The $300k Opportunity: One Email, Two Houses, Infinite Lessons

How One Email Turned Into a Game-changing Real Estate Opportunity

Welcome back, fellow Hybrids!

In today’s newsletter, I will share the story of how a single email from our realtor led to an opportunity that generated $72,000 in NET cash flow & over $230k in property value appreciation.

(Today’s issue takes ~4 minutes to read)

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You often hear fairy tale stories of how one well-timed investment can change your life forever.

And it’s true…One well-timed bet can provide outsized returns that make up for a lifetime of mediocre (or even harmful) decisions.

But it’s also no secret that sometimes opportunity strikes when you’re least expecting it.

Today, I’ll share how an email I wasn’t expecting completely changed my life and poured jet fuel into my real estate investing journey.

How it started

Before we dive in, here’s some context…

In November 2019, we were ~4 months into our real estate investing journey.

Our first rental property was off to the races with wonderful tenants (a lovely family with intentions to stay put for years).

Financially, we had made a trade-off:

• The rent checks were clearing, and we were netting ~$300 between the rent & the mortgage.

  • (NOTE: this is not the same as true net cash flow. You should always run a proper cash flow analysis and budget for expenses/Capex but that’s another story)

• We had depleted most of our accessible savings on the down payment for the first rental property.

Our knowledge of real estate was at a novice level, AT BEST.

But we had one thing going for us…we were in the game!

And we had a secret weapon…our agent.

An investor-friendly agent can change the game.

I spoke in a recent interview about how we lucked out big time with our first realtor in Las Vegas.

When searching on Zillow, we “spun the wheel” and were randomly assigned to an agent. This is akin to gambling, especially if you don’t know how to vet an agent.

(Related: Check out my FREE pack of interview templates for building your real estate investing dream team.)

I would not advise this method for any real estate investors, as it takes a specific skillset & base of knowledge for an agent to work well with investors.

But alas, our bet paid off. Our agent was willing to help educate us, and his connections were deep.

So back to the magical email…

Date: November 11th, 2019

Subject: “Just came across my desk”

Once I saw this email come through, I knew we needed to look into it.

To summarize:

• 2 houses bundled together with significant cash flow from day 1

• Both were 3 years into a 5-year lease paying above-market rents

• Leases contained an option to renew for another 5-year term at the end

• Annual rent increases were built into the contracts, indexed for inflation

Now THAT is a deal worth fighting for.

We had to get creative to pull it off

As I mentioned above, we were low on liquid savings.

Most lenders require 25% down payments on investment properties, and that was simply out of reach for us.

We came up with a bold plan:

• We sold off about 85% of our stocks to fund 15% down payments for the deals.

• Then, we refinanced our primary residence, borrowing against the house's equity. This allowed us to pay down the mortgages to 80% of the property values, eliminating the need for private mortgage insurance (PMI). The money from the refinance also helped us refill our stock portfolio

The cash-out ReFi added $400 to our monthly payment on our primary home, but we gained $800 in net cash flow from the two rentals.

If this math is making you dizzy, don’t worry. It was very disorienting to me too.

Bottom line: We were tapping into the equity in one property to purchase two more, with the net monthly cash flow improving by $400.

After all that, it almost fell through…

The sellers in this transaction were motivated, and one of their main terms was that we close within 4 weeks.

We had been working with Chase, and everything was on track up until 5 days before the scheduled close.

I got a call from our loan officer, and he said their legal team had deemed these houses to be illegally operating a “group home” business within Nevada.

After a few expensive calls with our lawyer (who had 30+ years of real estate experience in Nevada), we confirmed that the houses were operating legally, and issued a letter to Chase to appeal their verdict.

Alas, Chase wouldn’t close the loan, and our closing date passed with no loan.

Technically, the purchase contract was void at that point, but our agent again came to the rescue.

He brought in his preferred lender, who expedited our rather complex file and committed to closing our deal within 3 weeks (over Christmas & New Years, no less)…

The sellers begrudgingly agreed to the new deadline, and we ultimately closed on the houses.

To date, these two houses have generated over $72,000 in NET cash flow while appreciating over $230k in value.

Key takeaways

So why did I spend 5 minutes dragging you through this roller coaster?

Because I think there are several lessons that any investor can take away from this story:

1. An investor-friendly agent can completely change the game for your future

Without our agent’s judgment, connections, and resourcefulness, this deal would never have been an option.

Do your due diligence and find an agent who understands what you’re looking for and can help guide you toward the right deals.

2. We had to take a considerable risk to gain a big reward

We essentially sold all of our liquid assets to buy these houses and were banking on a cash-out refinance to replenish our funds.

This was incredibly risky, and if the ReFi didn’t go through, we would have had essentially no reserve or emergency funds.

I do not recommend this approach, but I share this to show you how large of a risk it took to get this deal done.

3. Big box lenders aren’t in the relationships business

The experience with Chase pulling out of our deal 5 days before closing taught me that you won’t get white-glove service from a big-box lender.

Remember, big box lenders are playing a volume game; frankly, they don’t care if you return.

We’ve worked with local mortgage brokers or credit unions for our loans ever since.

4. Don’t give up without a fight

Some deals are worth fighting for. We spent over $1,000 in legal fees for 2 phone calls and a letter to try and convince Chase to close the deal.

They didn’t care, but that didn’t stop us. We salvaged the deal by pivoting to a different lender, which paid off big time.

Final thoughts

Long-term real estate investing is about taking calculated risks and pursuing compelling opportunities.

It won’t always be easy.

Your patience and resolve will be tested.

You won’t win every deal.

But if you keep trying and give it your best effort, you’ll have your own home run story to tell before long…I look forward to hearing about it.

See you next week.

-Aaron