Rental House # 3 Details

We were so excited to have our renters move in last week, and we will be receiving $1100 a month in rent for this one. I thought it would be a good time to walk through what we learned on our first BRRRR and full interior remodel. We picked up the Indy Beauty from a wholesaler right before Christmas for $37,500. It was full of junk, a few squatters and smelled terrible, but was also full of potential, and we couldn’t be happier with the end results.

Here’s the before walk through video as a reminder of how dark and dingy it was.

Here’s a few after pictures from our rental listing

The whole renovation took about 60 days, if you take holidays and bad weather into account. We used a General Contractor to manage the interior renovation and oversee any work, and we used our own subs for the exterior work. There is no way we would have been able to handle a project of this scale on that timeline, so we were happy we hired it out.

Not only was this our first time purchasing off market from a wholesaler, it was also our first time using a hard money loan. Total renovation and holding costs for the hard money loan we used came out to be a little under $50k. This covered a six person three day clean out project, complete interior remodel including new flooring in kitchen/bath, refinishing the existing hardwood and cabinets, exterior painted, new windows, new appliances, HVAC, and electric panel (sure I’m forgetting something). We also did some extras to help reduce any maintenance or expenses in the foreseeable future, such as replacing sections of the fence, trimming all trees, removing several, and installing automatic garage door openers.

Since this was our first time working with a hard money loan, I wasn’t sure what to expect, but it was pretty easy. We closed on the home in under two weeks of looking at it and it was easy to get the renovation money. We had to put 10% of our own money down for the hard money loan, so right around $8,000. We had a 50/40/10 arrangement with our contractor, so our lender needed a statement of work upfront and then did a walk through at the 50% mark and we received the funds wired to our account same day. I will say the hard money lenders definitely make a profit, so we will also do a better job next time looking at a few options and seeing if we can find one with better rates or look at private lending options. Luckily, even with the high fees, the numbers still made sense on this house, even with us going a little over our initial renovation budget.

So, if you’re keeping track of the BRRRR, I’ve covered the buy, rehab and rent piece so far. We were using a private lender to do our 30 year cash out refi, and had completed all of the paperwork, jumped through all the hoops, and were just waiting on the appraisal, which was scheduled for this past Tuesday. Well, the appraiser didn’t let us know he wasn’t coming and just didn’t show, and then an hour later, we got an email from our lender that they are pausing their 30 year cash out lending program due to COVID-19. So, well, that was a really really frustrating email to receive. BUT, it means we now just have to wait until June, when we have owned the home for 6 months, and will use our traditional lender and look to be approved based on us as borrowers opposed to off the asset. (as long as they are still doing investment property loans..who knows with all the craziness going on right now what the world will be like in June)

So we have two things that are currently out of our control left on this one. 1) The appraisal-we need it to appraise at $120-125k for us to be at a 75% LTV to pull all of our money out and pay off the hard money loan. This is in line with other homes in the area, and ours has some extras, such as a huge corner lot, unfinished basement, and a detached garage. Worst case scenario, if it appraised below or the housing market crashes between now and June, then we would just end up keeping some of our own money in, right around $10,000 of our own or possibly more if it appraises super low, which we are comfortable with doing if needed. 2) Being able to even get financing. I’m just not sure how the current state of the market and the pandemic will impact cash out refinancing for investors 90 days from now. Assuming they may tighten up their requirements or may want to steer clear of cash out refis all together..who knows. So all we can do at this point is just wait and see and be prepared for a worst case scenario. This will put a hold on our goals of buying a few more houses using the BRRRR method for the time being, but we will be ready to purchase again when it makes sense.

In summary: Purchase Price of $37,500 and Renovation/Holding Costs around $50,000 for a total of $87,500. Hoping for an appraisal around $125,000 and currently getting $1,100 a month in rent.

How do you think we did or what questions do you have for me about the process?

6 quick tips on budgeting

Man..it’s crazy to me that it’s 2020 and there are still folks running around rogue with their finances, thinking it’s not going to catch up with them. Several recent studies show that only about 40% of people are living that budget life. 😱

I have personally been living with a budget for over a decade, and I can promise you that this is one of, if not the biggest contributing factor to my current debt free and wealth building chapter of my life. I would definitely still be living beyond my means without a budget.

