July 8, 2017

JF1040: Accidental Landlord Turned BRRRR Expert - While Working FULL TIME!!!

Driving trucks full time at night allowed him a lot of time to listen to books and podcasts. He used the education from that to buy his first BRRRR (Buy, Rehab, Rent, Refinance, Repeat) property. Now he has a lucrative fix and flip partnership, while still working full time.

Best Ever Tweet:

[spp-tweet tweet="If you see galvanized plumbing, I would walk away. "]

Brooks Everline Real Estate Background:

-Real Estate Investor, focusing on value add multifamily, single family rehab flips, and fix and flips

-Purchased and rehabbed 5 single family residences since July of 2016, with goal to do 10-12 this year

-Goal is to add 20-50 units to personal rental portfolio and get into bigger multi's with partners

-Have two four plex in rental portfolio; one being completely vacant at purchase

-Based in Martinsburg, West Virginia

-Say hi to him at 240.513.7836

-Best Ever Book: Rich Dad, Poor Dad

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Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I'm Joe Fairless, and this is the world's longest-running daily real estate investing podcast. We only talk about the best advice ever, we don't get into any of that fluffy stuff.

With us today, Brooks Everline. How are you doing, Brooks?

Brooks Everline: I'm doing great, Joe. How are you?

Joe Fairless: I am doing well, nice to have you on the show. A little bit about Brooks - he is obviously a real estate investor. He focuses on value-add multifamily/single-family rehabs and fix and flips. He has purchased and rehabbed five single-family residences since July 2016, with a goal to do 10-12 in 2017. He has two fourplexes in his rental portfolio, one of them being completely vacant at purchase.

He's based in Martinsburg, West Virginia. With that being said, Brooks, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Brooks Everline: A little bit about my background is I got started in real estate investing in 2014. We had a single-family house that we could not sell, so we ended up renting the property. I became what you would call an accidental landlord, so to speak. During that process I was able to borrow against that property to do the renovations on our now primary residence. As this opened up, I was like "Wow, this is really neat. I can use funds that I don't have to fix up the house that we wanna live in." It kind of opened my eyes, so to speak.

Then that turned me on to -- I'm a UPS truck driver and I work at night, so I have unlimited hours in front of me... And I was turned onto -- a co-worker had an Audible account, and he's like "Look man, I listen to Audible all night long. I've got a list of books... You should check this out. I'll give you my audible account... It totally eats up the time." So I took his account and I started listening to these books. The list is like "Think and Grow Rich", "Rich Dad, Poor Dad", "The Alchemist"... All of these different books. So I'm learning how to get out of the employee mindset, and to get myself focused into the investor mindset.

The Rich Dad's focus got me turned onto real estate, so I guess that kind of brought me up to speed as to where I'm at, learning the different between assets and liabilities, if you will. The other books helped to change my mindset.

Joe Fairless: You said that you had a single-family house originally, you couldn't sell it, you turned that into a rental, and then you bought a vacant four-unit. You have two four-units, correct?

Brooks Everline: Yes.

Joe Fairless: Okay, was the vacant four-unit the first four-unit that you bought, or the second?

Brooks Everline: The vacant four-unit was the actual first investment property that I purchased.

Joe Fairless: Okay. What gave you the confidence to buy the vacant four-unit and how did you finance it?

Brooks Everline: The confidence came from -- like I said, I'm a prodigy of just podcast learning and Audible books. That gave me the confidence. What I had learned from podcasts at night while working taught me how to buy with no money down, fix up, refinance and pull all your capital out.

So really, I went into it with no other knowledge than just what I had heard at night while working. I financed it with a private lender; he put up $145,000. The purchase price was $165,000, so I came up with the difference, some of my own funds, and some from a line of credit that I had access to. So I'm into this deal with very little money, and the process started right from there.

Again, reverting back to my current job as a UPS driver, I came across a person that I knew long ago from high school who was in the area that I was delivering, and he was a contractor. I kept his contact all those years, reached back out to him when I had this property under contract and I said, "Hey look, I've got this opportunity. I'm in Martinsburg and I need a contractor."

He comes over and he gives me a bid, we do all of the estimates, we kind of get ourselves reacquainted, if you will, and we tackled this beast together. While we were working together, we were talking about real estate, what we've been doing, this and that, where we'd like to go, and it just led to other business ventures, if you will. After we completed, him and I still work together on some single-family stuff.

Joe Fairless: So you hired him as a contractor, but then you also worked beside him and helped him do the work?

Brooks Everline: I did on this project. I thought it was invaluable to learn the business and to learn what it would take to get this thing up and running, how to lease them out, just so that I can scale later on. That was my main focus. I wanted to see how this all worked so I understood the business much better... So yes.

