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A relatively young real estate investor, Brian Davis, of Charlotte, North Carolina, purchased his first property after graduating from college, with the plan of fixing it up while living in it and then renting it out. One property lead to two . . . which lead to Brian's current portfolio of nine rental properties. We caught up with him recently and got his take on the hot Charlotte market and why buying and holding is a great tactic right now.ForeclosuresMass Monthly: Brian, how did you finance your first property?
Brian Davis: I purchased it with an FHA loan as a first time buyer. I then lived in the property while fixing it up and once it was ready, hung a "for rent" sign and had it rented in a month. I then refinanced it and used the cash to purchase my next property where I did the same thing.
But I have to admit, I had to ask my father, who is also a real estate investor and landlord, to come help me screen tenants and do that sort of thing. He gave me lots of advice.
FMM: When did you know you had become a "serious" real estate investor?
BD: Once I had the two properties under my belt, I realized I had to be more strategic in terms of managing my properties and financing. I joined a local REIA, met mortgage brokers and property managers and really learned the nuts and bolts of financing.
FMM: Speaking of financing, how do you finance your deals?
BD: I'm very conservative. For the first few properties I would refinance the property, take out the cash, and purchase the next property using conventional loans. After that I started using bridge loans. I'm not really big on "subject to" deals or pre-foreclosures.
But with the market changing, I've had to become more creative. I'm still very conservative, but just recently I did an owner-financed deal on a single family. The previous owner owned it free and clear but couldn't sell it because it was pretty beat up. I asked him what he wanted to do with the cash once he sold it and he said, "Get some work done on my teeth, maybe travel."
Since he didn't have plans for a lump sum of cash, we worked out a deal that would net him more cash in the end than selling the property out right.
The property was worth $65K ARV. I purchased it for $30K and put $6K into it. The owner financed it for six years at 6% interest only with a balloon payment at the end. I rent it out at $625 a month and make one annual payment of $1,800 to the former owner. It's definitely a win-win for both of us.
FMM: Do you own only single families - and do you still do all your own rehabbing?
BD: Yes, to the first question. Currently I have nine properties - eight are single families, one is a duplex. I'm planning on holding six of them long-term, because this is how I want to build wealth. I'll be selling the other three.
I haven't done commercial properties because I need more education. However, my friend owns a 5-unit multifamily that he wants to sell, so I'm seriously looking at that.
Because I still work a fulltime job, I outsource all the rehab and the property management. The management company calls me about once a month and I send them a check - it's pretty easy!
FMM: Can you talk a little bit about the Charlotte and North Carolina market?
BD: This is an absolutely fabulous market right now. Although we've had foreclosures, we didn't see the high numbers like other areas across the country. And too, values didn't appreciate 300 and 400% like they did in other areas, which means values haven't crashed, either. Right now they are holding steady.
We also have lots of people who want to move here. My realtor friend says he regularly gets calls from people in California who want to purchase properties sight unseen. Then you have what we call the "half backers." These are people from the north who retired and moved to Florida and couldn't handle the heat or the hurricanes, so they've moved half way back up.
North Carolina, and especially Charlotte, is a desirable area because of location. To the north is Washington DC. To the south is Atlanta. Both areas are expensive markets - the cost of living is much lower in North Carolina while offering "big city" amenities.
FMM: Do you have any advice for first time or new real estate investors?
BD: Not so much advice as a confession. Even though I'm a fairly confident investor now, I'm still scared to death every time I do a deal. The fear is normal - but you can't let it prevent you from moving forward. Run your numbers, and double and triple check them, and have your exit strategy - then go for it.
Renting out properties is a great way to build wealth, and if you outsource the property management, you leave time to enjoy your wealth by living the life you've always wanted.
FMM: When did you know you had become a "serious" real estate investor?
BD: Once I had the two properties under my belt, I realized I had to be more strategic in terms of managing my properties and financing. I joined a local REIA, met mortgage brokers and property managers and really learned the nuts and bolts of financing.
FMM: Speaking of financing, how do you finance your deals?
BD: I'm very conservative. For the first few properties I would refinance the property, take out the cash, and purchase the next property using conventional loans. After that I started using bridge loans. I'm not really big on "subject to" deals or pre-foreclosures.
But with the market changing, I've had to become more creative. I'm still very conservative, but just recently I did an owner-financed deal on a single family. The previous owner owned it free and clear but couldn't sell it because it was pretty beat up. I asked him what he wanted to do with the cash once he sold it and he said, "Get some work done on my teeth, maybe travel."
Since he didn't have plans for a lump sum of cash, we worked out a deal that would net him more cash in the end than selling the property out right.
The property was worth $65K ARV. I purchased it for $30K and put $6K into it. The owner financed it for six years at 6% interest only with a balloon payment at the end. I rent it out at $625 a month and make one annual payment of $1,800 to the former owner. It's definitely a win-win for both of us.
FMM: Do you own only single families - and do you still do all your own rehabbing?
BD: Yes, to the first question. Currently I have nine properties - eight are single families, one is a duplex. I'm planning on holding six of them long-term, because this is how I want to build wealth. I'll be selling the other three.
I haven't done commercial properties because I need more education. However, my friend owns a 5-unit multifamily that he wants to sell, so I'm seriously looking at that.
Because I still work a fulltime job, I outsource all the rehab and the property management. The management company calls me about once a month and I send them a check - it's pretty easy!
FMM: Can you talk a little bit about the Charlotte and North Carolina market?
BD: This is an absolutely fabulous market right now. Although we've had foreclosures, we didn't see the high numbers like other areas across the country. And too, values didn't appreciate 300 and 400% like they did in other areas, which means values haven't crashed, either. Right now they are holding steady.
We also have lots of people who want to move here. My realtor friend says he regularly gets calls from people in California who want to purchase properties sight unseen. Then you have what we call the "half backers." These are people from the north who retired and moved to Florida and couldn't handle the heat or the hurricanes, so they've moved half way back up.
North Carolina, and especially Charlotte, is a desirable area because of location. To the north is Washington DC. To the south is Atlanta. Both areas are expensive markets - the cost of living is much lower in North Carolina while offering "big city" amenities.
FMM: Do you have any advice for first time or new real estate investors?
BD: Not so much advice as a confession. Even though I'm a fairly confident investor now, I'm still scared to death every time I do a deal. The fear is normal - but you can't let it prevent you from moving forward. Run your numbers, and double and triple check them, and have your exit strategy - then go for it.
Renting out properties is a great way to build wealth, and if you outsource the property management, you leave time to enjoy your wealth by living the life you've always wanted.
Brian Davis is a real estate investor located in Charlotte, NC. He can be reached by phone at 704-564-1532 or by email at BrianDavis@carolina.rr.com. Check out his website at www.CharlotteInvestingClub.com.
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