There is no better time then right now to put the money you make to work..and that money isn’t going to get to work without your help. So do me a favor, and if you are in the 60% of people who don’t currently budget, then make a pinky swear to yourself to start ASAP…after reading my quick tips of course. 😉

Tip 1-Live off of a zero budget. That’s a fancy way of saying that every single penny you have incoming should have a home for where it needs to go. The key to this is to assign your money jobs BEFORE you’re eyeballing that delivery menu on an empty stomach or you’re clicking on that BOGO sales ad that just landed in your inbox. So a few days before the month starts, you can sit down and map out your incoming vs outgoing. Mind that gap with some investing and savings. Which brings me to my next point.

Tip 2-Have a goal you are working towards. Whether it’s building your savings up, paying off debt, or investing in index funds to work towards financial freedom..you will be more successful minding the gap if you have short term and long term financial goals in place. Don’t let lack of planning cause you to live with a YOLO mentality..it’s true..you only live once..so get your shit together already. Nobody wants to keep hearing your “I’m broke and just barely getting by because they don’t pay me enough” talk, yet you’re driving a new car, eating out, constantly getting new clothes/AmazonPrime packages and texting your money problems on the latest IPhone. (sorry for being a little harsh..but seriously..someone had to say it)

Tip 3-Speaking of planning..plan for the unexpected. I’m talking about having enough in your savings to cover a bigger item, like a new transmission, your HVAC suddenly breaking down, your car insurance deductible from an accident, or taking your dog to the vet after they ate something crazy again. I don’t have time to get into details here on what’s considered unexpected, but if you have to ask if it’s an emergency..it’s not. Also, stuff that is recurring, like personal property taxes or Christmas gifts are NOT unexpected. You knew all damn year they were coming up..you should have separate money you’re putting back to plan for these annual recurring expenses.

Tip 4-Check for trends and opportunities. For example, if you are noticing a large chunk of your money is going towards gas, then it might be time to explore a more fuel efficient ride. If you are spending over $100 each time you hit up Target, then it might be time to keep your ass out the store. Luckily, there are other ways to shop now, including carryout or delivery, so that could possibly help keep you to the items you need vs want. Also, if you find yourself doing a great job, like going two weeks without eating out..then celebrate. Rewarding yourself (within reason) for good behavior is a great way to train yourself on new spending habits.

Tip 5-Give yourself a cash allowance. Let’s be honest..little things come up and having some cash on hand is a great way to take care of these little things. For example, if you slept like crap and really NEED a Starbucks latte..go get yourself one. Or the neighbor kid hits you up for buying some Girl Scout cookies, and nobody can say no to those Caramel Delights, nor should they say no. Much like crash diets, budgets don’t work if they are so strict that you feel deprived, week after week, month after month. This will make you more likely to fall off the budgeting bandwagon, so plan to allow a little flexibility sometimes.

Tip 6-Make it easy. Budgeting is a long term wealth building strategy..not a get rich quick scheme..remember that as you set things up. Keep it simple and keep evolving as you and your needs change. Setting up autopay on everything is about as easy as it gets for your fixed expenses. Also, for tracking, I used a paper check register up until last year..lol. BUT it was easy and worked for me. Now I have a word doc that lists out all my recurring expenses, along with an app called Spending that tracks all incoming/outgoing expenses. Don’t get so caught up in trying to figure out the details to a point where you don’t ever start. Any way you track is better than not tracking at all..so get to it already.

You know I am happy to share my tracker if interested and answer questions, so ask away.

Reflecting on 2019

There will be a whole 365 days in 2019 for us to have set goals, have taken action, worked hard, and to have crushed those goals. Year end is a great time to throw modesty out the door and recognize how great your year was and how awesome you are for all that was accomplished.   If you did the work, then I don’t care who you are, you deserve to celebrate, so go on..brush your shoulders off.

If you instead stayed on the couch all year again, and your biggest accomplishment was only gaining 10 lbs from all the junk you ate while binge watching all the Netflix original series..well then..might be good to reflect on that also.   Still playing the “victim of your situation” game and convincing yourself that you can’t change or grow because “insert your excuse here”.  Did that binge or pity party help you or hurt you?

