Guest Speaker Alex Hines- How to Turn $40K into a $160K Investment Property & Get Passive Income !

Guest Speaker Alex Hines 

Caeli Ridge pre-recorded this episode on 11/3/2023
 
Caeli and Guest Speaker ( & Ridge Lending Group Borrower) Alex Hines discuss how he has been so successful in real estate investing in just the few years he has been doing it.

They go into detail about his properties and how he has been able to fix and flip while still turning a great passive income on his properties. 

Check out the video with the screen share and the documentation in the Community and our YouTube Channel.

https://www.youtube.com/c/RidgeLendingGroup

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855-747-4343 or email us at info@RidgeLendingGroup.com

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Transcript

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caeli ridge: Okay. Well, good morning, everybody. Caeli Ridge. Here, Ridge lending group. I am excited because today I am pre-recording this coming Tuesday, the seventh.

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caeli ridge: Live with Caeli with a special guest, Mister Al Hines.

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caeli ridge: He is a client of rich lending and an investor obviously, and he has what I believe to be a very unique story, or maybe some stories to share with us, and how he's been able to

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caeli ridge: successfully achieve some pretty substantial goals and milestones out of over the last few years.

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caeli ridge: Taking properties and identifying certain value, adds in the property and using a certain amount of capital and then turning it into 2 and 3 times the value in an investment

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cash flow. So I'm going to be asking him some questions. He has graciously agreed to be here with me this morning Saturday morning.

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Al Hines: taking time away from my hair a one year old, in the adjoining room, so we may hear some background noise. We'll see what happens there. Alex. Thank you so much for being with me. Yes, good morning, Charlie. Thank you so much for having me. It's a pleasure to be here, big pat your show and thank you guys. So thank you. Thank you. I appreciate that. Alright. So we're just gonna get right into this. I'm gonna pull up some of my my notes here, cause I've got some questions that I wanna ask you.

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First and foremost, everybody let me. Just

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caeli ridge: let's get to my notes

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caeli ridge: right here. First and foremost, I just wanna kind of set the stage here. Alex is a real estate investor. He started his journey about 3 years ago during the pandemic, which is unique.

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caeli ridge: And he has now currently a total of 6 rentals, the equivalent of 10 doors. He just sold a fix and flip, so he has a nice balance portfolio from what I can tell of having some buy and hold, and he's been successful in purchasing and then reselling for the profit

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caeli ridge: which is also kind of unique for having only been doing this for about 3 years. He also shared with me. Before we started recording here that he started with single family residents as his kind of core strategy. And it appears as he's moved up, or or maybe just diversified, and also

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into the 2 to 4 units. We'll get into some of those questions in a second

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caeli ridge: in this case, and all of his properties are in Georgia. And I didn't ask Alex, are they all in one particular area, or do you kind of

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Al Hines: take the state and different zip codes and neighborhoods as you think the opportunities are available. Yeah, I look at different zip codes and neighborhoods. I have 2 properties that are fairly close to one another, and then another property which is on the southeast side of Atlanta, Georgia, and then the the triplex properties and a city right outside of Atlanta, called Mcdonough, Georgia.

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Al Hines: And then I have 2 duplex properties down in Macon, Georgia. So I'm pretty diverse when it comes to the State of Georgia.

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Al Hines: And you're you're pretty familiar with those different areas, right? Have you lived there your whole life? I am actually well, I've been here since college. I started college here back in wow, 1998, so long time ago. But yeah, I'm pretty familiar with the State of Georgia. Certain areas of Atlanta, obviously, which are up and coming

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Al Hines: I've been paying close attention to, and I've been able to kind of put together a nice little strategy as far as how I'm able to make these purchases.

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caeli ridge: Yeah. And I think that'll be evident for the listeners here, once we get into some of these numbers they'll be able to see. You know

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caeli ridge: what you've been able to do, and I would say that most people would agree. If you're going to do the the fix and flip, and you're going to and and not really on the turnkey side. So everybody that's listening. Alex. This is a lot of sweat equity, right? Hands on.

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Al Hines: Yeah, something that you can do from afar. Probably you're gonna be far more successful if you got boots on the ground, and you were real familiar with the area? Absolutely not. You know. I would just, you know, my own advice to people. I started with, you know, buy and hold strategy, you know, just

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Al Hines: putting down the, you know, 20% taking out a mortgage and then just collecting cash flow.

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Al Hines: It's it's a lot more difficult just to start fixing and flipping. So I always recommend the people start with the buy and hold Strategy first try to build up your cash, flow, your monthly cash flow, and then you can kind of dive into

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Al Hines: the fix and flipping part is not as easy as Hdtv. Presents dealing with a lot of contractors. You know, timelines, a lot of sweat equity, and just a lot of cash. Unforeseen issues arising obviously comes up all the time. So

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Al Hines: this was a great learning experience for me. Taking on that fix and flip.

