During this episode of The Road to Family Freedom podcast, hosts Neil Henderson and Brittany Henderson talk about the recent purchase of their first house as a rental property, the fees involved, advice that helped reduce the risk and future real estate goals. The importance of just getting started and the challenge of momentum.

What you’ll learn about in this episode

• Neil Henderson and Brittany Henderson bought a single family rental house in North Carolina. 
• How did Neil go about finding this property? 
• You need to have a trust-worthy boots-on-the-ground team when buying remote properties.  
• The purchase price was just over $60,000 and about $20,000 for rehab costs.  
• After the renovations are complete, the house can be worth between $108,000-$115,000. 
• What will the rent most likely be?
• How much will they be able to borrow if they get a mortgage for 75% of the home’s value?  
• Why did they choose a single-family deal? 
• Why was this purchase a low-risk situation? 
• How many properties do they want to acquire in the next 12 months? 
• What makes this single-family house a good deal?   
• A property should rent for at least 1% of its total purchase price. 
• Their end goal is not to own a massive portfolio of single-family homes. 
• The Fannie Mae rule allows individuals to have up to 10 mortgages.

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Recommended Books

• The Book on Rental Property Investing by Brandon Turner
• Long-Distance Real Estate Investing by David Greene
• Buy, Rehab, Rent, Refinance, Repeat by David Greene

Connect with Guest:

• Email: neil.henderson@gmail.com
• Website: RoadtoFamilyFreedom.com/connect

*FTC Disclosure: This post may contain affiliate links. If you make a purchase after clicking on the links, Road to Family Freedom will get a small commission. We are dedicated to finding the coolest products for families looking to building financial freedom through real estate and we never recommend anything that we don’t love.

If I knew what I knew now, I would have skipped single family homes. However, here's a really important caveat. Almost every one of them 99.9% of them began in some form or another with single family homes. So I think that people forget the challenge of getting that momentum rolling. I'm Neil

and I'm Brittany,

we are a family on a journey towards financial and location independence. Each week, we interview successful real estate entrepreneurs about their chosen investment strategy, and rate it based on how much money it took to get started, how long it took to educate themselves, how passive it is, and whether or not they could do it from anywhere in the world.

Welcome to the road to family freedom. If you like our show, the easiest way for you to give back is to leave us a rating and review on iTunes, head on over to road family freedom.com slash review for links and instructions on how to do that we would be so grateful. All right, and that thought of us Let's hit the road to family freedom.

Before we get to this week's show, I'd like to make you an offer. You can video chat with me if you like. It's something people do with me all the time. And it's completely free. Every Wednesday evening. This is a free strategy session done over video chat, anything and everything you want to talk about in regards to real estate investing. There's no sales call here. There's no ulterior motive, I'm not going to pitch you on mentoring program. This is really just a way for you and I to connect. I talk to real estate investors all the time at Ria meetings. But there are only so many meetings I can attend having a family and a full time job. And I prefer the one on one connections anyway, doesn't matter if you're brand new investor just starting out or an experienced investor. I can act as a sounding board or a deal you're looking at or maybe just answer some questions you have about real estate investing, head on over to road to family freedom comm slash connect and fill out the form there to schedule a call. I look forward to speaking with you. Greetings, friends and families. I'm Neil

and I'm Brittany and you're listening to the road to family freedom. Today I'll be interviewing a Las Vegas based investor and Airbnb operator. He's a husband, a father, and overall awesome person. He's Neil. Welcome, Neil.

Thanks for having me, Brittany, in more ways than one.

Yes, yes. So

we are putting together this little mini episode today because we bought a house, we rented a house, we bought a house, we bought a rental property. And it's the first rental property we've purchased strictly for the purposes of being a investment property. We previously owned a condo here in Las Vegas that really started off as our own primary residence was never intended to be a investment property. It turned into one a really bad one.

negative cash flowing investment property,

learned a lot on that as applying those lessons learned on this one. Yeah.

So what kind of property did we buy? Neal?