Not trying to brag below I promise you..just trying to prove that you CAN do big things if you set big goals and are ready to take action and put in the work.   You can and should think differently about life and the pursuit of happiness..question things and don’t just do what everyone else is doing because it’s easy.  Also, I’m sharing some stuff that makes me feel vulnerable and gives a private look into some events in my life over the past year.

If you’re not ready to grow and celebrate success, then please stop reading this and head back to your latest Netflix binge. If you are ready, but not sure where to start, start by grabbing a pen and paper and write down everything you accomplished this year that makes you feel proud to tell others and makes you feel like you have grown as a person.  Then go share it with the world!!

See my list below:  My 2019 Accomplishments

  1. Started MySemiBasicLife.com blog and InstaGram account
  2. Grew organically from 150 followers to 1250 followers
  3. Helped teaching my youngest to read and my oldest to read and rehearse lines for a major part in a play
  4. Bought 1st rental property end of March 2019
  5. Bought 2nd rental property in August 2019
  6. Bought 3rd rental property in December 2019 (this one with a full cosmetic rehab)
  7. Was a guest on not one, but two podcasts, and submitted an idea to one of my favorite podcasts, and got to speak with the producer and provide input on a new series (can’t share any more info..sworn to secrecy..lol)
  8. Became debt free after selling our cars and paying off the remaining of our $165,000 in consumer debt. Nobody to impress now that I’ve changed my value system and if I don’t have the cash for it, then I’m not buying it.
  9. Completed a No Spend Year of no clothes, shoes, accessories, purses, makeup, haircuts/dye. Turns out I don’t give a shit what others think of me after all, and I don’t need makeup or new clothes to try and impress anyone.  “Letting myself go” in the eyes of society by not wearing makeup, rocking my grey hair, and not buying the latest clothing trends feels a lot more like getting comfortable in my own skin.  I’ve never felt prettier on the inside and out then I do right now.  I also learned to cut my own hair..not getting accepted into cosmetology school anytime soon..lol, but I can do it and it’s fun and free.
  10. Joined a real estate mastermind group and joined a local real estate investors group and have networked and made several great connections in the industry
  11. Attempted my first seller finance deal (didn’t work out but was a great learning experience and made some new connections in the process)
  12. Helped land a few really big accounts at work that required a lot of work and were out of my comfort zone
  13. Was matched with a little sister through Big Brothers/Big Sisters and continued to volunteer on the family selection committee for Habitat for Humanity
  14. Survived a lot of loss including losing a good friend to glioblastoma, losing my dog of 17 years, losing a terminal puppy we adopted, a dwarf hamster, and a pet rat. Lastly, there was an advanced stage breast cancer diagnosis for my mom with lots of biopsies, dr visits, chemo rounds, lots of soups/casseroles and will be leading in to surgery/radiation/hormone replacement in 2020.
  15. Started a gratitude journal that I write in every night.
  16. Started a daily morning meditation and manifesting the life I want practice.
  17. After my leg injury finally healed, was back up to running over 5 miles until I got bit by the neighbor’s dog..lol
  18. Stopped two nasty habits that I have battled on/off for years, smoking and drinking.  I still occasionally have a beer or drink, but not like I used to and have been smoke free since 6/1/19!!  I’m now focused on enjoying my current situation more and building a life I don’t need to escape from.  No judgment to my friends that are still doing these things..just doesn’t fit in my life any longer.
  19. I read 45 books this year!!
  20. Experienced 6 figure net worth growth through all of the above focus, hustle and sacrifice

Wow..I DID ALL OF THAT IN ONE YEAR??!!  I did notice that I didn’t have as much of a focus on my marriage or kids this past year, and plan to make sure I am placing more focus on those areas of my life in 2020.  Of all of those accomplishments, I am most proud of the self love and belief that I can do anything..because clearly I can after seeing my list!!  Also, with the belief in myself, I have noticed my risk tolerance is completely different.  I am ready to take on risks instead of turning away from them, because I know I will learn and grow from any mistakes, so bring them on!

Did you write a list of goals at the beginning of 2019 that you can compare your end of 2019 accomplishments to?  If not, no worries, because  I didn’t write any goals out at the beginning of the year either.  2020 marks the beginning of a new decade and new opportunities to start fresh for all of us.  Make it the year you stop saying “someday” and finally replace it with today.