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caeli ridge: Yeah, and I think that's great advice. Ii would give the same to anybody that would ask my opinion. Start small start on the lowest end of the risk spectrum, and that would be, either, you know, finding it yourself or turnkey. Buy and hold single. Family residents don't complicate things with extra units smaller price point, I would say, just, you know, in case something comes up. I always tell my clients.

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caeli ridge: you know a hundred $1,000 property or $75,000 property if it went on rented to stroke a check for 75, a mortgage on 60 grand or whatever it is, is, gonna be much more manageable than 250 or 350, whatever it is, but getting your C legs right, just understanding some of the the mechanics of of getting into real estate investing, starting on that easier, less complicated side. I think that's really wise advice.

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caeli ridge: Okay, so let me. So I'm just going to kind of paint the stage for everybody and go over some of these numbers. So the property that we're talking about are kind of showcasing today. Alex purchased

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Al Hines: how long ago, Alex. This has been a year a a year process. He purchased the property for 40,000,

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caeli ridge: and he's got about 40,000 of renovation rehab dollars into it. So we've got 80,000 in acquisition cost and we believe, based on his own research. And we'll get into some of those questions, too, that the estimated appraised value cause. He's we're we're right at the end of that. The process here, where he's gonna be refinancing.

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and, you know, getting his equity back.

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caeli ridge: But the actual appraised value estimated is believed to be between 1 60 and 1 70.

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Al Hines: So why don't we? Just let's just get into that

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caeli ridge: if you can. My first question, if we think that the value A is gonna be in that 1 61 70 range. Can you kind of define for us? How did you determine that baseline value, I mean, do you have access to the Mls there? Give us an idea of of where you're getting that number, or how. What I did was, I do have access to the Mls.

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Al Hines: And this was down in Macon, Georgia. So it's roughly about an hour drive for me. But I actually purchased a duplex in Macon, Georgia, and at that time at a price for 165,000. And then our way, I was able to see that other duplexes or multi family units were selling for around that price.

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Al Hines: And so that's kind of how I was able to determine that this particular property would be a good deal. And again it started out as a single family that I kind of renovated and remodeled into the duplex to assure that I would be in that 1 60 to 1 70 range when it came time to do the cash out refund.

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caeli ridge: Yeah, I'm glad you said that cause I may have missed mentioning this on the front end. So, guys, he found this property 40,000. It was a single family when he acquired it, however, it was zoned via the city as a duplex, so, Alex, can we talk about that a little bit, because I know, you know, dealing with the city planning and and zoning, and all of that stuff

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Al Hines: very specific to a county or a city harder or easier. How did you go about that? How did you even identify that it was zoned as a duplex? If you can kinda take people through what access or what databases you went to to find that out. Yeah, of course. And what I did was again, since I don't live in the Macon Georgia area. I actually know a general contractor down there who assisted me with this project, and he was able to go down before I even purchased the property. Go down to the planning and the zoning

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Al Hines: commission and kind of pull the records and make sure that we could do the project legally right, cause we had to redo all the plumbing electrical and all that stuff, and we added on a bedroom. So before I even purchased and got started. I made sure that I had my eyes dotted, and I crossed my teams, and he was able to pull that information. And that's how I knew. Okay, well, this is a legally zone to be a duplex for that particular area it was for

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Al Hines: continue. No, no, go ahead. I'll just say it was fairly easy to do by having somebody who actually is a general contractor in that area who has connections. They can go down there and pull that information.

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caeli ridge: Yeah. And so from the beginning, from the get you saw the property. You saw the land, etc. You had full intentions of making it a 2 to 4. Potentially it was never going to be intended as a single family. You always wanted to, even before you knew it was, it was viable. That was the intention correct, absolutely.

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caeli ridge: So. II think that a takeaway in that part would be having the relationships and the resources to try and do unless you have your own general contractors license, right? Unless you're your own. Gc, having those relationships and doing something like that is doing something like this is going to be crucial

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Al Hines: to success. It's paramount. I mean, you have to have team in place so definitely having the general contractor definitely having your real tour. You know, definitely having

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Al Hines: things in place, especially in the area that you don't reside in before you even purchase a property is very crucial.

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caeli ridge: Who else Al would be on that list if if we had to think it through? So you got your Gc. And then he's got his contractors below him. He's got those relationships you've got an agent there. Who else would you say is important to have on that

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Al Hines: that list of individuals, I mean, are you doing some of the work yourself, I mean, are you getting wholesale materials? Yeah, II get out. I would say, for certain individuals. It could be wholesalers, property, managers, things that I nature project managers. But I kind of deal with the project, management, and property management myself.

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Al Hines: since I am only an hour outside. Ii tend to do that on my own but obviously the agent, obviously the contractor. Those are the most crucial people have on your team.

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Al Hines: I do have questions for you about property management, but it's down to my list, so I'll come back to that. So let's get. Let's get back to the numbers here. So

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caeli ridge: he we are. He is estimating that the value is going to come in between 1 60 and 1 70, based on his own due diligence and research. Obviously gang. This is largely based on what the appraisal is going to give us. So that's a huge huge part of this, and the success of paying cash for a property, and then going and refinancing to get as much of your capital back. You better be dang sure about that.