Well, Brittany, my love. We bought a single family rental in North Carolina. Three bedrooms, two baths, about 14 just shy of 1400 square feet. Head of the lovely open backyard to does North Carolina. Yeah, North Carolina is like in the south. They have like massive backyards, no fences and things like that.

Yes, it's very different from from Las Vegas where everything is fenced in with walls. Yes. And lots of rock. Yes. All right. So how did you go about finding this property,

I reached out to a friend of mine reached out to my network and told told people that I wanted to buy a single family rental and I was looking for a market where it would work. I found this market. And then this person already had a team in place that they had worked with in the past, a realtor who was experienced with working with real estate investors is very important. And also a contractor who also his property manager.

Yeah, awesome. Yeah, I think if you've listened to enough of our episodes, one of the things that you can really take from that is that if you are looking to invest long distance that you really do need to have some kind of team boots on the ground there that is really trustworthy. And one of the ways that you can do that is to sort of partner with someone who's already doing that or ask them you know, mentorship partner, pay them to help you do those first deals, whatever. We can get you in the door with those people or you know, find your own contacts, but it's really, really important because you can't do everything, especially from 1000s of miles away.

And I did, this came off the MLS. This was a foreclosure. So there are still deals out there. It took us, we probably made offers on at least half a dozen properties. And this one was actually the first property that we made an offer on. And it was originally our first offer was not accepted, but it fell out of escrow with the person who won the first bid. And then we came back in, offered, I think, 1000 more than what we did the first time, and we got it.

Awesome. Well, let's talk about the numbers there. Okay. So what was the purchase price

purchase price was just over $60,000.

Okay. All right. And then so this is a foreclosure. So it's, it's not in good repair?

No, it's not. But it's not actually. It's not terrible, either. It needs. We're doing a new roof, new floors, new h fac, probably some new siding on it. And I think statline says, I think it probably needs to be redone.

For safety reasons. So. So rehab costs, what are we looking at?

We're looking at about $20,000 Okay, all right. Oh, um, for about $80,000.

And what, what's the estimated value after we do all the rehab on it,

the ARV our estimate is it could be anywhere from 108,002 all the way up to about 115,000.

Okay, so what does that? What does that translate to as far as like rent and that kind of thing?

Well, if you do, we're all in at $80,000. And we estimate that the rent will be about 950. So if you were to do the 1%, rule, two, a quick math here math in public, pulled out the calendar, calculator,

your calculator, they both start with CS. Also, we didn't sleep last night. Yeah, we have a sick child or

sick child. That's 1.1%. You know, if you go for the one, the 1%. Okay, but more importantly, the ARV should allow us at $108,000. If we get a mortgage for 75% of the value, then they will loan us $81,000, which should allow us to pay back all of our initial investment. Awesome, and then turn over

it all over again. Okay. All right. So we've talked to a lot of investors in different spheres of the real estate world. And you know, we've this has been a long time coming, but this is really our first intentional real estate action. You know, the Airbnb even was sort of a, an accident and a lot of ways. And so why did we pick a single family home rental?

Well, first, let me correct you is not really our first intentional deal. We have been I have been involved on a large multifamily deal. That's true. And if I had to say where it was syndication, if I had to say where we're ultimately going with this, I would say that we're going more towards that. However, it's we've interviewed, now over probably 30 investors, and I've talked with at least double that number of investors over the last three years, some of them very successful. And I would say that a lot of them would say, Yeah, don't you know, I would have if I knew what I knew now, I would have skipped single family homes. However, here's a really important caveat. Almost every one of them 99.9% of them began in some form or another with single family homes. Yeah. So I think that people forget the challenge of getting that momentum rolling. I once compared what I was trying to do with multifamily and self storage, as like trying to push a 5000 pound boulder over flat ground, it's probably going to be good once it gets moving. But it's really tough to get that moving. So this was really an effort to get things moving and slow, but a momentum, the law of first deal, I can get into the specifics of how we financed it and why I think it's sort of a relatively low risk way to get started. If you aren't sure. Let's talk about that. Alright, so we're funding this from our HELOC. We bought we bought it as if we're buying it with cash. We have a substantial amount of equity in our home that we were able to tap and we were actually able to purchase this property with less than 20% of our overall equity in our home. So we're not risking a lot of equity in our home. We have to be very strategic in how we use that HELOC. I've had all kinds of people tell me you know Oh, you should take your HELOC and I put 20% down on a bunch of homes, you know, turnkey properties. And I don't I don't want to do that I look at a HELOC as it's really cheap money, short term money. And a lot of people do hard money loans. Those are great. They're also very expensive. And we're able to borrow this money from ourselves at 6% interest. And it's interest only.

