Building a Portfolio

One day I started talking about real estate to one of the salesmen at one of the dealerships I went to in North Carolina. The dealership was not too far from Lake Gaston. Tommy lived near the lake and had some experience working with real estate. We started talking about opportunities that I might be able to take advantage of.

He found out about a woman in a single-wide trailer who was having financial trouble and was going to lose it to the bank. He asked if I wanted to make an offer to keep it in good standing, pay it off when the bank approved the sale, then sell it at a profit. I made about $15,000 on that deal.

Next up, he found out about a small modular home a dealership was trying to get off their lot for a advantageous price. Tommy found a lot near the lake I could buy where we could install the modular and sell. While that was happening, he found some other lots at Lake Gaston to buy at good values. I thought it would be good to buy those now before their values rose so that if we were successful with the first modular, we would be ready to do more.

I was getting tired of the time consuming hassles of the first rental. I decided to find a rental agent who could take care of that for me - for a fee, of course. I found a guy who actually lived not too far from Lake Gaston but commuted to our area several days a week.

He was also an investor and we started talking about me buying places out where he lived. It was a poorer, rural area, so it would also have the potential rental hassles of that kind of clientele like the first house. But he would also manage those.

By this time, my income-to-debt ratio was pretty tight so I couldn’t get bank loans. Since the places were fairly cheap, my strategy became to buy the places with cash, get renters in, then go to the bank for a mortgage because the rents were more than enough to cover the debts of the new mortgages. We (my financial partner and I) were also making some profit on these. I picked up a few.

The modular construction was moving along but hit a snag. The house was supposed to have a certain amount of clearance from the adjacent lot but at the inspection they discovered that they had laid it a few feet too close. There were two options. They either had to pull it back up and move it over (at great expense) or I could buy the lot next to it and redo the two plats to give us enough room.

Even though it was Tommy’s fault, I thought the first option would probably put some tension between us that would not bode well for our working relationship. I also thought picking up a new lot might be advantageous for the future anyway. That’s what we decided to do.

Unfortunately, the guy who owned the lot was also a long-time investor and he wasn’t going to give us a bargain. He sold it at the going price and offered us the lot on the other side as well. I went for it, thinking that would probably all work out for the better in the long run.

The modular was finished and we put it up for sale. We got some inquiries but no offers, which went on for several months. I started to get nervous and decided to go ahead and rent it out. Tommy would manage it. It was worth a fairly good amount more than it cost to build so I decided to refinance to pull the extra cash out. All the lots I had bought had also risen in value so I decided to do the same with those. I would sow all that extra cash back into other properties.


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