The Titanium Vault hosted by RJ Bates III

Case Study with RJ Bates III: Quit His Job & Bought a House

May 16, 2019 Episode 82
The Titanium Vault hosted by RJ Bates III
Case Study with RJ Bates III: Quit His Job & Bought a House
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The Titanium Vault hosted by RJ Bates III
Case Study with RJ Bates III: Quit His Job & Bought a House
May 16, 2019 Episode 82
RJ Bates III
Show Notes Transcript

In this real estate investing case study, RJ Bates III covers how he quit his job, cashed out his 401(k) and bought his first piece of real estate. He bought the property via lease option and eventually found a way to purchase the property with a conventional loan from a bank. Titanium Investments now owns the property as a rental property and RJ plans on owning the property forever.

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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
What's up titanium vault. I'm euro star j Beatz sit down with you guys today for another case study. Today I'm going to be talking about the story that I kind of always briefly touch when I tell how we got into real estate investing. But I never actually invite, fully told the story. Um, it's the first house that I bought. Um, so we're going to go way back to 2010, 2011. Um, I can't remember the exact date, um, because I was still young and immature and didn't keep good records. Um, but I was working at Pizza Hut. Everybody has heard that story where I was a general manager and I realize I was not fulfilling my destiny. So I quit that job and after I quit that job, I cashed it in my 401k. I paid the massive amount of penalty on taxes and I use that money to purchase my first house.
Speaker 2:
1:31
Um, now I didn't have that larger 401k cause I was still in my mid twenties, and I'd only accumulated, I think like it was like $10,000 in the 401k. Um, so after the taxes, I only had like six or $7,000 left. And, um, what I ended up doing, I didn't know what I was doing at the time. Um, and now looking back at it, I realize what a great deal this was for the person, uh, that sold me the house. But for me, I, you know, I didn't have great credit and I didn't have any income and I didn't even know how to purchase a house. Right? Like I didn't know how to go get a mortgage. Um, I was just completely ignorant about all of these, like real life things, right? Like the just things that they don't teach you in school. And I found this house and it was like a lease option or a rent to own type of deal.
Speaker 2:
2:30
And this gentleman that was selling the house was, I leave you, give me 6,000 down. Um, and then the rent will be $900 a month. Every month. A hundred of the 900 goes towards equity and you have the option to buy the house in the next three years. So it was a lease option and I didn't know that at the time. I just thought, hey, I have the right to buy this house for x amount of dollars and every month that I'm paying 900, I'm getting a hundred dollars worth of equity. So we gave him the $6,000 down. Um, it was my first ever house. I loved it. It was kind of a quirky little house. Um, it was, it had a rear entry garage, um, that came from an alley and the garage, basically he separated the two backyard. So it has two backyards, one on the right side, one on the left, and the house cuts it right down the middle.
Speaker 2:
3:27
And then it has two fences on each side. So a kind of a unique little house over in Fort Worth, Texas. Um, where I grew up and I just, you know, I loved the House and ended up having a lot of life memories there. Um, I had multiple roommates, uh, different living arrangements with people that came in and in and out. Just kind, Kinda help, you know, me afford the house at the time. Um, when I quit that job, I ended up getting a minimum wage job as a cart boy at two or 18 out in flower mound, Texas. Uh, before finally Elijah del Garza, my current partner and titanium investments of Hawaii and Alaska. Um, he started a company called exact claims and then that's when I worked at that. That was my first like entrepreneur, um, experience. And then later on in 2012, that's when I started fairway solutions.
Speaker 2:
4:18
We, Cassie to Haas. And that's when, you know, everything changed for me. And eventually we got into real estate investing and started titanium investments. But I also, uh, that's the house that I brought my son Trinity, who has co hosted an episode of the titanium vault. Um, if you haven't listened that episode, it's one of my favorites because he's got his little baby voice. I'm still in that episode, but that's where I brought him home. Um, and, and for the first couple of years of life, uh, that's, that's where we, we enjoyed living together and, and you know, having his first Christmas and first birthday parties and all of that. So I have great memories of this house. Um, but long story short, uh, at some point in time I had to actually like buy the house and when the three years came up, which was probably right around 2014, um, it kinda snuck up on me.
