25-Year-Old Real Estate Developer Building 20 DUPLEXES!

what's up what's up y'all know who it is we're back with another episode building wealth by black straight from houston texas man you know how we do it we're about to jump into this episode you bout to feature a young guy by the name of donovan adacio he's about to talk about real estate investing he's building out duplex and doing some major things out here so tune in and listen to this we're dropping boys some diamonds and gems whatever you want to talk about you bout to put lay it all out of this episode right here so uh let's get into it my name is donovan adacero this is our new two bedroom two bath duplex that started building in april hopefully finishing up end of this month or early next month this one's actually under contract right now i'll kind of give you a tour give you an idea of how we actually got the money for it how we built it got the plans give you the whole rundown on how to do this yourself kind of the kitchen or not sorry the living room slash dining it's kind of small but we wanted to make it still affordable so we had to reduce kind of the square footage so i mean some of the two-story and the bigger ones you see they'll go for i mean some of them are pushing like 400 000 right now so for us to keep this like relatively affordable like under 3 15 so this one's under contract right now for like 296 300 so and i think the median for houston is like 350 360. so we wanted to keep it somewhat affordable and to do that we just had to reduce the square footage so um but yeah the people have shown it they like it it's great for like a couple that's who's actually moving into it it's a couple of man and his uh and his wife they're moving in to rent the other side they're bringing in cash flow you know probably saving instead of paying 1200 bucks on rent they're probably paying 800 bucks out of pocket now so yeah just a win-win that's the way i see it the reason i designed it like this is i wanted the master bedrooms to be on the outside of the the units because on my duplex the master bedrooms are touching the shared wall and so you can kind of hear the other person on the other side like if they got kids so that's why i kind of designed it this way but yeah so two big old windows we wanted a bunch of light in here this is the master bath electricity is not on yet so it may be tough to see but then here's the guest bedroom so a little bit smaller room a little bit smaller closet but it's still nice if you have you know a kid you have guests family coming to stay the night um this is perfect because there's no hoa in the community you can put this on airbnb there's just so many options you can do with just an extra bedroom that also has its own guest bath that way you're not sharing it with family friends airbnb person so um yeah so they're excited about it they have people hitting me up non-stop like hey is anyone are they going to close on it because i want to buy it so yeah this lot we purchased for 50 000 last year at the time this was in december of 2020 and that was like kind of top of the market at the time and so people were skeptical of buying but i knew when you see the transformation in the area you know that prices aren't going to stay low for long and so like this brand new single-family home was built and so i was like yeah this slot isn't going to stay there for long so we bought it for 50 000. um now lots are going for 70ish 75 and you know it's only been 10 months right so we because we bought at such a good price you know we got some profit built in there and then obviously putting a structure on here adds even more kind of profit into the mix so um and then yeah we'll probably be all in for maybe two [Music] 250 240 250 and then like i said we're selling for roughly 300 so just a pretty reasonable amount of profit just you know nothing too major but um something where the home buyer wins because they're getting an affordable duplex we win because we're making some money builder wins we're supplying jobs making the community look better so i think it's a win-win all around so kind of the way it works is you buy the land you send the survey to the plans and permitting company the plans and permitting companies is going to fit your structure on there then they're going to submit it to the city that takes about four months to get the permits approved so from december until april was permitting then april may is kind of when we started construction and construction should take about four to six months depending on weather um i don't know if you guys remember but it was like july or august where we had rain like yeah basically every day and and when it stopped it would only stop for like two days and so it needs to dry up fully before you can do like the foundation and some more work so when it rains that's how if you're wondering like how can how can it go from four to six months the weather is a big piece of how it can extend the timelines obviously supply chain issues we didn't have too much trouble cabinets were an issue for us like it took us a while to get cabinets windows are issued for a lot of people right now so basically i tell people six months because that's kind of on the higher end but ideally we want to be done in like four to five but again these delays where there's not not much you can really do come up and you just kind of gotta roll with it you just build it into your your model so like if you're paying interest on the construction loan like we are you need to account for that potential six months that way you're not surprised and struggling last minute when you're like oh man like why aren't they hurting up and finishing you got to prepare for it i mean that's just the way business works doesn't work uh if it was easy everyone would do it that's why i always say so gotta account for some risk in there excuse me guys can we come in for a second oh yeah okay we're just gonna show some friends here yeah so you see working on the cabinets right now um kind of putting the finishing touches um let's see what else we got left here got you like the vents for the air ducts just some little stuff what we're waiting for out here we're gonna have a driveway so for both sides um the problem is we need to put the water meter in and so we can't we gotta dig for the water meter and we and so until we do that we can't put the driveway in but hopefully we can finish the next like two weeks here yep so yeah it's like if at 300 000 their mortgage payment is probably going to be somewhere around like 1800 1900 and so if they can rent this side for 12.50 living the other side now you see now they're only coming out of pocket like 600 and so if you're paying 1200 for rent right now like i was i was living downtown i was living lavish right 18th floor apartment thinking i was doing something but i was paying out the butt basically for