Anyone else brave enough to share their year in review??!!

BRRRR it’s getting cold in here 🥶

I know I know..I’m sure everyone is thinking there must be some Toros in the atmosphere comes next?! Or maybe I’m the only old ass nerd still out here quoting Bring It On, which by the way, happens to be a classic cheerleading movie. 📣 🎥

Ok focus..it IS super cold and snowing hard here in Kansas City today, so it’s perfectly timed to talk about BRRRR, which is why we are all here (not from the cheerleaders movie or cold weather, but the real estate investing version). The strategy has been around for a minute, but the guys from BiggerPockets hold the clever naming rights I believe.

I am SO SO SO PUMPED UP to be getting after our very first house using the BRRRR method. So I wanted to explain this strategy very high level, and how it can be a great way for investors to grow a portfolio of buy and hold properties quickly, and with little of their own money tied up in the deal long term. Clearly I’m a newbie and can only speak to what I’ve researched/read/listened to, and what real life has brought my way so far, but thought I could at least introduce the concept to other newbies.

The premise is a way to use little of your own money while growing a buy and hold portfolio. In its simplest form, it stands for buy, rehab, rent, refinance, then repeat. We are still in the “buy” phase of ours, set to close this week, and excited to move into the rehab piece and plan to share the full details once we wrap up this project. We are going to just use some rough numbers here as an example.

Let’s say you find a distressed house or a homeowner who needs to get out fast of their current home. There’s lots of ways to find these deals, which I’m not going to cover in this post, but will save for another day. The distressed home or owner is an opportunity for you to help solve their problem and to buy their house from them. You would aim to acquire low, due to current condition of the home, taking into consideration all of the repair costs, and your ability to close fast. You would also need to make sure all of the numbers truly work for a BRRRR. But let’s say you can get this house for $30k and it needs an additional $30k in renovations. You use your own money, private money or hard money for the initial purchase and rehab (also lots of funding options I will also save for another post).

You know from looking at comps in the area (not houses for sale, but comparable houses that have already sold recently) that the ARV, or “after repair value” is around $100k. You have also checked average rents in the area, and know it will rent for $1,000 a month. So, after you rehab it and rent it out, then you go to a traditional bank for a cash out refinance on the property at $75k, and you pay yourself or your private money lender back and you now have none of your own money tied up in the deal and have acquired an asset with 25% instant equity. You have a tenant placed and are now cashflowing a few hundred bucks a month after your mortgage/expenses. You also walk away with a $7,500-10,000 profit (after closing/holding costs).

You keep repeating this process until you get to your buy and hold end game number, whatever that is for you. Work until the cashflow covers your monthly expenses to live, then you can sit back and enjoy your time freedom from your rental portfolio, or you never quit…completely up to you. 🤷‍♀️

I know I’ve simplified the process, but that was my intent. There are a TON of resources out there, including lots of investors using this strategy and sharing their successes/learnings, lots of podcasts, and even some books, so go do your research and dive deeper to fully understand. I would also love to hear input from others out there who are ice cold BRRRR experts. I just love this strategy and I hope sharing from my real estate investing toolkit will help you either get interested in getting into real estate, or help you to strengthen your current investing game.

Shout out for NO SPEND SATURDAY

OK so we DID get our Costco groceries haul for December, but just necessities..right along with milk and eggs, Cheez-it’s are totally necessary right?! Also, my uncle and cousin were passing through town and kind enough to take us out to lunch so we could catch up.

2.6 mile trail walk with kids FREE

Impromptu photo shoot FREE

Finding a tree stump to sketch FREE

Finding a cool leaf FREE

New walking stick FREE

New pet caterpillar FREE

Is it just me, or have you noticed that the less you spend, the more freedom you have to enjoy yourself?!

No stress of watching your hard earned money leave your bank account or worrying about if you got someone the right thing or if it’s the right size or color or whatever the many stressors that come with shopping are. No stress about how the other bills are going to get paid now that you decided to make this purchase, or the extra hours it will take to cover what you spent. I know that when I spend money, the dynamic changes. I now have expectations and pressure to make sure it’s a fun time or a good meal or the best most memorable gift. Maybe it’s just me, but if I take spending out of the equation, then I literally don’t have to worry about it. It then becomes about enjoying the moments and making memories with my peeps.

