Case Study with RJ Bates III: Our First Hawaii Flip

In today's episode of The Titanium Vault hosted by RJ Bates III, we breakdown the first flip Titanium Investments completed in Hawaii! RJ goes into detail how they were able to pick up the property from a wholesaler based out of California and use a hard money lender from Dallas, Texas! After the dust settle they were able to have a net profit of $75,000 on their first flip in the most remote location on the planet!

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Speaker 1 0:01

Well, it's not real estate investors, entrepreneurs and agents doing long length place, unlocking the secrets to real estate investing and entrepreneurship. Welcome there. That titanium vault hosted by RJ Bates . But third, here's RJ.

Speaker 2 0:26

Hey guys, welcome to the titanium vault. I'm your host, RJ Bates sitting down today for another case study of a property that we've taken down here at titanium investments. Uh, before we go too far though, for those that are watching on video , uh , yes, I do have a war wound on my forehead. Um, the titanium flag football team , uh, we had our first game of the new season this past weekend, and unfortunately, I , uh, I got headbutted during a play. So I look like a true , uh , warrior over here with this a nice little , uh , bruise right in my forehead. So, but that's not gonna stop me from creating more video content for you guys. So , um, I, I promised you guys that I would , uh, be creating more case studies of deals that we've done , uh , like I said, and the vault, the Facebook group for the titanium vault and for titanium investments. Um, I asked, who would you guys like to have on here? And, and overwhelmingly , um, case studies without guests was the winner . So we dropped one last Friday. Um , I'm going to do these as a kind of think of, you know, deals that were fun and exciting and or maybe even losses that can kind of give you guys a , a good direction on what you're trying to accomplish in your business and just learn from either our success or our mistakes. So today we're going to talk about our first flip that we did in Hawaii. And so to give you guys some background on how we even got started in Hawaii, I'm sure you guys have heard it, so I'll kind of breeze through it pretty quick. But my childhood best friend, Elijah, Dela Garza , who has two episodes on the titanium vault , um, he's a roofing contractor on a Wahoo and we've, we've just been friends forever. Um, we've even been in business together before. Um, you know, we were just, you know, talking like friends do occasionally, you know, once every week just talking about our businesses and you know, I'm talking about real estate investing and he's talking about all these contracting jobs. And it was just finally, it was like, Duh, why aren't we doing business together? And so Elijah was like, Hey, I, you know, there's a ton of opportunity out here. I don't see a whole lot of competition. Um, why don't we try to do something together? And so naturally I was like a little bit about it because just from the small amount of knowledge that I had about Hawaii was that everything was expensive and a high price point. And so I wasn't sure if we were going to be able to find the right margins or ROI out there, but just like anything else, it just takes time to get on the right wholesaler's list to do the right marketing and just find out, get the market knowledge. And so , um, I was actually on a wholesaler's list that mainly wholesaled in California and Texas and I don't actually do business in California, but just because they did some wholesale deals in Texas, they just put me on their list for all states and they sent a deal to us in Hawaii. And what stood out to me right off the bat, I didn't know if it was a good deal or not, was the price point. They were selling it at $192,000, which is about as cheap as you could possibly get for our property in Hawaii, especially on a Wahoo, a big island is, is more affordable, but on a Wahoo, $192,000 is a very affordable property. This was in wine . I A, we'll call it our water street property cause it was on water street. And you know, I reached out to Elijah and this is on the far west side of the island where he lives on the far east side of the island. So it was quite a drive. Um, some days about an hour and a half to two hours to get over there. Uh, but we identified that the ARV on this property was $335,000. Um, properties in Hawaii usually are smaller square footage and the rehabs usually aren't that bad because, you know, unless there's something just astronomically wrong and there's not HVACs or foundation problems or windows, things that can be really pricey. And other markets, that's not really the case in Hawaii. So this, I think this property was right around a thousand square feet. So we estimated the Rehab Elijah drove out there, walked