lack of a better word because um i wasn't i didn't own it i didn't have any equity in it nothing so i was just paying 1200 each month not making any money now when someone comes and lives in it they're not only building equity someone else is paying their down payment for not their down payment but paying their mortgage for them they're saving what probably 1200 bucks a month and now that can go to investing and now you can see how it can snowball you get one or two of these now you're making three four thousand a month now that you know the generational wealth really starts to be attainable so um that's that's kind of the goal here is want more people to start seeing the opportunity of living in one side renting out the other it's a little background by myself i'm from minnesota st paul minnesota to be exact went to school in tulsa oklahoma i did petroleum engineering for school and then obviously came down to houston because that's where i got hired full time with all the oil and gas jobs so that's still actually my current full-time job this is more of a side hustle you know maybe one day it'll be a full-time thing but goal right now is to just build it aside income save up capital and maybe start doing it myself right now i have partners in each deal because a lot of people ask like man where do i get 50 grand i didn't have 50 grand i just graduated two years ago so i just partnered with someone say hey you provide the money i'll do all the work so i manage the design contractors arranging the financing um paying the checks doing the draws with the bank so pretty much everything so that the investor only have to do is just worry about collecting their money at the end so um yeah there's no i'm not special or anything anyone can really do it all you got to do is just got a little put a little bit of effort into understanding how to make the numbers work the numbers work there's plenty of money out there for you to go and get it so yeah it's a little bit about me fight myself i'm hiring someone and trusting they know how to and then building inspectors come and inspect it the other inspection that's important to talk about is with the lender so if you have a construction loan like i do like we do um construction lender if you say hey lender the general contractor just finished the foundation we need 40 grand to pay him okay and lender's gonna send out their own inspector to come and verify okay they did it they did it that's right that's right that's right okay good now they're gonna cash you the check so it's not like you just ask for the money and lender just gives it to you they're gonna verify that what you did actually took place that work was completed and work was completed correctly and then that's when you get your money and then that's when you pay your contractor so a lot of inspections are involved to make sure everything's being done correctly like up and coming areas where they're putting new houses next to some of these older ones sometimes the older ones will drag on the value of the house so for example the one we're selling at 300 right now let's say the appraiser comes out and says man looking at the area the recent comparable sales so they'll look at similar properties that have sold like other 2-2 single-family or duplexes ideally and they'll say they only sold at 280. so your property is only worth 280. now the reason why it's causing an issue for both the builder and for the buyer is the lender will only give you if the if the appraisal doesn't at least meet the purchase price the lender is going to say you either need to make up the difference or you get to cancel the contract so obviously that's not good for the builder right because builders missing out on money and so for example like on this one if we get we've been under contract since like may basically i put it on the market two days or one day later we were under contract we got like four offers but now what happens is if we're under contract for all that time and the appraisal comes in like they're gonna do the appraisal sometime end of the month um which is typically about a few weeks before closing and if that comes in lower than the purchase price then the buyer gets to cancel the contract now i got to go find a new buyer now i'm not making any money now i'm paying on a construction loan so that's why the builder is like worried because we got to pay off the construction loan we got to get our profits back for the investor whoever it may be um now what i did for this one and what i'm requiring for all of mine is an appraisal waiver so an appraisal waiver is when you tell the lender look if it doesn't appraise i'm gonna either make up the difference or i just get to lose my earnest money so typically when the um the appraisal comes in lower than the purchase price you get to cancel when i say you i mean the buyer the buyer gets to cancel the contract and they get their earnest money back in my scenario i'm saying look if you want me to lock up the property for four months for you that's fine now but i need you to sign an appraisal waiver because if it doesn't appraise then you need to make up the difference or i get to keep your earnest money that way i get compensated for my time because now i gotta go find another buyer now i'm scrambling right because as soon as you finish these you want to sell it you don't want to hold it oh i'm sorry if your plan is to hold it you can refi refinance and keep it but if you if your plan is to sell it as soon as you get past that final inspection you want to close because the quicker you get your money quicker everyone makes their money quicker profits get made quicker we can reinvest that somewhere else so that's kind of the whole appraisal i guess issue dilemma that builders are working with in these newer areas is we try to make it look better but then the appraisers come and say well it's actually not worth what you think it is and we're like well yes it is because the buyers want to pay for it so we go back and forth on what the actual value is but ultimately the value of something is whatever someone's willing to pay for it right whether you agree with it or not if i'm willing to pay 500 for a pair of shoes the shoes are worth 500. so that's the way i see it like the extra room too yep so that's another thing too um i'm really cheap like i don't want to pay any housing payment so as i mentioned like my housing payment i'll just yeah it doesn't matter you guys can know so it's about like 1900 like total so principal interest taxes insurance 1900. the other side is bringing me 14.75 but obviously there's a delta there so only you know 500 bucks or so 400 bucks so it's not much i have to pay um but again i want to save as much money as possible so i can so i can invest it so i want to save to invest so instead instead to make up that difference i rent out an extra room on my side for 5.75 so