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caeli ridge: A. RV. After repair value within a small variant for error, because it could be a real problem. I see it all the time. Where, if Mr. Jones, for example, has 80 grand into this property, and let's just use our numbers here, and he thinks that the value is going to be 160,000. But it comes in at.

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caeli ridge: you know, 80. That's a problem. Right? So you really, wanna yeah, you really, really wanna do your your research and have as much data as you can like kind, I assume. Al, that when you were looking at and comparing other models for sale that you were checking bedroom bathroom, count right, all of those important variables, absolutely. And that's why I had to make sure that this one, for example, was going to be a 2 bedroom, one bath each side.

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Al Hines: I could go into a property and only have a one bed, one bath each side and inspect to have the same appraisal value.

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Al Hines: And that's where a also your network comes into play. Luckily I've been able to meet and and do business with a lot of other investors in the Macon Georgia area who are able to kinda give me some guidance as far as what areas to purchase in again, what values can come back in those areas before again, before I even purchase the property I knew going into it with this particular area. There's a lot of renovations going on

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Al Hines: on on the Mls. There's a lot of property selling for that price and that area. So before I even made that purchase I had a strong feeling that I would be able to pull out the majority of my money.

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Al Hines:  fairly fairly easy.

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Al Hines: You said network. So are are these like on on social media platforms? How are you finding? These are like minded individuals in that area where the introductions from the Gc. How did you? How did you identify those people? Yeah. Introductions from the Gc, just kind of going down there to Ria's real estate investment meetups. Relationships is a big part of real estate, I think sometimes people don't understand that. And even it's funny cause the first duplex that I purchased.

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Al Hines: That's how I was able to meet my Gc. Was because he sold it to the investors that bought it, that I bought it.

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Al Hines: And so you know, we made that introduction. And then from there, I've met other investors down in the Macon area, Savannah area things of that nature. So just relationship building just old fashion. Not. I know you can do that on Facebook, which is great. But I'm an in person kinda person. I like going to these meetups. So like talking to people going out to coffee and having those conversations

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caeli ridge: eyeball the eyeball, I couldn't agree more and while you've got the technology to do it virtually like we're doing here. II agree there's really nothing that that takes the place of that that physical interaction. II totally agree.

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caeli ridge: Okay, let's talk about how how you

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caeli ridge: went about identifying this property. I mean, I'm sure that you found. I mean, there were others that that you looked at, that you passed on, etcetera. Was there anything in particular about this one that you saw?

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caeli ridge: And when you saw it you only saw the outside, of course. How? How do you know you've done this? Enough times that? Can you just now see something in the distance? Say, okay, that one's probably going to be

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Al Hines: one that I'm gonna acquire. What does that process look like? Well, for its location location location. And I look for things like, if there's universities, if there's hospitals, if there's other renovation projects within that area. So II looked at it from that totality, there's a a Mercer University, where this particular property is only 10 min from.

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Al Hines: So, in case, you know, students might need housing, I have that option is not too far from the north side of Macon. It's kind of right there in the middle to where you have your hospitals. So if I wanted to go the traveling nurse route. I know that I have that option. And then again I looked at that specific area and saw that there were other other renovation projects going on in that area. And so when I see that, then that tells me, okay, this is the area that's up and coming. They're investing a lot into this area. And I wanna be a part of that.

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caeli ridge: Yeah. So let me, I'm gonna recap some of that because I have a few takeaways. So location location location is what Al said, and largely part of that comment was about the tenant population right? Where is his pool of tenants? Gonna come from. The second thing that I pulled from that is is that he's got

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caeli ridge: plan A and plan B right. He's got a long term tenant database and potentially a midterm tenant database. So he's gonna have both. I think that's very smart. You guys are always hearing me talk about diversification and all the different facets of real estate investing

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caeli ridge: market type strategies short term, long-term midterm very, very important. So he had his backup plan. I think that's

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caeli ridge: extremely smart, especially for somebody that's that's been doing this and 3 years is a a good chunk of time. But you know it's not the the investor that has 10 or 20 years under his belt in in many cases. That's how long it takes for some people to learn those lessons. I think that's very wise. And then the other thing that I took from that and, Ellie, you tell me if this is right.

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caeli ridge: because you saw that other activity, other developments going on there in my mind that could signal or trigger, that it might be a city that's a little easier to work with. And guys. That's not always the case. You can't assume that going into this kind of of strategy, that the city is going to be investor friendly. That isn't. That's just not a foregone conclusion.

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Al Hines: Is that something that that was a trigger for you when you saw that there was other renovation and thing things going on that it's going to be easier to deal with the city. Yeah, absolutely. And that turned out to be true, like the city itself, is a smaller town right? Make it like an Atlanta Georgia

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Al Hines: lot easier to go in and talk to people and kind of see what's going on. Even pulling a permits was a non issue it was pretty simple. You could talk to people directly. And I've had a great experience so far. Working down there and make, and

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Al Hines: I will say that

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Al Hines: go ahead. Well, I was gonna say that there's also a lot of lessons that come along with that in terms of making sure that you do your own due diligence. As far as you know, your own research on areas on research as far as title work on the particular property, because sometimes in those small areas.