The weekends, and especially those leading up to the holidays are HARD. Everyone has a deal going and all of our senses are inundated with smells of candles or food, seeing a must have item advertised for $5 off, touching all those soft blankets and stuffed animals, hearing the ads and workers at the store telling us today is our last chance, etc. This is all that most of us are used to..our society has been like this for as long as I can remember, and as long as we continue to consume at the rate we do, nothing will change. We truly have to make an effort to avoid, so if you are able to stay strong on any shopping front, you are winning. A great way is to start with a No Spend day or weekend. Another great way to do so is 1) to set a Holiday budget and 2) stick to it. Know who is on your list, know how much you want to spend, and make sure you have the funds to cover any of this. If not, your family and friends would much rather you bake some cookies, or spend time with them than to have you go into debt to show your love. Trust me on this one!!

Who else left their stress at home and their money in the bank today? Any other tips for surviving the holiday season?

Intro time

Intro time! I want to learn more about all of you, so please share as little or as much as you want. I will get it started. 👋

My personal residence in the Kansas City area is what I call “the zoo”. Always lots of dogs and kids running in and out and if the garage is open, then let yourself in. 😉

I have two awesome kids..one who is learning to read and the other is reading lines in her latest city theater play. I have a very patient and supportive husband, with a beard, who breaks gender stereotypes by cooking, doing dishes, AND the laundry. 🧺

A few hobbies include meditating, yoga, running, reading, writing, eating but not cooking, and volunteering on the board for Habitat for Humanity and as a big for big brothers and big sisters. I work for an insuretech company and my degree is in sociology with a minor in psychology and I LOVE people watching. 👀

When I look back on what we’ve done this year since I started mysemibasiclife, it’s been a journey of finding our values, embracing minimalism, doing a No Spend Year, paying off $165,000 in debt, buying two rental properties, and continuing to build wealth through diversification. 💰

My goal is to help you take control of your mindset and financial future, so you can design a life and a legacy to leave your mark on this world. 🌎

I’m an open book, so ask me any questions and tell me about yourself. 👯‍♀️

Photo credit: my yelling and my IPhone timer

Value Based Budgeting

I know I’ve shared in the past that I am a big fan of the zero budget, which means that before each month starts, I go count every single penny I will have coming in, compare it to what’s going out, plan for any variable expenses for the month, and then put the rest to work. Since paying off the last of our debt, these remaining funds have grown as high as almost 70% that I am using to fund our real estate portfolio and other savings/ investment goals. When I put that all in writing, I know some of you on the FIRE journey (Financial Independence Retire Early) are probably pretty in line with this strategy and aiming for the same, or maybe already achieving it.

I also realize for someone who is anti-budgeting or brand new to budgeting, then my current path probably seems pretty extreme and even intimidating. Just know that I didn’t start here..I started somewhere though, and sometimes just getting started is the hardest part. So I have a middle ground solution for those that just want to dip the very tips of their toes into figuring out once and for all the following two things without counting every penny 1) where is my money going and 2) is that where I want it to go?

So here is a really quick and easy way, inspired by the book “Your Money or Your Life” By Vicki Robin. If you haven’t read this book, please do yourself a solid and follow the affiliate link below and pick up a copy, and maybe grab a few extra for gifts. It is a very influential book that will CHANGE YOUR LIFE.

https://amzn.to/376Bipl

One way to get started thinking about the two questions posed above is to make two lists. One should include your top 3-5 things that you value, and the next should list your top 3-5 things you spend the majority of your money on each month. That can give you an idea on if your values align with your spending each month. For your first time doing this, you should expect some room for improvement, so don’t be too hard on yourself and just focus on how you can get better. Before any purchase, simply ask yourself “is this aligned with my values?” If the answer is no, put that delivery menu up or put that shirt back on the rack.

Want to really make some value based budgeting and spending become your new normal? Another eye opener activity to help with this is to go back and add up how many hours you have worked for all your life and how much earned income over your lifetime you have made, and then compare it to what you have in savings/investments/assets. Is there a huge deficiency? Great way to see how all those little things quickly add up. Find 3 ways right now that you can start keeping more of your money and write them down.

Does anyone else currently do value based budgeting?