Video Transcript
Hey guys! It’s Dustin here with FasterFunds Lending. I’m here with one of our excellent borrowers and tribe member, RJ Campbell. So today we figured we would go live and really talk about how RJ has progressed through the real estate investing world, how he has started building his portfolio, and kind of show you–based off the title of the video—how building a real estate portfolio can be simple, yet not easy at the same time. So RJ, again, thank you guys for coming. Tell me and the people out there just a little bit about yourself and what got you into investing in real estate.
RJ: So yeah. So, I was just in the business world my whole career. Dustin and I go back to previous life; we’ve worked together, so I’ve known Dustin probably almost 10 years. So, I had never had any thoughts of real estate. I watched as Dustin started building a portfolio and moving through the real estate world and, well, last year (2019), we got together and started asking a lot of questions and just had some interest. My wife and I both in using real estate as an investment portfolio and building some properties and getting some rental houses, and I have a million questions, especially: ‘how do we afford that?’ and ‘I can borrow money and without having to put 20 percent down on every house?’ That’s where it all led to working with Dustin.
Dustin: Yeah, so RJ really fell into the concept of the BRRRR model, which we know and we’ll talk a lot about this on this channel, and that’s gonna be buying a house at a discount, rehabbing that property, renting that property, and then refi-ing out to a longer term loan, and repeating the process over and over. So that way, by using FasterFunds Lending, or a hard money source, you can leverage other people’s money and build a lot quicker. So RJ, how many properties do you have right now?
RJ: Four.
Dustin: Okay, and you started and when?
RJ: Beginning of 2019. Actually I’ve done four in the first year. Dustin: So, a little bit–almost 18 months?
RJ: Right at 18 months.
Dustin: Okay. You’ve got your four properties. So let’s talk about what was your… Well, the thing you didn’t know, probably out of all that you were really surprised by when you first jumped into it?
RJ: The borrowing. So, I did not realize that you could borrow money for a rental property, or- or any type of investment property, and not putting 20 down and buying from a traditional lender or borrowing from a traditional lender. Had no idea.
Dustin: Right, so not familiar with that, I guess, hard money concept. Gotcha. If you’re like me, a lot of people out there, you think of hard money you think of Tony Soprano. Or, at least I did. So what you’re saying now is, obviously that was not the case.
RJ: Not the case whatsoever, to work with FasterFunds Lending from the first house that we bought. Again, introduced through Dustin to Suzanne and the team here, and found out how that works. Learned more about money–that we joke about, it’s really easy money– borrow from them short term and get the properties going and you can refinance out later. And Working with FasterFunds Lending was, you know, hey, they’re easy to work with but then when you have the team here it’s kind of a second set of eyes. They’re looking at the property before they underwrite it also. Yeah, that sure works out great.
Dustin: Awesome. So let’s go over…pick one in one of the four properties, and let’s kind of do a quick case study on it if you don’t mind. So which one would you always talk about?
RJ: The first one? [Laughter]
Dustin: I know a lot about his first one, it’s a fun story. So, all right. Great! So let’s just walk through that one. I’ll ask you some questions about that and some learning experiences, but let’s first talk about the numbers behind it. So, do you remember what your purchased it for?
RJ: That’s a great question…I think we bought it for about $68,000.
Dustin: Okay, all right. So $68,000, yes, beginning of 2019. And how did you buy it?
RJ: Bought it, found it through a wholesaler. And then borrowed the money through FasterFunds Lending.
Dustin: How much money went towards the purchase price?
RJ: That full price, the $68,000, whatever it was. The full amount.
Dustin: So you didn’t put any of your own money down, and you were able to purchase the property?
RJ: Correct.
Dustin: All right. And then you were going to fund the rehab out of your pocket?
RJ: Yeah. We funded the rehab out of the money that we had.
Dustin: All right. So let’s talk about that rehab. How easy was it?
RJ: Oh that was such an easy rehab! Everybody says the first rehab you do is when you’re going to learn almost everything you’re ever going to know, and we ran into every snag that you could run into, from contractor challenges–that being the main one–budgets went higher than we thought, extending time frames, but, it end up being a great property. We learned a lot on But, You know, we got all done within the time and the team here was great to work with and yes! We survived.
Dustin: Good. So, I want to dive into those challenges because, again, I know what some of those challenges were, but…so how long did it take you to rehab that property?
RJ: Probably, I think, about four months on rehab. Three to four months- it shouldn’t have been a big rehab.
Dustin: Okay so that was my next question, how long it should have taken?
RJ: I think maybe four to years weeks.
Dustin: Perfect. Okay um so four month rehab. How much did it cost?
RJ: Probably $20,000 on the rehab, pretty close.
Dustin: All right, so $20,000 on the rehab. And I’m just going to tell the story because it’s one of my favorite stories. So, RJ has a full-time job. Me and someone else who’s kind of helping RJ along with this stopped by one day and the contractor and his wife were the people working on the property and we walked into the kitchen and there was no kitchen ceiling anymore! And the contractor’s wife said, “Yeah… it just fell down! It just fell out by itself.” It was interesting because you could see up there, that there was footprints from the inside where the contractor was crawling around and walking. So you had to gut your entire kitchen, which was not part of the plan.