it, took look at it. We estimated the rehab to be $35,000. So with an ARV of 335,000 Rehab, a 35,000, and we're purchasing at one 92. That included the assignment fee. I can't remember exactly how much the wholesaler made on this. I think it was like 10 or $12,000. Um, but what did stand out to me about this property was, is that the wholesaler locked this property up from hubs zoo. And the reason why that stood out to me was, is because now that became a source of properties for us , a place where we could find our own deals in Hawaii instead of having to go through the wholesaler. I'm not trying to cut the wholesaler out. I mean, bless them. I mean, they brought us good property. It's the first property we ever flipped there . But if it's actively on hubs or option.com or zone and we can go on there and bid ourselves, then we're going to do that. And so, you know, it's just something that we learned on this deal. Um, we contracted it, we put our nonrefundable earnest money up, and then the next thing that we had to solve was finding a hard money lender. You know, we weren't really set up to do business in Hawaii yet. This was our first deal and we didn't have a hard money lender and we didn't have the private money at the time that was willing to pay for the entire purchase price and the Rehab without us actually proving the concept in Hawaii. So that took quite a bit of time. Um, I think I ended up probably filling out probably 10 or 12 applications with different hard money lenders that were like, yeah , yeah, yeah, we do business , um , in Hawaii and then kind of flaked on us. Um, once it actually got down to the 11th hour. Um, one of the other things that stood out to me was a lot , a lot of the local lenders did not want to give us very good terms. Um, I think at one point in time I had a hard money lender that wanted to charge four points , 14% interest for 60% of the purchase price and 0% of the Rehab, which if you've ever taken out a hard money loan before, that is like some of the worst terms that I've ever heard of. Um, and, and I was actually fearful, like, what if this is all that we can get in Hawaii? I mean, I didn't know any better and I still don't remember exactly how I found this gentleman because it, I remember the first conversation I had with them , he was based out of Dallas and he had an Oklahoma phone number. Uh, which stood out to me because we also do business in Tulsa, Oklahoma. And he said, yeah, I'll do a loan in Hawaii. And I just remember, I mean at this point in time, I've already gone through 10 or 12 applications and all these people that are in California, Washington state, Hawaii, that makes sense for them to do business in Hawaii. I'm not having a whole lot of faith in this gentleman from Texas with an Oklahoma phone number that he's going to be able to loan on this project. Um, it was funny because he was like, you know, hey, I need help finding an appraiser to go out and do an appraisal. So we helped find the appraiser went out, appraisal came back fine and he actually closed the loan and gave us free ds and terms that they , we only ended up paying like two points and 10% interest. Um, the loan amount on it was 204,000. Um , we had to bring cash to close was 26,007 Oh eight 62 cents. Um, we ended up borrowing that cash to close on this deal from , uh , my old high school football coach. Um , this was one of his first investment deals is probably one of the larger ones he had done. I didn't want her two previous deals with us and was a little bit nervous about it in Hawaii, but he also knew Elijah from back in high school and junior high days. So just relationships, having that rapport already that kind of enabled us to go into Hawaii, you know, I mean, otherwise we would have ever done it. So we took down the deal. Um , August 11th , um , the Rehab took us a little bit longer than anticipated and that was due to Elijah's lack of inability to be able to go to the project on a daily basis because of the distance. But , um, also just because it was our first deal, you know, I mean, Elijah was at this point in time trying to learn how he was going to be a rehabber and a contractor , um, on his own projects. You know, you'd always work for clients, but never for himself. And that's a whole different thing. I mean, I've been on both sides of those. And , um, there's, there's pros and cons to being a contractor for yourself. Um, we ended up finishing the project and listing and right around early December, which is one of the worst times of the years to the list, but it is what it is. That's when we finished the project and we weren't just going to sit on it cause we're paying holding costs. Uh , they, we , so we listed in, in December , um, we chose, chose the realtor for this , uh , based off the fact that he was representing us. And if you've ever followed anything of mine on Facebook or