now it's covering everything right now i'm not paying any housing payment there's two thousand dollars that i don't have to worry about so right now if i get laid off something happens with my job i get disabled whatever happens i know my housing is covered because the payment from the other side and my roommate are covering everything so again another way to and not only that i'm building equity in the property right because i own it so they're paying down my loan for me on top of that i'm getting tax benefits right you can you're going to say you're not going to pay any taxes on your on that rental income because you're going to depreciate it talk to your cpa don't get me wrong but you know you get to depreciate that in the house so for example i don't want to give a cpa lesson but long story short you'll probably get to you'll rarely pay rental or income on that rental money you're receiving because of depreciation and tax benefits um any maintenance you get to write off your income so all these things add up like man i just need to give it time right five ten years from now this is still going to be probably the best decision i ever made because i'm saving so much money now other than the tax benefits i'm paying down my loan i'm building equity i mean there's there's so many pros that i can't even name them all but yeah so one quick question up here for sure um so what got you actually into starting is like you had any background in real estate or or like you know i know you said you're an engineer all right so ain't like you're a finance guy so what what made you just say was it somebody you know something you read or like what got you to say half and just get this first property and now what yeah five not like the fifth probably whatever but yeah what triggered you to take that lead yeah so the first one um the first one came like the duplex i bought to live in that came from so i was working my job right i mean i'm still working my job but again i realized pretty early on like within a few months like man i don't know if i can do this for 40 years so i was on youtube googling how do i make money how do i make money passively so that i can keep my job and still make money real estate kept coming up i found a website like bigger pockets i'm sure most people have heard of them so i listen to the podcast start getting really into the podcast i listen to them every day on the way to work and one time they're talking about house hacking like yeah get in with the old down payment loan so that's perfect i'm broke i don't have no money a good way for me to get into it is to use one of these low down payment loans to rent out the other side and start saving on rent because my rent was my biggest expense and so i was really trying to like tackle that bill or expense so to speak so that i could start saving money for the next property so that's how i got started with the duplex to live in the house hack and then from there i was like man i wish i could be on the other side of the closing table right because i bought my my duplex new construction from a builder i was like man i need i need to get like them they're selling these for making 40 50 grand off me why can't i do that and i was like trying to put the pieces together like man so if i could build it for this i know i can sell it for this now i just got to get the land okay i can find the i can find the deals now i got to find the money so just putting different pieces together um again just not taking no for an answer i mean a lot of builders kind of blew me off like he's a 23 year old kid at the time like he's not ever going to do anything but i just kept talking to people you know eventually i put together a presentation to get like the investors that's how i got um all my current investors i sent my presentation and we're like hey we can build these for this we can sell them for this your profit will be 30 40 percent so even though i haven't done this before like don't worry don't focus on me focus on the fact that you can make 30 40 and let's say i'm completely wrong and you only make 20 yeah you know it's not a bad day 20 on your money is not bad so that's how i was able to get the first investor once i got the first one got the next one and so now we're up to um 13 have been purchased vacant lots have been purchased and like we're under contract for like three more right now so i should be at like 15 16 by the end of the year and then but we're building on seven at the moment so so right now that's amazing so appreciate it 15 what two years yes sir yeah so yeah i mean i just figured out as i go i mean i don't know have all the answers but i just yeah i i don't have a good like explanation of how to do it it's just you make things happen really like so figure out what you need and go do it don't take no for an answer ask people for help google youtube podcasts that's all i use people ask me did you major in real estate did you have a your parents were in real estate nope nope nope didn't know anyone in real estate didn't know anyone who owned an investment property really my parents owned their home but they didn't have an investment property or anything like that they just strictly typical american lifestyle right by the house and live in it and you know don't really invest so i had to learn all that from youtube podcasts talking to people yeah just really changing what i was like like bringing into my mindset you know what i mean like on facebook everyone sees a bunch of you know bs sometimes and sometimes it's funny right all the memes and i still joke around here and there but you know most of the time i'm focusing my feed like i'm only following people talking about real estate i'm only listening to podcasts about real estate so i was really training my mind like to to kind of be in that world and that's that's what really got it going was really focusing the mindset to say hey i can do this i've seen other people do it they're not special i'm not special either so i don't see why we're any different why can't i do that and that's kind of the way it started happening and kept it going i'm stopping the video right here donovan has been dropped into some major gems right here man it's all about your mindset let's get started let's do don't just keep thinking about don't wait for the perfect opportunity you got to have this course everything you're getting out there on his own so yes this property was filmed way back in october it's done i'm gonna drop some pictures of it here you know he's about to burn this one he's working on many more all i got to say is let's get it let's do it i'm saying billam wealth wild black later

Channel: Building Wealth While Black

Views: 91,084

Keywords: BRRRR, Real Estate Developer, BiggerPockets, duplex, airbnb, houston, sunnyside, building wealth

Id: rztvucLNzms

Length: 19min 24sec (1164 seconds)

Published: Wed Dec 29 2021