Update on the rental empire: Anno Darwinii 0.25

It’s been a few months since I closed on my first rental property.  It’s high time for an update on the state of the empire.

As an easy way to track the progress of my real estate ambitions, I am going to mark the birth of my empire from the closing date of my first rental (mid June 2019).  All events afterwards will heretofore be measured in a new timeline: Anno Darwinii (Year of Darwinian).

So it’s now Anno Darwinii 0.25.  Here is what’s going on.

First rental property

To recap, in mid June 2019, I purchased a 3 bedroom, 1 bath property in Birmingham, Alabama. I purchased it for $92,000.  It appraised for the purchase price and I used what I felt was a reputable* turnkey operator.  

*”Reputable” defined as having good third party reviews.

I had a friend who had previously purchased three properties through them. The quality of their rehab was good, he said, but their property management (PM) left something to be desired.  One of his properties had an eviction, and then had over 12 months of vacancy before being re-tenanted. He ended up taking his properties to another property manager.  

Perhaps he was just unlucky, I thought. Perhaps the tenant just took a really long time packing…

I decided to give the in-house property management a chance.  

Vacancy woes 

After two and a half months, my property still wasn’t rented to a tenant, despite twice monthly email inquiries and phone calls to the PM company.  To their credit, they promptly answered each inquiry with reassurances and a description of their efforts. But obviously their efforts weren’t enough.

So after three months with no tenant, I made the executive decision to fire the PM company.  I called the same company my friend found after his own bad experience, and filled out a stack of papers to switch over management.

I got the good news just a few days ago that a tenant has signed a lease for the property.  Once they’re moved in, I’ll finish my calculations about my projected returns and write up a post about it.  Suffice to say that 3 months of vacancy are going to drag my expected return down quite a bit.

Second rental property

Rome wasn’t built in a day, and I’m sure Julius Caesar would say that forming an empire has its fair share of challenges (Ides of March, anyone?).  

Not to be dissuaded by my Birmingham experience, I’m forging ahead.  I got off the > 1 year wait list of another turnkey provider in the Memphis / Little Rock area, and just went under contract with a 3 bedroom, 1.5 bathroom house in Little Rock, Arkansas.  

• Purchase price:  $94,000
• Renovation completion date:  November 2019
• Target rent:  $925/month

So far, the purchase experience has been quite smooth.  Smoother than with the Birmingham company.

They have a rabid base of customers, and it seems like all their properties get reserved within 24 hours.  Basically, they sell them as fast as they can source the deals.  

I’m hopeful that this property will be tenanted and stabilized quickly.  Call me an optimist.

Third rental property!?

Real estate is a little addictive as an asset class, and I’m consumed by a desire to quickly grow my rental portfolio.  So as my first two properties are percolating through to stabilization, I’m moving swiftly onwards.

But I’m hoping to tackle something a bit more challenging for my next property. I’m looking for a potential BRRRR (yes, it has 4 ‘R’s).   This stands for:

• Buy:  purchase a distressed property
• Renovate:  Use a local construction team to renovate the property
• Rent:  Use local property management to rent the property to a tenant
• Refinance:  Use a bank to refinance the property to recapture 70-75% of the higher ARV (approximate retail value)
• Repeat:  Use the proceeds to repeat this process

The acronym was coined by the folks over at BiggerPockets, which is one of the dominant internet repositories of all things related to real estate investing. 

See this link for more details on Brrrr on the BiggerPockets website. Rest assured I’ll publish my own explanation of this in the future as well. We have no financial relationship, sadly.

I’ve spent the last month cobbling together team members to give this a try, and withdrew about $100k from my taxable investments to fund this project.   Yeah. I’m going for it.

So lots of developments, and we’re only a quarter of the way through the first year of Anno Darwinii!

I’ll keep you all in the loop about my progress.

— TDD

What do you think? Horrified? Excited for the future of The Darwinian Doctor’s real estate empire? Let me know below and subscribe for more updates!

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