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Al Hines: operationally, they might miss certain things. And so if you're taking on a project you want to do. Make sure that you do your own title research. So you know exactly what's going on with that project or that property. And again, you want to dot your own eyes and cross your own teas when it comes to that. So

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caeli ridge: that's a good point, and and let's segue into that. There's there can be lots and lots of red tape, so kind of just quickly going back to the city, and and the ease and and dealing with

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caeli ridge: that process?

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caeli ridge: Red tape, right bureaucracy. Tell me about the title work. So how did you? How did you gain confidence that it was clear title, and by clear title guys for those that aren't familiar with this, making sure that there's no existing liens or encumbrances or clouds to title that could otherwise be problematic if you don't find those in advance if you purchase this property, and you didn't do the due diligence that I was talking about, and you come to find out. There's there's a $60,000 mechanics lean on this property

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caeli ridge: that's first lean position that's getting paid, no matter what. If you didn't see it. That's that's a problem. So what was the process? How did you go about.

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caeli ridge: or who did you go to? To find that title was all buttoned down. Well, first of all, I went through a closing attorney, and I was able to acquire title insurance on this particular property, which I urge everyone to do

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Al Hines: because that protects you. That hey? That you know they did their title search. Everything came back fine, and you know it's to work out. So you know, I close it through a proper closing Attorney title company had that insurance, and I wanted to make sure everything was clear. Obviously, before I purchased it.

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Al Hines: But even within that II do have to tell this story because it's a pretty relevant to why it's taken so long as far as the renovation, even by doing that. What I learned was, you still want to do your own title search on the property ahead of time before even go to the closing table, because with this particular property it was purchased that auction.

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Al Hines: I didn't know that I was purchasing it from another investor. I thought it was just his property, but apparently it was purchased at an auction a month before I purchased it, and usually they give you time to redeem normally of 60 days so, but because he quick deed at the property from his personal name into his business name, that

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Al Hines: paused issue with with the property, which I didn't know about until almost 6 months later, that the property since the paperwork wasn't done right, that I had to actually go back to the land bank, which was the right phone or the property cause. They had it at auction.

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Al Hines: and then they eventually had a quick deed it over to me, but because I went through a closing attorney, and they did have the title Insurance on the property, they were able to take care of it for me. So where it wasn't an issue. But if you don't do that, if you're just doing a cash deal just straight with the seller, and there's no, you know, title insurance. There's no closing attorney. You can run into some major issues similar to that one.

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caeli ridge: So guys, let me, I'll recap that. So while it sounds kind of wonderful in in today's day and age, just a handshake and and cash exchange especially in this case, that could have been extremely problematic for Al.

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caeli ridge: Because if he didn't have that title insurance, and just to clarify what that means is is that the attorney that he hired

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caeli ridge: and going back to that that group that support team we talked about. Gc, we talked about the agent, a closing attorney. If you're in an Attorney State. Sometimes it's gonna be called an escrow officer. In this case it's an attorney closing attorney

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caeli ridge: the title insurance protects your interest against things like this. You pay. You know it. It's very. It can range wildly across the Us. But title insurance is, gonna be some calculation

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caeli ridge: based on the value of the property. So let's say, just, I'm just gonna throw, let's say, custom 1,000 bucks. That's probably way high. But whatever it was

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caeli ridge: but that ensured that if there was something that came up on title, he purchased the title Insurance. So the attorney that did that, the company that did that if something was on there that that in this case it was as simple as just kind of getting a hold of the bank and moving the the parts around on the chessboard. But let's say that there was a lean that wasn't discovered within the title. Search

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caeli ridge:  The company that Al would have hired would have to have made it whole. They would be the one cutting a check to clear that title, make that title clear.

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Al Hines: So huge, huge, huge

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caeli ridge: in terms of that due diligence that Al keeps talking about real quick, real quick Jaylee on that point. So people know

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Al Hines: when you do acquire title insurance, even on a fix or upper property which you can do is normally they give you title insurance for how much you're purchasing the property for. But what you can do here is that if you have a Gc. In place they can submit kind of like an invoice as far as what the work is gonna be. And so you can actually receive more title insurance based off of the which you purchase for the property

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Al Hines: as well as the the renovation cost, so that can also be tied into your title insurance, which I learned that within this process.

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caeli ridge: I don't think I knew that either. So yeah. So instead of $40,000, I was the purchase price.

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Al Hines: You probably got it for 160, or whatever you think the value was going to be of the property right? For example, if I paid $40,000 for the property. But let's say it's gonna take $40,000 to fix it up. I can actually get title insurance for that whole $80,000 opposed to just the $40,000. As long as I submit, what the work order is going to be, and the estimated cost of head of time before I purchase the property.