Okay,

and the The plan is to, obviously, buy it rehab, get it rented refinance, which will then allow us to pay back our HELOC and then repeat. Awesome.

Since this isn't our ultimate goal, how many properties do we want to repeat on

my current goal, I've set out a plan over the next 12 months to acquire four properties. Now, I currently would like to do single family homes. But depending on how well it goes, I may decide to sort of move up and try and do a duplex or a triplex or four Plex, just so that we're we're using, we're going to refinance using the late finance program, which basically allows us to we don't have to have a seasoning period. If you've heard any of our previous episodes with Alex Felice in Episode One, the Huffman, I can't remember his episode, both of them are masters of the delayed finance program, which allows you to basically put your rehab costs on to the HUD. And so when you go to a bank and say, hey, I want to I want to refinance this, they basically look at that, and they there's no seasoning period, a lot of times banks will require you to do a seasoning period anywhere from six months to 12 months. But we don't have to do that as soon as we're done. Since we've got it rented was assigned to the long term lease, we take it, and we then we get the refinance over the long term.

So the seasoning period is how long someone was like that would be like, we'd have to have a renter in it for that.

Correct. Correct. So the bank will say basically, okay, once you get it rented, you now have to have it. You know, that person has to be in there for 1212 months before that you refinance?

Got it? Got it. That makes sense. And just to clarify, I'm making it sound like I have no idea what has been happening with this, but I really do. She does.

She's been she's been

very involved in the process. And yeah, you know, I've just, it's been much easier to allow you to really take the reins on looking for the property. And me sort of be more of the cheerleader and kind of learn and understand what you're doing along the way. Because I don't have the same eye or knowledge for finding those things. But it's been really interesting to be along for that process, and kind of see the different different places that that I have have come across. And that could be a good deal. And that could be a good deal. So do you want to talk about what makes a good deal for this?

Sure, we were looking for a property that we could acquire for more than 50,000. Well, anywhere from 40. To $60,000.65, I would say it was kind of our top, we're looking for something that would rent for anywhere from 850 to 1050. That's kind of the sweet spot in this market. It's kind of a B class working class housing. It's not like super nice, but it's not a really bad area. And then it's just a matter of finding a property, you don't want to go too low. Because you you want to be all in for over $50,000 Otherwise, the bank's not going to finance it.

Okay.

So a lot of times, you know, people will say, Oh, hey, I'm buying these houses in Detroit for for $10,000. And I'm putting $25,000 in them. So I'm only at $35,000. And I'm like, Well, good luck getting financing on that. Most banks won't do that. So we really, you know, I sort of once you kind of have that, what the rent is going to be nice, you can kind of back into that for what the 1% rule is going to be. Okay. Now, if you recall what the 1% rule is, it's, it's it's a rule of thumb, it's not hard and fast. It's basically says that a property should rent for at least 1% of its total purchase price. And you should if it if you do do that, then you should be okay. Now that's it. Again, it's not a hard and fast rule, you still want to run your numbers. It's just a way of screening it. So we were looking for properties that I could basically rehab for buy and rehab for under, under $85,000. So we're gonna have to take a pause here because I can hear our As he's six Okay, let's see if we can get back into this. We are.

We're back after some snuggles. Slow cough medicine. Some TV. Food.