Elijah's, you've heard us talk about our Lilly Poona project. That was the, the thousand day short sell that we actually just completed last week, thousand days. Uh , that will definitely be , um, an episode in the future that we're going to talk about. But we had that property under contract. Uh, but we knew it was a massive short sell, a huge undertaking. But the agent that listed that was also representing us on that transaction. So we asked him to also be our listing agent on this transaction. Um, he did a great job for us. Um, we ended up contracting about 30 days after going on market. Um, we officially sold on January 29th so we bought it August 11th and we closed on the sell side on January 29th. So not like great timeframe, but for our first deal in the most remote location on the planet. Pretty good. Um, one of the funny stories about this deal and, and part of the reason why I wanted to share this is because we originally listed for three 35 and we weren't getting a whole lot of traction. Um, our agent was having open houses and there weren't that many people that were showing up. And so we did a $10,000 price reduction, that 325,000. And when we did that, we got a contract, we got an offer, we accepted it. And when the appraisal happened on this, it appraised for $335,000. Now, if you've ever heard me talk about this for, if you don't ask the answers always. No . Here's a great example of this, and I would have never thought to do this, but our realtor went back to the buyer's agent and said, we originally listed for 335,000 we did a price reduction in three 25 you guys offered three 25 but it appraised for three 35 would you be willing to pay $335,000 because that's what this property is worth. And that's what my clients actually wanted. He just asked and they said yes. I've never had it happened before, although I've never had the gumption to ask either. I was blown away. We didn't ask our realtor to do that. He just did it. And he called us and he said, hey, I got you an additional $10,000 on this deal. Um, we asked them to pay for what it appraised for, and they said, okay, and so sign the amendment, it'll be coming over in your email. And so then we sold it for 335 . Like I said, we , we closed on January 29th. Um, we ended up getting $108,000 at closing and then we had to pay our private money off. We'll say, you know, we original clash cash to close. There's 26,007 Oh eight, probably when it , with interest on this, we were probably somewhere around the 30, $32,000 range. So we ended up walking away somewhere around $75,000 net on our first deal in Hawaii. Um, I consider that a pretty big home run. Um, it's probably one of the more proud projects that I've had. Uh , just for the sake of the location. Now that I've learned more about Awahoo and Hawaii, I mean, why not is not one of the hot markets. It's one of the more difficult markets to, to flip a property in from the standpoint of where it's located and the, the lack of like days on markets just higher there. Um, and, and just the fact that we were able to do it on our first deal. And you know, I always hate told people, you know, if you make profit on your first flip, you did a good job. This being our first flip and making $75,000 was a huge victory for us. So that's our, our case study on this one. Uh , to kind of complete the circle on it, our next deal that we got was a deal that we got from hubs zoo that we got ourselves. Um, that's just learning, you know, like we paid attention to where this person got his, his lead from was hubs zoo . All we did was then going to hubs zoo, set up notifications for, for good deals on similar location. And the next flip that we also got for actually better numbers was one street over from water street on Kapooey Street. And we ended up successfully flipping that one for some more numbers . So maybe that'll be another case study at another time, but a , just want to kind of put a cap on that, on how paying attention where this property came from enabled us to have another, a win for titanium investments of Hawaii. All right guys, that's a case study number two for you guys. If you like what you heard, please give us a thumbs up if you're watching on youtube or leave a comment, share it on your social media profiles. And also if you're watching listening on iTunes, please give us a review. Five Star review personally. Uh , we got our first a four star review and man, that just hurt my heart. So , uh, we'd love to get some more five star reviews guys. Alright , that's a today's episode and we'll see y'all soon.

Speaker 1 15:23

Thanks so much for listening to the titanium vault with your host RJ [inaudible] . The third for more info and to stay up to date, visit www.podcast.thetitaniumvault.comandonfacebook.com/the titanium vault. If you enjoyed the episode, please rate and review and we'll catch you next time on that titanium ball .