The Business Plan Of Our Single Family Home Investment | Ep 30

James: I had an interesting interaction, or I had an interesting realization recently that I am often self-deprecating to myself, but I don't like it when other people do it. I find myself being like, dude, don't say that about yourself. Like, that's not true. You are so much better. Like, don't let yourself believe that, but I personally do it all the time.

So that's something I'm half actively working on is how do I be

Jessi: less self-deprecating,

James: but still remain humble. Right. Like, I don't know. It's an interesting balance. You don't want

Jessi: to be boastful.

James: Yeah, something I'm trying to figure out.

Jessi: Don't say anything at all.

James: I don't know. All right. Yeah. Yeah. Ready?

Okay. Welcome to the Furlo Capital Real Estate Podcast, where we dive into the intricacies of passive real estate investing. And our mission is to equip people to invest wisely in both property and people so that together we can build our wealth while improve in housing and housing. Together. Again.

I'm James and this is my wife, Jessi.

Jessi: I'm here! Yeah! And I, I don't know what I was thinking about this, but I have been looking for this sweater that I used to wear all the time.

James: Okay.

Jessi: And I couldn't find it anywhere. I was like, did I leave it somewhere? Did I leave it in the car? Man, it's just lost. It's lost.

And I found it tonight. Oh. In a closet. Where sweaters are. I was like, oh. That's so random. Yeah. Well, that would make sense. I, I don't know. I was thinking of it because I was just wearing it and then I got too hot.

James: So, I was going to say, we're in the middle of summer right now.

Jessi: I know. It was cold. It was kind of you,

James: I was going to say, did you put it on because you were just so excited about finding it?

Oh, no. Or were you actually cold?

Jessi: I, I was cold. I was cold.

James: It was kind of a cold day today. It was a

Jessi: little chilly. It was

James: a little chilly. Which I've seen a bunch of outside work. I am so sore right now as a result of it, but it was good. I was happy that it wasn't. Super exciting though. The kids were both like, dad, your face is so red.

I'm like, yeah, you'd be ready to still go through the clouds. You know, I put on sunscreen. I was like eight hours ago. Yeah. Yeah. Oh yeah. So I was working on a property and we have another one that we are just kicking off and it's super exciting. And so I kind of wanted to share some of the details behind it, what we were looking at, what was going on.

We we're calling this one 11th. That's the name of this one. It's because it's the street that it's on.

Jessi: Thumbnail.

James: Oh, we'll, we'll do it afterwards. And so we're buying this property. Or we bought it and yeah, it's just kind of a cool, it's a single family home. It's got three bedrooms, one bathroom. It's on a well, the city sewer, and it's two stories.

So it's kind of has one bath, one bedroom down below, and then it's got the two bedrooms up and they're kind of like vaulted cabin ish style, I guess. So the story behind it is that there was an older gentleman who used to live there and. getting old, some form of dementia, and it was no longer safe for him to live there alone.

And what they had done was they had some other people like caretakers who were actually living in a trailer in his driveway and their job was to check in on him, make sure he was okay, and and then eventually they had to get to a point where they took away his oven,

Jessi: because he

James: burned himself, I'm guessing, and they gave him just a like a big toaster oven, essentially a microwave oven type thing to work with.

And but yeah, I just eventually got to a point where like, yeah, he's not healthy. He's not long for this world. So we need to, you know, we need to move on. And interestingly, he does not have a will. And so here's my mini PSA. If you don't have a will, you have no idea what I'm talking about. Get one. There's a couple of different things you can do, but essentially a will is a piece of paper, a letter that just says, here's what to do when I die.

And it's things like, what do you do with your assets? And for us, the most important thing is what do you do with the kids? And a will is something that spells that out. Because if you don't, then goes the probate, the courts get involved. It is messy. It is really hard. But if you have a will, all they do is they open it up, they read it and they do what you want.

Mm hmm. And you can write pretty much anything you want in this will, any sort of stipulation is kind of nuts, but have one. And you can have a lawyer help you out. That's actually what we did. And we actually built up a living trust at the same time and like they can help you with all sorts of stuff. It should only be like somewhere between a thousand to 1, 500 to do, do it.

