Why Mary Used Hard Money for Her Very FIRST DealReading Time: 6 minutes
“If they can do it, so can I.” It’s that “can do” attitude that led Mary to her first Houston investment Property deal. Mary knew that if others were investing in real estate all she needed was some education and practice in analyzing deals.
Mary strategically looks for deals. She has a specific criteria in mind that will work for a rental property. Although financing a deal as a real estate investing newbie can be overwhelming, Mary is confident in her decision to use a hard money loan. She knows exactly what to expect for the terms of the loan.
Mary’s recent deal (her first!) was a buy & hold. She actually decided to spend more money on the property rehab, knowing that in the long-term this will benefit her.
We recently sat with Mary to learn more about the deal she found on MyHouseDeals, why she wants to be a real estate investor, and her future plans.
Listen to our conversation with Mary during which she talked about her first deal, plus…
Listen to the interview to learn:
- The benefits of using a hard money loan
- Why you should consider a full rehab on your next deal
- The essential education tools for beginners
NOTE: Since Mary is a Premium Elite member, she received a FULL refund of her up-front membership fee for simply doing a deal! Find out more about our Premium Elite membership here.
Tell Me About Yourself…
How did you get into real estate investing?
Actually, I have a friend who is a real estate investor. He was talking about it and saying it’s a very good path that can lead to financial freedom. I started to educate myself a little bit about it then I just got into it.
What did you do to educate yourself?
The main thing that helped a lot was the BiggerPockets website. I listened to many of the webinars and the podcast. I also read a few books and attended a few seminars. Basically, I tried to watch as many videos as I could from YouTube talking about real estate investing.
What happened in between there to help you take the first step?
Analyzing different deals. I just started to get into properties that I could find online and I tried to analyze them, go over the numbers and find out if they actually would work for me or not. Once I saw so many people are doing it, then I thought, “Okay I can do it as well.”
How did you find your very first Houston investment property deal?
I found it on MyHouseDeals.
What kind of numbers were you looking for?
I was trying to find a house that had a big difference between the after repair value and the listing price. I wanted to have a big gap. The other thing that was important for me was finding a property that would give a good cash flow on a monthly rent because I’m planning on holding this property and renting it out. I wanted it to be an area that would be tenant-friendly and easy to rent with a good cash flow. I also wanted it to be in a specific price range. I wanted it to be less than $200,000.
Tell Me About the Deal…
Did you find the numbers on this deal that the wholesaler posted to be accurate?
No, actually the rehab cost was not correct. Their rehab cost was mentioned to be maybe $5,000 or $10,000. Now I’m doing a full rehab which will cost me around $50,000. The ARV was also more than what was listed I believe. I think it depends on how much you want to repair a house. When you spend more money on rehab, the after repair value will go up, depending on the upgrade that you do to the house. I think in this case, when I decided to do a full rehab, it increased the value of the house.
What are you doing for the rehab on the house?
Well I’m doing everything. I’m repairing the foundation and changing the roof completely. I’m removing two walls in the house to change the floor plan. I’m doing a full rehab on the kitchen and on the bathrooms.
What made you want to do such an extensive rehab on a rental property?
The house is not in a very good condition. Since I’m using the hard money loan, it made sense to do an extensive rehab that would increase the after repair value a lot. I thought if I spend more money on the rehab, then I can increase the after repair value. And I would lose less money from my pocket.
How did you decide to use hard money?
I’m trying to spend as little as I can on each deal. I think hard money is a good choice because if I were to go with a conventional loan, I would need to have 20% down payment and I don’t really want to do that. By using hard money, I’m trying to find a house with less than market price value and rehab them so that I won’t lose too much of my money.
How have you found contractors for your Houston investment property?
The main one I’m working with was recommended but I actually contacted a few other contractors just to compare and see which one would give me a better deal. I tried to Google it. I found some websites that had contractors. The main one that I’m working with was referred from my friend.
What has your experience been like with this rehab using a hard money loan?
The rehab is not done yet and I think it’s going to last for at least one more month. So far the hard money is good. All the costs that I ended up paying was what I was expecting and even though the interest rate is high, it’s a very short-term loan. So far I have been satisfied with that. I don’t know what’s going to happen when I want to refinance but so far it has been great.
What’s your plan to get a tenant in the house as quickly as possible?
I think by putting signs out in the neighborhood before the rehab is completely done and listing it as soon as the rehab is done. I’m hoping to have tenants as soon as possible.
How did you determine whether this neighborhood was good for rental properties?
I went over the rent history. I couldn’t do it myself but I asked real estate agents to help me and research how many active homes are in the market right now for rentals, which are not many. Also, looking at how many days the house was on the market before getting rented.
What do you want your investing career to look like in the next ten years?
In 2017 I’m planning to add 10 more properties. My goal is to get to 20 properties within three years.
What’s your plan for financing all those properties?
I’m going to use hard money for all of them. I’m planning to find properties which are less than marketplace value so I can spend as little as possible on each deal.
What advice do you have for new investors?
Just educating yourself and finding different opportunities, and learning how to find deals. I think the most important thing is to find good deals. You can’t do that unless you start learning and looking into the market.