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Al Hines: the amount extra to go from 40 to 80 was probably inconsequential in the big picture. It's it's like, most insurance is right, yeah, absolutely, absolutely, absolutely. And so I learned that by an attorney who advised me of that going forward. So that will be a part of my my my process when it comes to purchasing these properties is making sure I'm getting title insurance for not only the purchase price, but also the renovation cost.

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caeli ridge: Yeah, what about inspections now, inspection for lending isn't required. We have an appraisal that doesn't necessarily go to all of the detail that an inspection would, and some buyers will forego their right to inspect how do you feel about that? Did you get an inspection on the property? Absolutely. You know that that's another person who's a part of the team so definitely. You know, lawyer closing attorney and an inspector, and I do know a local inspector down there who kind of inspects my properties for me

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Al Hines: who can give me a heads up? If there's go anything going on that I'm not aware of with the property II definitely believe in having your own inspection done and then that way, it just kind of gives you a heads up. If there's that doesn't mean you're not gonna do the deal. We you wanna make sure you have as much information going in before you purchase the property. So I'm big on having inspections done.

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caeli ridge: I am, too. I think it's it's paramount. You must have the inspection

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caeli ridge: before you're making those those final offers when we talk about the inspection. I've I've spoken on this before. It's important to 2 things, is what I would share on an inspection one.

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caeli ridge: The agents are probably going to have a referral for the inspector, which is fine, and I'm not. The following commentary is not to imply that the the agents

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caeli ridge: there's anything ominous happening here, but I am more comfortable vetting and finding my own inspector. I don't want it coming from someone that has

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caeli ridge: a potential financial gain in the transaction. I wanna I wanna vet for my myself. So that would be the first thing. And then, second thing, it's important to remember that the inspectors job

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caeli ridge: is to scrutinize the shit. Excuse me out of that property. They are going to nitpick it to death and find every possible thing. That's what their job is. So you know you're looking for things that are substantial.

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caeli ridge: If there is a cover missing on an outlet.

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Al Hines: you know you're not going to go back to the seller and say that you you demand that that be fixed before I'll purchase because you're gonna waste their time, your time. You're gonna lose the deal you're looking for things. Foundation roof. H back, right? Plumbing electric. What else? All? Are you looking on that? That inspection for? Those are the main. Those are the main things is foundation like there's a foundational issue. I'm not purchasing the property.

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Al Hines: Like you said, roofing electrical plumbing. Those are still things I'll take into consideration. But I need to know that ahead of time. So I can add that into my renovation costs as far as return numbers are gonna be. But yeah, th, those are the big things that they're looking for. Obviously, if you're buying a turning key property or a property that's already renovated to a degree. You wanna make sure you know water heater furnace. Again, Hvac, you wanna make sure all that's in place and working properly in my age

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Al Hines: things of that nature. But yeah, big ticket items like you. You hit on. It was, you know, foundation roof, electrical plumbing

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Al Hines: and and Hvac. The smaller stuff I don't worry about, because, like you said, you're not going to go back to the seller, and you know, ruin the deal. I mean, the numbers are the numbers. So

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caeli ridge: and and some of that might be negotiation worthy. Some of it is just, you know, deal killer done, not interested. Otherwise you might be able to go back and and negotiate the price a little bit to help recover some of those costs.

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caeli ridge: Okay. Speaking of renovations. you know.

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caeli ridge: Do you have a good idea? In in this case it because it was an option you weren't able to to tour the property? How did you determine what you thought you were gonna be putting into it? Were you able to kind of see? Maybe pictures online, your Gc. Was was probably useful. How did you kind of?

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Al Hines: Well, he was when we went to go view the property? Cause again. I like to put my own eyes on it. I like to walk the property for me. I would never just look at a property online and make a determination if we're gonna buy it or not so. He was actually with me when we toured the property, and it was vacant, it was abandoned. It was in really really rough shape, but

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Al Hines: but Gc. Has a good vision for what the property could have been, and needless to say that it's actually come to that fruition. So we walked the property, told me how we can add the bedroom, and how we would be able to move the kitchens around and and work the plumbing. So he was with me

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Al Hines: when we turn the property, which was a definite plus for me to have somebody who has that experience. Cause I don't. You know, typical investors, you know I'm a paramedic firefighter in Georgia, so I don't do this full time. So, having somebody who actually does is very paramount to my decision in purchasing that property.

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caeli ridge: You know. This is kind of a sidebar here, and I don't want to take us too far off topic, but contractors in general.

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caeli ridge: I think, in our industry. They they a lot of them, have a bad reputation rightfully. So, right there's a lot of there's a lot of flaky contractors out there. If you find a good one man. I've had investors.

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caeli ridge: Have Jvs with the general contractor, one. They're obviously hugely incentivized. Instead of just being contracted for this job. If if they've got a joint venture potentially, and they've got some more skin in the game. I think that there may be some Opi extra opportunities there of finding that person and establishing that relationship

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caeli ridge: that might be at the top of the list. As you're acquiring right? Absolutely absolutely number one, for sure is having a great place definitely when it comes to fixer upper properties. Yes.