Yeah. Sick five year old right now is pretty pitiful.

So you know, that's but that's what the road to family freedom is all about. Yes. So

where was I think I was talking about what makes what makes it a good deal? Yeah, it was it fit the 1% rule, I sort of backed into it from the rental, we anticipate it's going to rent for about 950. So if I was going to buy it at the 1% rule, that would mean that I would want to be all in at $95,000. And we're all in it about 80,000%. So

we have some room in case there's a rehab thing that

if a rehab goes a little higher, it's okay. I don't anticipate it will. But it's always a possibility. Yep. So awesome.

All right. So we just went over everything. So what else would you like to say? Well, about our this project, or you know, what we're doing going forward? Well,

I think it's some, I think it's important to understand that this is my end goal, our end goal is not to own a massive portfolio of single family homes. We right now, I have most I think what I'll do is buy nine of them. And that's because of the Fannie Mae, Freddie Mac rules allow you to each individual to buy up to have up to 10 mortgages, we have currently one on our primary residence. And I can add nine to that under my name. And currently, that's how we're going to finance them. Brittany's name is not going to be on the loan document. These where I'm going to try and save her name for if we want to do nine more. Yeah, I don't think we will. But I want to leave open the possibility. And again, this is this is a base hit, it's a step forward. A lot of real estate investors never get to this part. And we have struggled to get as far as we have. And my good friend Eric Hemenway talks about every real estate transaction begins with a certain percentage of fear and a certain percentage of excitement. And when you're new, and when you've never used a HELOC to, to the 100% 100%, purchase a property that you're then hoping to rehab and refinance and get out of it, there's probably more fear than excitement. And so this was a way for me to do something that was really not all that hard, wasn't big, wasn't a massive big transaction that I'm trying to do. And I know that we have, even if things go wrong, and we have a reserve to handle what, you know, handles overs, we have the reserves to handle the costs that would would come from

Yeah, yeah, that makes sense. And it's really as you you kind of have to, you always have to start somewhere. And the other thing is, I don't even know that a lot of it's not necessarily that we didn't know how to go forward, we didn't didn't have the the resources, or anything or other tiny or their child, it's our free one is about to bark, because it's we're recording this when daylight savings changed. And so it's it's 420, but she thinks it's 520. So, anyway, hopefully, she'll be quiet for the rest of this. But I don't necessarily think that all of us because like we can't move forward another way that we're scared or we don't have enough knowledge or anything like that. It's really just that, logistically speaking, because of the circumstances we're in right now between our full time jobs, and you know, our life, that some of those other options just aren't really good options right now. So we want to get into this, we want to learn more, we want to be able to sort of walk the walk, as well as talk the talk because we have this podcast. We know a lot about this, but we aren't doing as as much of it as we want ourselves. So this is a great way to get started there, learn some things and really be able to speak without feeling like we have imposter syndrome. Yeah, yeah. I

don't feel I don't feel that way. But it's a matter of reducing the fear percentage with real estate transactions and increasing the excitement. I mentioned. Again, I mentioned my friend Eric Hemingway. Eric's been in real estate for 20 years. I'm sure he's lost money. But Eric is one of those guys. I love Eric, if you're listening. Eric is one of those guys, when you bring him a transaction. He's like cool.

Let's do it.

And because he's done enough real estate transactions that he's he's got confidence in himself about, you know, what's the worst that's gonna happen? Okay, well, there's a lot of money, we'll make money on the next deal. Yeah. And so that's kind of what this is about. It's about sort of reducing that fear factor and, and getting some steps in the right direction.

Awesome. All right. All right. So

are we there yet?

No, we're not there yet. We're in the car and we started the car.

Awesome. All right. All right.

So we'll see you next time. Next week. All right. Let's hit the road. And if you like this podcast, we would really appreciate it if you take just a few minutes and leave a review for us on iTunes. It's really simple to do. Just go to road to family freedom.com slash review for links and instructions. Thanks for listening. We're doing this all again next week. Until then, safe travels.