Joe Fairless: How do you get a quote for that, if you tell the contractor "Hey, I'd like for you to do this work, but you know what? I'll work with you, so factor that into your pricing."

Brooks Everline: Well, knowing him obviously helped with that, but he saw me there every day, so he just took off, based on my labor, what he would charge me or have one of his guys do. I'm working there very day beside him, so he just discounted that as a labor cost that he didn't have to pay.

Joe Fairless: Okay, alright. Easy enough. How much all-in did you end up being with the property that you bought for 165k?

Brooks Everline: We were right around I'd say $180,000.

Joe Fairless: Okay, that's not a lot at all. $15,000 to get four vacant units rent-ready?

Brooks Everline: That's correct... And we put a roof on it, we did some siding... Now, here's the thing - like I said, I was in there every day. [unintelligible 00:08:02.09] hardwood floors, refinished hardwood floors, did a ton of painting, patch work... I mean, I'm familiar with construction; I was by no means a contractor or a construction worker, but I've done a little bit of everything, so it didn't take me a lot to pick that right up and get back in there, painting and patching and things like that.

Joe Fairless: Yeah. So maybe in my mind I'm thinking of something that's a much worse scenario than it actually was. Did they have the electrical in them, and was plumbing fine, and did they have all the appliances that you just kept?

Brooks Everline: The appliances we kept, there was a stove... Now, some of them we did have to buy used, but they were there. The plumbing was intact... For any of your listeners, if you see galvanized plumbing, I would turn away.

Joe Fairless: Why?

Brooks Everline: Because it corrodes, and there's no fix. Galvanize will close up over time, the rust will close the pipe. Now, I haven't experienced it, but I've seen the inside of the piping, and mine - I don't know how much longer that property will hold like that... But if you see it, I would be very hesitant to purchase. I would look for copper, PVC... Newer plumbing, obviously, is where I'm getting at.

So plumbing is there, it's intact, it just needed a lot of make-ready stuff. It had been neglected for probably 6-8 months. A lot of just make-ready: paint, flooring, the roof needed repair... So a lot of the painting and things like that I was able to do. We redid the cabinets, we painted them a nice white...

Joe Fairless: How long did it take?

Brooks Everline: We did all of that work -- we bought it in March, and we were finishing everything up about a month later, all the renovations. So no joke, we were busy. We were on top of things every day, pretty intense.

Joe Fairless: Were you renting them out as you went, or did you wait until you had all four completed before you started showing and renting?

Brooks Everline: The last unit needed just a little bit of finalized touching up, and I was already showing the other three and starting to lease them out. So yeah, we were very close to being complete. All of the ground work, the exterior things were done, so that there weren't any issues and nothing was gonna fall on anybody coming by or anything like that. So it was just more so inside of the last unit.

It was a very intense process, but a valuable one. I saw all aspects of that deal, very hands-on to it as well.

Joe Fairless: You said you got a private lender for $145,000; the purchase price was $165,000 so you put in 20k with your own funds and line of credit... What are the terms that you have with the private lender?

Brooks Everline: He [unintelligible 00:10:42.20]. He is 12% interest-only payments monthly. I think we did have a fixed month time period built into that, with an extension if needed. It's funny how I met the private lender... She's actually a long-time girlfriend of my wife, and we met at an auction property; we were both there looking to buy this single-family house to rehab and flip, and we didn't know how to get to the other -- we were going to another auction and he didn't know where it was at or how to get there, so he followed me over. We were walking through this [unintelligible 00:11:12.13] and we were just sparking up a conversation... That's how we put two and two together that he knew my wife.

Then he said "Hey look, I'm also lending money." At first he told me 6% while we were in that house... [laughter] I'll never forget it, because I had a guy call me from Baltimore the other day, and he heard me on Michael Blank's podcast and he said "Did I hear you're getting private money at 6%?" I said "You heard 6% just like I did, but it's not at 6%."

So yeah, it's at 12% now and it is interest-only; what's nice is he has continued on to lend with us, and he's done three of our single-family rehabs. 12% sounds like a lot, and it is high interest, but when they're funding the whole entire purchase for you and you don't have to pay points and you don't have to pay all these other fees that are gonna be associated with hard money, it's not that bad.

Joe Fairless: And just to clarify, he didn't fund the entire purchase, but he funded everything but 20k, right?

Brooks Everline: Yes, that's correct.

Joe Fairless: Okay. Just for the Best Ever listeners' education, for anyone who's not familiar with this, why did you choose to do interest-only payments?

Brooks Everline: Well, interest-only is a keeper. Interest-only payments - you [unintelligible 00:12:22.17] to that and it's a whole different ball game. Interest-only - if you can get a lender... And most private lenders that I have come across - even hard money - are typically interest-only. Now, like I said, with the hard money you're gonna have some sort of point up front that you're gonna have to pay, and they're gonna have their own fees. Each one is gonna be a little bit different.