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caeli ridge: So start to finish. You purchased it a year ago. It's been almost a year. We know that there was a piece in there having to do with title that stalled things a little bit.

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Al Hines: If that hadn't been

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Al Hines: part of it, how long do you think this would? How long should it have taken if if none of that had happened? Well, there was a few factors in place, it should have only taken 3 months to complete the pro project.

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Al Hines: What I did was I took on another project

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Al Hines: so I kinda got the the fever, and I was like, man, this is going great. This project's good. Let me take on another one. I had an opportunity. Come along, and I took on another project, and I kinda put my project to the side cause I did, partner with somebody on this other project.

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Al Hines: And you know, in retrospect, I probably should have stayed focused on my project, completed it first, and then went forward, but it worked out because of the issue with the land bank. So even if I would have completed it at that time, I still wouldn't ran into that issue that I had to deal with, which literally took 6 months out of the equation. So, but going into it, the project should only last 3 months.

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caeli ridge: Okay. as a result. So that brings up kind of a good point.

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caeli ridge: I would say that as investors it's going to be impossible to prepare for everything. Impossible. There's too many variables to ever try and and prepare yourself for every

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caeli ridge: one of them.

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caeli ridge: So

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caeli ridge: a.

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caeli ridge: I think that it makes sense, then to have certain buffers or guardrails in place that will will help you through. So in this case.

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caeli ridge: you tell me if this is right out? It was just a matter of your capital being tied up. Were there other carrying costs that you could have been or should have been prepared for, you were prepared for

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Al Hines: right right? And that one. And there was cause. Obviously it was interest payments having to be paid on certain things that I had out. Yeah, absolutely. So I was able to take out a loan because, you know, I mean, I'm new in this investment journey. And I started to realize how you were able to kind of use other people's money, ie. The bank.

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Al Hines: to go purchase these properties. So not all your capital was tied up into the property. And then, obviously, I had reserves that I was able to pull from. But yeah, so I had interest payments that I had to make on loans which

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Al Hines: it worked out for me, because I had my buy and hold properties. So it didn't really come out of my pocket, and it was pretty much my tenants that were paying it. But yeah, that's that caused an issue, because I was taking on too much at at at

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Al Hines: too little of a time or too soon of a time, and what I should have did was just focus on finishing my project initially, and I wouldn't have had to make those extra, you know, interest payments. I could've just been done with it and moved on. So yeah.

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Al Hines: hindsight. Right? Yeah, that was definitely a learning lesson.

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caeli ridge: you know, I think in general, most investors on just a a a quick turn key buy and hold. They wanna have 2, 3 months of of reserves right on a fix and flip. I think that that probably doubles in some cases 4 to 6 months. Yeah, right? Just just to have the other thing. I would I would encourage you guys to do is make sure you understand the terms of the financing. If you've used financing.

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caeli ridge: make sure you understand the terms, because if there are delays outside of your control, and there are more than 50% of the time. If I had to to estimate that

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caeli ridge: what happens if you go beyond

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caeli ridge: the balloon date? Right? Let's say this is a 12 month term. What happens if you need another 3 months or 2 months or one month, or whatever it is you wanna ask those questions of the lender. Chances are there are costs involved. It's not

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caeli ridge: right. They're not gonna just out of the kindness of their heart. Say, oh, no problem. We'll give you another 6 months, or whatever it is, they'll say, sure. But you're gonna pay a point or or whatever. So just make sure that you ask those questions. And you understand what it means. If you're gonna go beyond the 6 or 12 month term that you originally signed up for

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Al Hines: absolutely totally agree with that.

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caeli ridge:  let's switch to the financing, and then I have a couple other questions, I think. This has been great. I think there's so much good information here for people.

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caeli ridge: So the the takeout financing out when we're gonna go do the refinance. Was there anything, I mean?

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caeli ridge: obviously, you've been doing this for a while. You know what kind of goes into the qualifying of it. Maintaining that you've got your your debt to income ratio is in place. You probably have a good feel for that credit maintains at its its level that it needs to be. You have 6 rentals, which means for financing at least conventionally. You're on that edge to where the credit score requirement is hard and fast.

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caeli ridge:  Any anything that you would say about that? I have some comments that I'll I'll throw in there for people. But anything you observe that you could have done differently, or that you feel like you did really? Well.

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Al Hines: well, I mean, just basically already putting ourselves in a position to where we could carry that kind of project, if that makes sense like being in a position to where our credit score was solid in place, being in position where we had the reserves

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Al Hines: on hand, and not being, you know, cash strapped and just kind of being in a position to where we lowered our debt by again by me doing the house hack here. That kind of took away our base expense, which would have been our mortgage payment, which

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Al Hines: again, I make $500 a month currently by living in the place that I'm living in. So the fact that we kind of set ourselves up to be in that position. To kind of take on those projects was the biggest takeaway. And then, again, having that cash flow in place.