Cause he didn't. And this particular case, as a result of that, if he passed away, cause again, he was kind of getting to that point. They were like, Oh, this house is going to go to probate and it's going to be months of it. So instead what they were willing to do was sell it to me at a major discount. So they could avoid all of that headache.

Interesting And so not having a will significantly cost them. So. Get a will. It's worth the investment, especially if you have kids. Oh my gosh. Get a will. And

Jessi: yeah, so that was

James: what they did. So this is a house that it's on the edge of town, but it's definitely in town. It's in like this nice little neighborhood place.

Okay. It's got great access to I 5, to highway 34.

Jessi: Question about condition. Yeah. I mean, if it was. It was an elderly gentleman did he have someone taking care of it? Like doing regular maintenance? Or is it kind of neglected a little bit? Definitely signs of

James: deferred maintenance. Thankfully, it doesn't look like there's any water damage, as far as I can tell, which is good.

Yeah. But it's just like, the carpets upstairs are old and gross. Whoever laid the flooring in the living room didn't know what they were doing, because it all, like, leaked. It's like they didn't click it together or something. I don't know. Super weird. And there's definitely been a build out of this house over time where it's like, for example, the downstairs bedroom window looks into the garage, which is weird, right?

So you can tell they added the garage after the fact. And honestly, when you look at the roof, you can also be like, Oh, there's definitely multiple roofs that have been added here because there's different pitches and it's weird.

Jessi: What's the age of the house?

James: Yep. Uh, it's like a 1930s, 40s probably.

Jessi: Because like the vibe that I get from it is one that we bought several years ago.

Yeah. In, you know, that we lived in.

James: Right.

Jessi: We actually lived in it and then turned it into a rental. Yeah,

James: we joked that we bought a fixer upper and then we just did a fixer

Jessi: up. Yeah, we didn't fixer up. Yeah. It's very super cheap.

James: It's very similar to that. Okay. Yeah It's not a very big yard at all. It's kind of a skinny lot, skinny properties in general, but they're all like that in that area.

So it's nothing weird. So I got some, I got some quick stats. I got the stats. So we think that the after repair value is going to be about 310, 000. Okay. This area makes sense for that type of size and how, Oh, it's a 1946 and it's 1242 square feet.

Jessi: Okay.

James: Thank God. Just had to look it up. But in order to get it to be.

Looking good. It's going to require about $82-$85,000 worth of repairs. And, but we're going to do all sorts of stuff that it means like new roof, fixing some siding, we're going to repaint the outside. We're going to repaint the inside. We're going to redo the flooring, both like, Everywhere. Wow. And one of the things we're also going to do is we're going to open it up.

The, the kitchen to the living room is just like a single doorway and we're going to open that up so it's not just a single one. And then that back bedroom we're going to punt on that, like that mini window. And instead what we're going to do is we're going to kick the wall out a little bit, get rid of the window altogether.

And then since it's up against the. Whatever the thing's called, the living room, we're actually going to put in some French doors there. So it can bring in light that way. All right. So it's going to be a super cool, sweet little vibe to it. Yeah. It's going to look awesome. And so we're going to do a bunch of work to it and we're going to make this little tiny house.

um just kind of sing it's going to be really cool. Yeah. There's this massive blackberry bush in the backyard and I called my yard guy and said, so I got another blackberry bush. Project for you. It's not as

Jessi: big as the big one. I

James: made you do once. I must wait them.

Jessi: Oh, I remember there was this,

James: blackberry bush.

It wrapped around the storage facility. It was easily 15 feet wide. 10 to 15 feet tall. And it was like

Jessi: massive,

James: a hundred yards. It was so much. It was so much. Yeah. So he looked at this and was like, no big deal. We got

Jessi: this.

James: He's awesome. Yeah. He's my favorite. Just gotta

Jessi: compare things to that project.

James: Yeah.

Yeah. So here was so here's what we did for them. A, we offered them a quick close. So close it in two weeks and we offered them a couple different options. One of them was Hey, we'll pay you 135, 000 cash. Yeah. We're just done. Yeah. So I'll say, you know, less than half of what the after repair value would be, but honestly it needs all those repairs.

So you gotta do the math. Or we said, if they're willing to carry a note. And at the time we said, like, it was like, I think we were something to the tune of like, we'll give you guys, probably could look this up to get my exact number. Here, you know, give me, give me two seconds here. I think this was the one that was ultimately what we.