Speaker 2:
5:11
We were two years into being entrepreneurs and I, you know, started re I was making money at this point in time. So I knew I had the money to afford the house and tried to get a mortgage. And it was like, no, as an entrepreneur you didn't have, you know, two years of tax return showing in enough money. You know, our first years we show quite a bit of a loss and, and so I just kept getting denied the right to get a mortgage. And so I had to, this was my first experience of negotiating a real estate deal where I basically had to go to the seller and, and say, look, I can't, I can't buy the house right now. Uh, but I still want the house that I'm going to find out a way to do this. And, uh, it kind of got a little bit awkward.
Speaker 2:
5:55
There were, you know, he started explaining side of things and now as I'm an investor, I realized like what his issue was. Like he needed the to get out of that deal. That was his plan. And you know, there, at that time I was ignorant, so I was like, I don't understand the problem. Like, you know, I'm still paying you monthly. I know you have to be making money on this, which is the truth. But it wasn't part of his plan and he needed that to go down within those three years. And so eventually I found a way, uh, to, to purchase the property and, and get a conventional bank loan from it, from a local bank here in Fort Worth, Texas. And, uh, at that point in time, I moved out of the House and I've turned it into a rental property. We've had one tenant in there the entire time.
Speaker 2:
6:40
Um, it cashflows, it's great. And you know, I kind of have a, a goal of mine to, to own, um, every house that I've ever lived in. Um, at some point in time, uh, I know it's kind of a weird goal, but you know, as an, as a real estate investor, it's something that I want to do. And so that house I'll probably keep forever. Um, it's, it's turned out to be a really great deal because we ended up, the original purchase price of the property was $72,000. Um, but by the time that I got around to being able to actually purchase it, um, the market had just, you know, skyrocketed here in DFW and it eventually increased all the way up to, you know, it was by the time I could buy it, it was worth probably 110. Um, and, and he cut me a deal and because I didn't close on time, we renegotiate the price and I ended up buying it for $92,000.
Speaker 2:
7:38
So, so not being able to close on time, that cost me $20,000. Um, but now, today, um, that house I just recently pulled comps for and it's worth $160,000. Now, of course, you know, that's because we're, we're currently on this upswing here in DFW. Um, I'm sure there'll be some sort of slowdown or correction at some point in time and maybe it's not worth that much. Uh, but hey, we have a ton of equity in it now. The cash flows. Um, it's just crazy to me to think about how that story has evolved from, you know, I didn't know what I was doing and looking back at it. Um, seeing how much money that investor made on the lease option. I mean, that was a really good deal for him. Um, at one point in time he was able to refinance the property and pull some of the equity out that allowed him to, uh, purchase a whole nother property, um, free and clear, um, obviously on that side.
Speaker 2:
8:38
But he had the, the new mortgage on the House that I was, uh, buying from him and that's why he needed me to, uh, cash him out. So crazy little story. Um, I don't know if I recommend anybody to purchase their first house, um, after they quit their, their career without knowing what they were going to do. But it worked out for us and I always look back at, you know, the risks that I took on that property, um, was kind of the first risk that I ever took in my life or career. That kind of catapulted us to be like, okay, we can do this, we can find out a way to, to make this work. And, and ever since then we've been able to do that. So that's Today's case study. Um, you know, nothing. Um, you know, there's not a ton of content where it's like, Hey, follow this.
Speaker 2:
9:30
But you know, it's still a cool story to share. So I just want to jump on here and do that guys. Um, hope you all are enjoying these case studies. Um, we do have some great guests lined up for future episodes coming soon. So we'll probably do a couple more case studies. I know we have one big one that a, I think a lot of people are kind of looking forward to, um, which is a flip in Hawaii that we just completed. So we'll probably do a couple more case studies and then we're going to get back to the regular format of having guests on the show. Uh, but if you do like what you're seeing, uh, make sure to, to give us a review on iTunes or give us a thumbs up on youtube. All right guys. We'll talk to you soon. Thank you.
Speaker 1:
10:07
Thanks so much for listening to the titanium vault, with your host, our Jane Banks. 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 a titanium ball.
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