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Al Hines: to offset any issues that may have arisen which they there were. But we had the reserves to kind of take care of it. We had the cash flow to take care of it. So I think being well prepared is the biggest you know, takeaway. Because when you take on a project like this, there's gonna be unforeseen issues that come up. It's just there's no way again around. It's it's gonna happen. So

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caeli ridge: it's called Heads up ball guys, right. You've got to be playing heads up, ball. And while we said, you can't prepare for everything you do wanna have preparation in your back pocket. You wanna have those reserves. Al talked about leverage and in the credit score. So let's say, for example, one of the things that that resonated and what he was saying, that I wanna share with you.

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caeli ridge: Let's say that you had to use your own credit for some of the renovation right? You had credit cards that you charged up. And this is very common for fixing flippers or fixing holders right? Making sure

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caeli ridge: that you know you're gonna you gotta time. This right. This is a jigsaw puzzle kind of So

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caeli ridge: knowing

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caeli ridge: getting the information from your lender, ideally working with a lender that is pro profoundly focused on educating its investors. Okay, that's that's, I think, one of Rich's value ads greatest value ads.

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caeli ridge: But as it relates to this topic and the the credit scoring. If you utilize credit cards, for example, your utilization of those credit cards is going to be high. Nothing can hurt a credit score more than having a credit card that's over 50. If you're 100% leverage on that credit card, even if it's because of this this project, and it's going to be a short period of time.

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caeli ridge: It doesn't matter. The score is going to impact. It will either disqualify you altogether or create a scenario where the interest rate you're going to get is not as favorable as it would be if the score was optimized. So getting with your lender and understanding the the nuance or the underwriting guidelines. Taking a look under that hood that says, Okay.

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caeli ridge: we want to keep your credit score at 7, 60 or above. In order to do that.

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caeli ridge: Our credit reports are good for a hundred 20 days. For this particular loan product we have 4 months to utilize the credit score

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caeli ridge: before a new one is required. So if you have that information and you're working with a lender that understands investor needs, then you sequence it or time it appropriately before those cards have have necessarily maxed out right? We wanna pull your credit here

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caeli ridge: and now go ahead and and do that. So communication, I think is key. That would be the takeaway communicating with your your lender and making sure that they're aware of what your plans are.

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caeli ridge: There are going to be things that come up. But that preparation, I think, is key. So yeah, thank you for that. Al, let me let me move on. I know we're taking. I'm taking up your morning here. You've been so generous.

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caeli ridge:  okay, I think. Then just a couple of more questions. Are there hard, non negotiable must haves or must do, based on your experience. If you had one or 2 or 3, if you want, just

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caeli ridge: absolutely have to have or do to make these transactions successful.

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Al Hines: Well, first and foremost is again the title, Search going forward on these cash properties. That's non negotiable. I have to do that ahead of time period especially in certain smaller markets. I wanna, you know, take that ownership on me and make sure I know everything that's going on with that property before I purchase it. So that's definitely something I have to have in place. Also having my contractor in place

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Al Hines: with me. Kinda have an idea how much the renovation cost is going to be is again another non negotiable. I will never make an offer on a property or purchase a property, unless I have that contractor on my team with boots on the ground that can come in and take care of the the the project right away, and then not over leveraging myself in terms of taking on multiple projects at one time, especially as a smaller investor who's still building his team.

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caeli ridge: That's also very important. So those are my my 3, for sure I would agree. Yeah, excellent. Now let's let's take that and go the flip side. What are some of the things that you'd make sure to avoid going forward or looking out for? As you've done this a couple of times now are there? I mean, I guess you could say all of those things would be the flip side not having. But are there any other little things that you you experience that you'd wanna avoid like the plague.

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Al Hines: Yeah. Terms. If if you're working with like, for example, a hard money lender, making sure that you have the correct terms in place. That's gonna be beneficial for all parties.

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Al Hines: Ensuring that you give yourself enough time, even though you feel like the property is gonna only take 30 days to get done, or I'm sorry. 3 months realistically scheduled that out for 6 months, 9 months, even a year, you know. Give yourself some room

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Al Hines: just in case something were to arise or come up. So those are 2 biggest takeaways on the flip side, and then you know, for myself, just making sure that I'm able to carry that kind of that kind of project with my capital being tied up in it to where it's not gonna cause any type of hardship on myself and my family is also very important when it comes to these flip projects.

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caeli ridge: Okay? Final question, obvious other than the obvious answer, which is going to be great because you started this during the pandemic. Can you think of anything.

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caeli ridge: Between now and then the significant changes of what it it was like, I mean, I guess, because you were brand new, and all the things that you've learned. But is there anything about pandemic time and doing this to now? In doing this? That seems to be the the biggest significant changes again, other than great, because clearly

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Al Hines: right. The the returns have changed a little bit, because interest rates are higher. We have to change our expectation a little bit, but anything else about the differences between then and now. Not really, I would say for myself, is that even when the pandemic was happening, people were telling me this is a bad time to buy. You can't find a deal. And, they're still saying that now I would say that.