Yeah, we said, if you give us a note, a loan for 100, 000, we're willing to pay 153, 000.

Jessi: Okay,

James: so a little bit more for more money. They came back, so they would essentially get like 50, 000 in pocket and then 100, 000 later. They came back and said, okay, okay, what about 160, 000, but we give you a loan for 135, All we need is 25, 000 upfront.

Yeah. And that was where we're like, okay, I can work. Yeah. So we're buying it for one 60 and it instantly started with having raised, if you will, 135, 000, the guy owned it free and clear. So there's no other loans that they need to worry about, which is what makes this work.

Jessi: Yep.

James: And so when all that was said and done, what that meant was that we needed to raise 120, 000 for this property.

So that's to pay them the 25, 000. Down essentially, and then pay for all the rehab stuff. Plus we want to have reserves and pay for holding costs and all that kind of stuff. Yeah. And we, I put out an email and we raised the funds in two days. Wow. Super fast. Yeah. Yeah. It was, it was super awesome. And so yeah, so that's what we're doing.

So, so

Jessi: what's the timeline for, you know, those repairs and fixes and all the things you described?

James: Yeah, that's a great question. I I budgeted that we're going to do everything in six months.

Jessi: All right.

James: Okay. And it's like beginning of July is when all this started, July 2nd. And our contractor who's going to do all the work thinks he, he told us this was a 35 day project.

I don't know if that's business days. But even if it is, I know that was my, that was my thought like, Oh, I

Jessi: guess if they're not doing anything else, just this.

James: Yeah. Which is the case. And they've done this a ton of times. Interesting. You know, if you focus and you know what you're doing, like, yeah, you can, you can move pretty quick.

I think like doing some of those structural things will take a little bit more time, but it's like, yeah, like yeah, a day, you know, then we move on. Yeah. So, which is super cool. And so six months gives us plenty of buffer to do the rehab and get it listed and sold. Now one of the things that we're going to do is we're actually going to focus on the outside first.

So yeah, so we're going to do the roof and we're gonna do this siding and we're going to paint it all. And I already got my yard guy working on the yard. And so that will all look nice. And then what we'll do is we'll take pictures and do what we'll call a pre listing. And then what we'll kind of, and then what we'll do is we'll share projects that this contractor has done for other properties and say, not this, but it will be like this coming soon.

Jessi: That's smart.

James: Yeah. Oh yeah. And so our contractor suggested we do that. And I was like, that's a great idea. We should totally do it. Yeah. And for him he goes, yeah, almost all the time. The thing is sold.

Jessi: Mm hmm.

James: When you finish. Before the project's done. It's already on a contract, ready to go. You're just waiting for it to finish now.

Wow. So I'm like, dude, that'd be sweet. And, and here's the other cool part about it. He goes, and anyone else who calls and says they're interested, he goes, now you have a future buyer list. You can ask them, okay, what did you like about this? What didn't you like? In a perfect scenario, what would you be interested in?

So that as we're going around looking at other deals, We now have them in mind, and the second we find one, we can just call them and say, Hey, we found one. Yeah. Do you want us to go do a thing? Get them lined up. Super smart. Yeah.

Jessi: So, when you do this pre listing how do you, how do you do that? Like, do you?

Yeah, how do you do that? Do you make a flyer? Do you put it out? Do you

James: put it

Jessi: online? Do you send out a message? This is

James: a ready fire aim situation. There's got to be a way. I feel like in the MLS there's a pre listing option.

Jessi: Oh, yeah, I feel like that is a thing. I've seen it on Zillow for sure. It's like it doesn't say it's available.

It's, yeah, it's a pre

James: listing.

Jessi: Some, and some of them do list, like, coming available In August or whatever.

James: Yeah, I guess we'll have a flyer.

Jessi: I don't know. Yeah. Something. I mean, you don't typically list things with the MLS. Do you?

James: Right. No, I've I've done it once and I did my own thing. So typically for an MLS.

Yes. Here's a little, another little insider tip. You have to have an agent to post, right? So what companies have done is there are other companies who go, Hey, we'll post quote for you. And what they do is they create a software front end. And so I pay them, it's like a hundred bucks. And then I use their interface to create my MLS posting, hit the submit button.