RJ: Not at all part of the plan to gut the entire kitchen! We were going to do a major kitchen overhaul, but that ended up being the ceiling as well, and the soffets, and all that, all new cabinets and new countertops. And then you run into all the electrical that’s behind those, and yeah. That extended the time and extended of the budget a little bit with the kitchen.
Dustin: Yeah, and you had to a fire contractor?
RJ: Yep, first job I had to learn how to fire a contractor, yeah. So that was a good weekend. So that was a good weekend. Dustin: Yeah. but again, why I’m sharing this with you is because the title of this video is “Building a rental portfolio can be simple,” meaning the mechanics of the BRRRR strategy is a very simple process, yet it doesn’t have to be easy all the time.
Dustin: All right, so we purchased property, we rehabbed it four months, how fast did you find your return there?
RJ: Probably two weeks, or less, right away. Very quick. Great house.
Dustin: And tenants. Did you change tenants?
RJ: Nope, renewed, signed a long term lease. Great time. Four kids, they wanted the house, they didn’t want to move, didn’t want to move their children around. Perfect. They were great tenants.
Dustin: Good, and what’s the rent on it?
RJ: $1,250.
Dustin: $1,250. All right. So if we follow the BRRRR strategy, we bought the house at a discount, (RJ: Yep, from a wholesaler) Dustin: We rehabbed, it had challenges during the rehab process but rehabbed it, and then the renter part went pretty easy.
RJ: Very easy.
Dustin: Yes. So now the last two step is going to be the refi part. So that refi, let’s talk about that.
RJ: Yeah, the whole story? Dustin: The whole story, right now.
RJ: Okay. So now we have to go to a lender. Yep. Of course, we did not necessarily go right to the lender that Dustin knows the best. So we try somebody new. There were definitely challenges with that one, and we switched, you know, midstream. And then went to one of the lenders that, you know, Dustin uses a lot: FasterFunds Lending. [He] uses a lot, recommends people to. And then the refi process was easy. The house appraised at exactly what we thought it should appraise for. We were able to close on the deed, close it, close the loan, get our money back.
Dustin: Perfect. Dustin: Perfect. So in that process, the first bank that he went to, the appraiser came out and didn’t appraise the house properly or based off the comps that we thought was gonna happen. And this happens a lot in this process. I don’t wanna say a lot, but it can happen a lot.
The thing is you’re not married to that lender until you close on that property, so you can just pay for an extra appraisal and then go to another lender to get a better appraisal where you can get your money out. So, you’re able to appraise it, so how much did the first house appraise for?
RJ: $110,000. Dustin: Okay, so you’re able to pull 80 percent out of there. RJ: Yep. Dustin: So you pay off FasterFunds, got the majority of your rehab back, (RJ: Yep, pay ourselves back) perfect, and then how much are you cash flowing each month?
RJ: That house cash flows, after everything-net all expenses capex set aside-probably $250 a month, okay, and that’s everything. Dustin: Right, yeah, so that’s $250 a month extra you guys bring into your household? RJ: Yes. Dustin: You have, based off your numbers, about $83,000 into the house and the house is worth $110,000. RJ: Correct. Dustin: So what is that math? $27,000 right there. Instant equity by not… and you didn’t have to put any money down, correct?
RJ: Yeah. Okay! The system worked.
Dustin: Yeah, ladies and gentlemen, that is the BRRRR strategy. You can build a rental portfolio quickly leveraging other people’s money and getting all the money you put into it, the time you put in, and then start building that rental portfolio that pays you every single month. RJ: Yes, exactly.
Dustin: So what was the-probably the biggest learning moment that you had during this process?
RJ: I think we had two. First one was learning to manage a contractor, so there was a lot that we learned up front on how to better manage that process. And then, two, finding the right lenders on the back end when you do the refi, somebody who’s familiar with the process, definitely friendly for investors from their lender that we use too and we’ve gone back to the same one. So those are the two things we learned. Smart on the front end with contractor, use the right lenders on the back end which makes the refi very very quick.
Dustin: Awesome! So guys, that’s it. That’s the BRRRR strategy. I wanted you to hear this from a current borrower now. We are here to help with any of this. This is what FasterFunds was put in place for. We are a short-term lender in the St. Louis area that helps landlords and helps rehabbers out. I love the BRRRR strategy, I love talking about BRRRR strategy and also flipping and rehabbing houses. We help introduce you to some of the banks that we recommend, which again, RJ kind of made a good case in point that it helps when you have that inside connection there. So, of course, if you guys have any questions for me, or, I can give them to RJ, you can just comment below or send us a private message.
And also we look forward to seeing everyone this Thursday night at the buyer’s club because we’re back and we’re live. I believe RJ said he was buying everyone a drink who watched this so I don’t know…just kidding! But again, thank you guys for this. We’re gonna start doing these meeting uh our live videos probably every other week just getting some case studies and testimonials in here to show you how easy you can invest in real estate.
That’s all I have. Everybody make it a great day! Thanks a lot.