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Al Hines: So for me, my biggest take away is that you can always find a deal. You can always find the number that's gonna work for you. You can always find a strategy that's gonna work for you, regardless of whatever's going on. So interest rates are higher. Now, it's a lot more difficult. Prices of homes haven't really come down. So you still have to, you know, find that jewel, that diamond in the rough.

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Al Hines: but it's still possible. So for me, it's just understanding that, regardless of the time, or regardless of what's happening in the market, that you can always find the right deal that fits you, and kind of what your buy box is, and you can move forward. So I would say in action is not

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Al Hines: an option, so you can always take action at any time. You can always find a strategy that works for you. That's my biggest.

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caeli ridge: I'm so glad you said that because I couldn't, I absolutely could not agree more. There's always opportunities out there, guys for for real estate investors. It may mean that you gotta work a little bit harder to find them. But they're there. You're just gonna have to to.

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caeli ridge: and I'll kiss a couple of frogs, a needle in the haystack, all of the the trite

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caeli ridge:  analogies that you can use. They're there. They're out there. You're just going to have to go find them a little bit, and it'll be worth it.

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caeli ridge: Alex Hines. Man, I owe you something good, maybe credit on an appraisal or something some lender credit for doing this. Thank you so much. I really do think there's gonna be some huge value for the listeners and what you've been able to share and if you are a willing participant, maybe when all is said and done. We come back and and just do a follow up and see how it all

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caeli ridge: all worked out. Oh, you know what? I didn't go over real quickly guys. So let's just for example, I wanna use Alex's numbers. I didn't do this. So let's use the middle of the road. We said 1 60 to 1 70 is gonna be the approximate value. Let's say that it ends up being 1 65. This is a 2 unit. We're going conventional. And the financing. He's owned it for a year, so we don't have any more seasoning issues. I'm not gonna get into that part of the financing guidelines.

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caeli ridge: but at 1, 65, 70%, because it's a 2 unit cash out. Refinance is going to be 115,500. Okay, let's say the closing cost, just for round numbers are going to be 5,500.

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caeli ridge: Alex is going to pocket a hundred 10,000. He has 80,000 into this. You guys can do the math.

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caeli ridge: Not bad for a year's worth worth of work right? I mean, that's pretty slick. And even at today's rates. I know that you've done the the math already.

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caeli ridge: Total rents on on these 2 units that I get it right. I say it's $2,400 written somewhere. Is that correct? Okay.

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caeli ridge: so taxes and insurance, all inclusive, etc. We've got some decent cash flow coming out of this

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Al Hines: at the end of the day as well. Yes, absolutely. Yeah, of course. And it's kind of like hitting a home run, cause in these burr kind of properties. You usually don't hit home runs where you're getting all your your capital back, but I'm actually able to do that, and then I'm able to cash flow at a pretty good rate where I can have my monthly income rise with my cash back, and basically no more money left in the deal.

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Al Hines: Which is awesome.

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caeli ridge: So awesome. You guys seriously take this information. Look at that again. Study that. I mean, this is one in probably

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caeli ridge: 50, maybe with even one in 100, where you're actually profiting by 30 grand and cash flowing within a year's time. It doesn't happen that way often, but if you can even get 90% leverage at the end of the day. That's still.

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Al Hines: That's still a home run. So good for you, man! Boom! Congratulations! Thank you. Thank you. And again, thank you for having me. And I will just want I just wanna say this. So it's clear your group has been awesome. You guys have been really amazing. I've been looking as an investor for a real professional lender to work with. You kinda understands my needs and kind of what my goals are going forward, and I can honestly say, you guys have been

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Al Hines: top tier just just 10 out of 10 in terms of setting me up for success, and I look forward to working with you in the future. So thank you. Thank you, Alex. I did not pay him to say that. By the way. That's very, very nice. It's not lost on me, because I know you know the financing I am. I am not oblivious to the fact that the financing of all of this is is generally people's least favorite part of the process, and I get it. It's it's

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caeli ridge: files of blend DNA samples my my token joke. So thank you for saying that I really really appreciate it. We do pride ourselves on being a strategic partner, and, and, you know, understanding the goals and and helping you

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caeli ridge: along the way, as this things change, and they will. So very generous of you. Thank you, Alex. I have some some housekeeping stuff that I have to tell everybody. You've gotta go and follow us on all of our social media stuff. If you are not part of our community, which is where this will be. Post first. It's free. Join our community. All kinds of good information. Intel for investors.

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caeli ridge: If you need us. You know our website, Ridgeloney group.com, you can email us info at Ridgelininggroup com. You can call us at 8, 5, 5, 74 Ridge

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caeli ridge: and we'll be here on standby if you guys need anything, Alex, I'm gonna stop recording here. But if you have a quick second, I'd like to just thank you properly. Thank you guys for listening. And we're here. If you need us.