They double check it. And then they essentially automatically submit it to the MLS. So it's, it's kind of a for sale by owner,

Jessi: but I'm able to get on the

James: MLS cause I had this other company representing me, which we'll put in agent, my agent. Exactly. Yeah. So that's kind of, that's what I did. So that's been my experience with it.

And I've my partner is an agent, so I don't have to do that. He already has access and that'll be the thing he manages.

Jessi: Yeah. Yeah. Pre listed or whatever.

James: Yeah. So, so yeah, that's the project. I'm super excited about it. I think it'll be good. This is going to be our first like full on we're flipping this thing, making it awesome as it ever could be.

Cause a previous project was one where we were going to do that and then I happened to find that buyer and he was like, I'm looking for a fixer upper and we were, Oh, okay. Okay. I guess we won't fix this up. We won't do it. We'll do what needs to be done to get it lendable.

Jessi: Yeah.

James: And then we'll just sell it to you.

And we kind of, we found a middle point where we had still made, still made the same amount of money. I just had to do a whole lot less work, which was, I'm like, I'm on board. That's great. And instead he'll do it. Do all the work and save money.

Jessi: Yeah.

James: There's going to be great. And yeah, so this is going to be different one.

This one's like full on. We're going to make it nice and awesome. And we'll see how that feels.

Jessi: Totally have to take some before and after pictures. I love seeing that kind of stuff.

James: I will. I intend to take some before and after video too, but yeah, I'll have to do that kind of thing. There are kind of cool when you see them online, they're fun to look at, I guess, I don't know.

They're the trick is to do it in such a way where it's not. Look at me. I'm so awesome. It's more of like, look what we've done or I don't know. Or sometimes like, cause I know construction guys will do this. They show a bunch of before and afters and it's like, Alright, so this is our, this is what, this is your, this is service we provide, show this to me.

Yeah. It's like the one type of post that you do. Yeah. I don't know. I'm, I gotta, like, I gotta work on my social etiquette. How do I make it awesome? So, I don't know.

Jessi: That is interesting. I just like before and after pictures. I love like makeover videos. Well, what am I talking about? So, well, let's just do that.

Just

James: go for it. Yeah. Before or after. Yeah. Before or after. Just do carousels. Yeah. All day long. Love it. Yeah. That's what I can do. . Yeah. So. So yeah, so that's what we're doing and I think it's going to be a fun project. I'm looking forward to it. I'm really interested to see how accurate my numbers are and how how long it takes just from that standpoint.

And yeah, this is, I would also say. I created a new underwriting tool in order to evaluate these kinds of deals. And so it's my first time using that tool and it's a lot more conservative than I've ever done in the past. And I like that. So I know me too. Me too. It was one of those, like, for example, here, I'm gonna pull it up real quick.

I have a, I have a reserve fund of there about 10 percent of all my starting costs. So it's about 88. 100 is what it is. And that's just like, just in cases. And so so yeah, so that's kind of thing that I built that into the, the modeling of it and, you know, everything goes perfect. Cool. Like that's just profit.

That's great. But if it's there, it's there. So there's things like that, that I've done that I haven't. I haven't integrated that into things in the past. Instead, I've just kind of eyeballed it. I'm like, ah, it looks like it's about this much and I want to have a buffer. And now I'm like, okay, let me be explicit about it.

Things like that. So I think it's good. So so yeah, and the fact that I got funded quickly makes me think that people are interested in doing those kinds of deals and there's hunger out there for it, which is awesome. Yeah. And, so, yeah, there you go. Cool. Cool. I like it. That's what I got. Yeah. And so yeah.

So, I'm excited. And and hopefully that investing and kind of that thought process and the numbers all kind of make sense for what it is that we're looking for and what those kind of ratios are. So, I would say if you're listening to this and you're like, dude, that sounds really cool. That's an awesome deal.

I'd love to get in on it. Your first step is to head over to furlo.com sign up there because that's how I let people know about these kinds of deals. That's, I only send it out through email and so you can get on that list. As you've heard, like, gotta be on it too, which is okay. And and we did, we're going to have a lot of deals coming down the pipe for that kind of stuff.

So you missed this one, not a big deal. There's going to be others. And so you can check it out. And if you also have time, we would love it. If wherever it is that you listen to podcasts, you leave us a quick rating and review. That would be super awesome. Thanks for listening and have a great day.