number. My local lender was willing to refinance four of my rentals, giving me $244,000 cash out. I am in the process of doing that now, with lower rates and higher loan to value ratios that Jordan Capital.