Garon Reinvests His Investing Profits to Build Passive Income
Garon has invested in Washington investment property long enough to know that when you rehab a property, you should invest your money into the areas of the house that people will look at. If people like what they see…they are more likely to buy!
This is just one of the investing strategies that Garon uses to build a financially secure retirement.
His investing experience encompasses both rehabbing/selling and buying/renting out properties, but his long term goal is to create passive income from rental properties.
Garon finances his deals with partners, private lenders, or hard money lenders, depending on which agreement yields the greatest profit for him. He enjoys the ongoing process of learning how to invest and is the first to admit that he happily learns from other investors’ mistakes.
As a part time investor, Garon saves time by receiving property emails from MyHouseDeals.com to search for good deals. He recently found a fix and flip property that matched his criteria. We sat with Garon to learn more about this deal, his experiences with rehabs and financing deals as well as his overall investing strategies.
Listen to our conversation with Garon during which he talked about this deal, plus…
- Why finding comps for a property in a condominium complex is easy
- Why you may want to reconsider having a partner when it comes to financing a deal
- How to use rental properties to build passive income
NOTE: Since Garon is a Premium Elite member, he received a FULL refund of his up-front membership fee for simply doing a deal! Find out more about our Premium Elite membership here.
Read the full story here…
Tell Us More About Yourself…
Why did you become a real estate investor.
This was a part time job for me. I dabbled in real estate for a while, but back in the whole crash, I got badly bit. Then I went back to my day job doing computer consulting, but I started investing in flips on side. I needed to build a retirement and I really enjoyed it. With my work on computers, it’s hard to explain or show or tell somebody what you’ve done. I just really enjoyed having something tangible I can point to and say, “That’s what I accomplished there.” So basically, I need a little bit more money for retirement and I enjoy the work and the results.
What was recovering from the market downturn like?
I went back to doing the day job to pay the bills. That is helpful when you’re starting a new business or a new endeavor and you don’t have to live on what you’re making off of the investment. You’re able to take the risk along the way. Then it allows you to be able to reinvest some of your profits. It was a little bit at a time, and it was also realizing what some of the things that my house yields and some other sources have shown that you don’t have to have a lot of capital to do this. There are some sources that can help you get started you don’t have to have all the money yourself.
What are your strategies for financing deals?
I have a little bit of a mixture: some of my own, some of the old friends and family, and then I have some private investors. I also have one or two deals that I did with traditional bank financing and a hard money lender. One of the things I’ve learned is that if you have partners, and you’re splitting the profits at the end of the day, that can cost more than a fixed interest rate, even if it’s from a hard money lender. It’s still cheaper if you’re doing things right and getting in and out of a deal fairly quickly. You’re making more that way than you are if you’ve got some investor who’s going to take half the profit.
How have you built relationships with private investors?
I have met a couple through word of mouth. One of them was a realtor that I worked with. She helped me find some properties, and just over time, that relationship grew. When I started investing in the Washington, D.C. market, I told her what I was finding and that there were more and better deals in the D.C. metro area. I told her about that, and she was pretty excited and looked at some of the deals and now I’m going into the second deal with her. She turned me on to another investor who has more capital than she does. That has been word of mouth.
People that have maybe learned or have earned their money in one area, now they want to make money on their money, but they don’t have all the time to do it. If you find the deals and bring them to an investor and can show them that you’re competent and show them that you’re honest, I think there are a number of people out there who would be willing to invest in you.
What is your current investing strategy?
I’m trying to do a little bit of rehab/resell and buy/hold, with the real goal towards the buy and hold. That’s where I think the passive income that we all dream about comes from. It is from having properties for the long term that are rental properties that are going to give you a good return over time. Once you’ve got them in good shape and once you’ve got good tenants in them, then there’s minimal effort compared to you doing the flip. I’m trying to use the flips and turn that into long return buy and hold properties.
Tell Us More About the Deal…
What kind of property were you looking for on MyHouseDeals.com?
It’s the ratio. What is the cost and the repairs compared to the after repair value? That has to be there, and it has to be there with a comfortable margin for error. I am new to the D.C. area. I need to get to know more and better contractors who can give the most value for the money. When you’re looking at investment, there has to be the cushion. It will allow you to maybe make a couple mistakes, pay for your real estate commissions when it’s sold for all of the above, and still leave some profit at the end of the game. It’s looking at that ratio. Actually, the emails that MyHouseDeals sends to my inbox are really valuable because I don’t always have the time to go out there and actively search on the website the way I was doing it first. It really helps me to have that proactively show up in my inbox.
Why did you choose this property?
The location was good. It was also in a townhouse condominium complex. A lot of this you want to do on the web. What I like about having it in a good typical neighborhood or a condominium complex is that it is easy to get the comps. You can see there are the same floor plans, same age, etc. and if a property is sold, that gives you comfort in validating what the after repair value is. I have looked at some properties that are unique and it’s just really difficult to really grasp and say “I’m confident in what this after repair value is worth.”
The second thing was because of the fact that this was a townhouse, you’re mainly going to do interior repairs which minimizes overall costs. It reduces your risks because you know you don’t have to worry about a whole lot of exterior and landscaping and all that.
How did you negotiate with the seller?
With this particular seller, this particular property was bought from foreclosure. This person actually goes to the auctions in the state of Maryland, goes to the auctions, bids on the auctions, which is something I don’t have time to do. They’re a wholesaler, which is of course what you find on MyHouseDeals, and so they’ll put a markup on that. We didn’t really have much of a negotiation. It was kind of a take it or leave it. He has high demand and deals move pretty quickly.
How many hours a week do you spend on your investment properties?
I would say about 15 hours a week. It can be more than that when I’m doing an active flip, but probably 15 is a pretty good estimate.
What did your rehab look like for this property?
You really want to make sure that you put your money in things that they can see, and for us, that meant doing some minor remodeling. We opened up the kitchen, opened up a window between the kitchen and the dining room, living room, and family room. Then we opened that up and put some lights in there, and added hardwood floors which is something the rest of the homes in the neighborhood didn’t have so that made it stand out.
Does a rehab look different for a rental property versus a property you are flipping?
In both cases, the main principle is return on investment. I’m working on a rental property now. Initially I want to get some income out of it and then over time, I can make improvements using the cash flow. If it is in good enough shape to rent, and I can do it without any significant remodeling repairs, I’ll do that.
How do you make your Washington investment property deals so efficient?
I wish it were more efficient. It helps to line up your contractors, get your estimates, and do all of that literally before you close. Have it ready so that one day one, the contractors can come in and make it happen. If you’ve got permitting to do, get the permitting done. You can have that done. Be ready literally on the day you close.
That’s a big part of it, and I think the other part of it is staying on top of the schedule. If there’s enough demand in the market for the trades and repair people, they’re not going to be available. It may be 3 weeks before they get out there. You really need to stay on top of your scheduling or you can wind up sitting for a couple of weeks getting nothing done.
What advice do you have for new investors?
It’s an education process. You have to learn to invest. Don’t think you’re going to hit a home run the first time. Frankly, breaking even is not bad for your first time out. You need to stick with that and you need to talk to people that have done it before. Get advice from people who have done it before because people like talking about what they’ve done, and there’s an awful lot you can learn from their mistakes which reduces your mistakes the first time out.