I dealt with Restoration Capital who's just funded one of our most recent properties last week. They did it in five days; kudos to them, they're awesome. [unintelligible 00:12:54.14] Restoration Capital - they did it in five days. We found that flip, we've talked to them - I haven't used them, but what I'm getting at is they're all a little different. They all have their own fee basis.

When you call one of them, like I did with Restoration Capital and I said "Hey, I've got a private lender that's charging me 12%", they go "Well, what else are they charging you?" I'm like, "That's it. 12% interest-only." They're like, "Are you serious?" I'm like, "Yeah." So it's a good deal.

If you've got an uncle or a family member that wants to give you money at 10% or 12% interest-only, do it.

Joe Fairless: How long do you have the loan for?

Brooks Everline: The four-unit or the rehab properties?

Joe Fairless: The four-unit loan.

Brooks Everline: The four-unit loan I had for four months.

Joe Fairless: Oh, you only had it for four months... Then what did you do with it?

Brooks Everline: Refi cash-out. It's a crazy story... It was a four-unit property -- here I am, my first investment property. I'm like, "Oh my gosh, this is really happening. Everything's going the way that I heard it should work on all these podcasts and this and that, and it's coming to fruition." I go to refinance at my bank, commercial lender; first deal, I have no experience with this, and he gives me 80% loan-to-value. Now, initially he was not willing to do a refinance cash-out. I said, "Well, this is what we talked about. This is why I wanted to do this."

Joe Fairless: Is it a local bank?

Brooks Everline: It's a local community bank. They hold all the loans in their portfolio.

Joe Fairless: Which one is it?

Brooks Everline: Bank of Charles Town.

Joe Fairless: Okay, alright. Please continue.

Brooks Everline: So initially he was a little hesitant [unintelligible 00:14:25.11] "This is where we're at, this what I talked to you about... We're days away from closing. I'm banking on pulling capital out." So he ended up doing the deal, the 80% cash-out refinance. It shook out to be a little less than what I thought I was gonna get, just because of closing costs and things like that. I was anticipating 10k-12k up... I ended up getting $6,000 back at the table, but for my first deal I was like, "Man, that is alright. We just did this..." and we had it all leased out in less than three months. By June it was completely leased.

Joe Fairless: You put in 20k and you got back 6k, so you're in it for 14k, right?

Brooks Everline: Absolutely.

Joe Fairless: That's great. And how much does it rent for?

Brooks Everline: Oh, my... That property... I can tell you what the rents are right now; they're $750, $700, $640 and $635. I bring in about $1,500/month on that property.

Joe Fairless: Profit?

Brooks Everline: Yes, that's after expenses.

Joe Fairless: And just to use for the ratio - you've got $2,725 and your total acquisition was $180,000. That's 1.5% of monthly rent to all-in price; that's great.

Brooks Everline: Yeah, so if your listeners are trying to hit the 1%, we're a bit above that. I try to do $150/door of cash flow - that's what I like to hit on the multifamilies. Some people like $100... It's all market specific. In California you're not gonna get that, in certain other places you're not gonna get that, but here we try to hit that.

Joe Fairless: Any other lessons learned on this vacant four-unit that you wanna mention that we haven't talked about? What did it appraise for?

Brooks Everline: $200,000. I just think that the lessons that I learned on this property are learning what it takes to get one of these up and running, and actually to be there and to see it all happen. It proved invaluable, because now every deal going forward, when you're dealing with the contractors, you can tell them "Hey, look..." -- they think that you've never done anything like this. So when they're giving you estimates or bids or things like that... You know how contractors are; they just throw all kinds of numbers at you.

Joe Fairless: Yeah, everyone knows how contractors are. [laughs]

Brooks Everline: Exactly. So if you have some knowledge about what things cost, you can greatly increase your chances of success when dealing with them, and finding the right fit. And that's just one lesson on the four-unit. I learned a lot throughout the whole process of leasing, learning all the tenant/landlord laws, state-specific... It takes time, but these are all things now that I can turn over to [unintelligible 00:17:11.21] and he/she can run with it, and I can just follow up with them and making sure things are happening the way they need to happen... Which is where we're trying to get to now. That's where my focus is now - trying to pull away from the business.

Joe Fairless: What's the last deal you did?

Brooks Everline: The last deal - we just bought one last week, the 24th. It was a single-family in Hagerstown, Maryland. It was a small three-bedroom, one and a half bath, [unintelligible 00:17:35.03] nice little quarter acre plus lot... It will be a rehab flip.

Joe Fairless: How much did you buy it for and what do you put in it and how much will you sell it for?

Brooks Everline: The acquisition was 97k. We'll put somewhere around $30,000 into this property and we'll sell it somewhere around 200k-205k, maybe higher... It just depends.

Single-family real estate is not sitting on the market very long where we're at. It's flying off the shelf... Which kind of brought me to why we're doing single-families now. I don't wanna say you can't, but finding a multifamily that makes sense where I'm at is becoming very challenging. So this business here, as I said, this relationship with this contractor has turned into one where we partner up and do these flips together, and we're just having a great time doing this and we're making really good money at it.

I guess what I'm saying is to have a couple tools in your toolbelt is a good thing. I know a lot of real estate investors will hone in and really focus on one thing and that's great, and I do the same thing to a point, and then once the well is dry for a period of time, you've gotta be able to do something else; you've gotta make money somehow, right? So now we do a little bit of wholesaling, we do a little bit of fix and flips... Actually [unintelligible 00:18:49.22] and it's paying the bills pretty well.

Joe Fairless: One thing I don't wanna get lost in this conversation is you have a full-time job you said earlier as a UPS employee and you work at night... What are your hours?

Brooks Everline: They vary, but when I was really gearing up to do all this, Joe, it was 9 PM to 9 AM. It was one of the most challenging things I've ever done, but perseverance... I knew that real estate was gonna be one of the only vehicles that was gonna set us free... Financial freedom. My biggest thing for doing this was to earn X amount per month, and my goal is about $10,000/month of my own personal portfolio. When I'm at that point, I'm well over my expenses, and those properties will be leveraged. 70%, 75%, sometimes 80% LPV. Now, I don't buy them based on appreciation, so when I say they're leveraged, they may not look great as far as their purchase price, but they're cash-flowing strong. Very different scenarios.

As long as you're cash-flow heavy, you can [unintelligible 00:19:56.12] in up and down markets, especially on multi-family. I don't have any single-family rentals. I tried to get into the five and up, and that's where I'm trying to be at, but these three four-units - they're gonna take care of themselves through ups and downs.

So once I get to that point of $8,000-$10,000, I'm in a very good spot at that point. That's kind of where I'm trying to get to with the personal portfolio. And it's getting there.

Joe Fairless: What is your best real estate investing advice ever?

Brooks Everline: Know your numbers and how they work for you, because it's different for everybody and it is very market-specific... And it helps you buy good deals, and it helps you to walk away from bad ones.

And also I'd say network. Always be in the business networking. Create new contacts and relationships wherever you can. You don't know where it's gonna lead, and it's gonna help to grow your business.

There's a lot of computer desk activity and behind the scenes things that need to get done and they're extremely important, but they can be outsourced, and networking cannot.

Joe Fairless: Are you ready for the Best Ever Lightning Round?

Brooks Everline: Yes.

Joe Fairless: Alright, let's do it. First, a quick word from our Best Ever partners.

Break: [00:21:04.14] to [00:22:01.29]

Joe Fairless: Best ever book you've read?

Brooks Everline: Rich Dad, Poor Dad.

Joe Fairless: Best ever deal you've done?

Brooks Everline: I would say the first deal that I purchased, the vacant four-unit. It opened my eyes and it allowed me to see how this really unfolds and how it works.

Joe Fairless: What's a mistake you've made on a transaction?

Brooks Everline: Not sticking to the numbers that you know work... Especially with the fix and flips - don't try to ever extend your numbers. Know where you're at, know your ARVs, know those numbers rock-solid. You don't wanna deviate.

Joe Fairless: Best ever way you like to give back?

Brooks Everline: Just my time, and if anybody wants to reach out to me, I'm always here to talk real estate, whatever it may be. Now with my kids, I like to support them in any way with donating to their athletic groups and helping to coach, things like that.

Joe Fairless: Where can the Best Ever listeners get in touch with you?

Brooks Everline: You can reach me on e-mail. We're at ynthomesolutions@gmail.com, or you can call us at 240-513-78-36. These are probably the best ways to get a hold of me.

Joe Fairless: Well, thank you for digging in with us on that vacant four-unit. That was the main focus of our conversation because right out of the gate you bought a vacant four-unit, which is not typical. What I've come across is you buy something stabilized and then you get into the nitty-gritty stuff. Ultimately, you have an opportunity to make more money with vacant and distressed property, but usually people don't dive in immediately, and you did... Talking about the way you structured it with your private lender, how you partnered up with the contractor, how much money you put into it, and ultimately the result on the cash-out refinance, the portfolio lender that you used locally, and just the whole thing from start to finish. I'm glad that we talked through how to buy a vacant four-unit as your first investment property.

Thanks so much for being on the show, Brooks. I hope you have a best ever day, and we'll talk to you soon.

Brooks Everline: Thanks, Joe, you too!

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