Investing in the Sooner State
In just two short years, we doubled our real estate investments in Oklahoma City from two to four and will be closing on another property this month. The diverse economy, landlord-friendly regulations and positive economic growth indicators were among the many reasons why we set our sights on the Sooner State.
Last week, I had the opportunity to present about real estate investing in Oklahoma City to the Long Distance Real Estate Investors (LDREI) group my husband Chad found on Meetup.com a few years ago. With COVID still raging, the LDREI pivoted to virtual and I spent about two hours talking to about a dozen people. I decided to recap it here to share with you.
If you are interested in long-distance real estate investing, you should check out this group and local groups in your area. This group, along with a women’s investing group, have been key to growing my contacts, tapping resources and in general, meeting like-minded and interesting people. The catalyst for our dive into the OKC market was a member who kindly met with me and my husband over lunch in 2019. She talked to the market, gave us her contacts and advised on local groups in the state to join. Within a few weeks, we booked our tickets, and set up a lot of meetings.
Why We Love Oklahoma City
Oklahoma City has a population of about 500,000 people over approximately 600 square miles. It is home to a wide range of industries including aviation/aerospace, biotech, energy, transportation, government, and healthcare. The city has a program called MAPs (Metropolitan Area Projects), which imposes a one-cent sales tax to fund improvements throughout the city. It’s been renewed four times and these are debt-free public projects. The program has improved downtown areas, funded improvements to OKC schools and more. In essence, OKC is investing in itself to be a more desirable place to live.
Prior to COVID, it had a decreasing unemployment rate and a population increase double the national average. The ratio of homeowners to renters is around 50% so there’s a good pool of people looking to rent houses. With less than $80,000, you can buy and renovate a property. This property will be less than 1000 square feet, would be categorized as Class C and your tenants would be blue-collar workers. Rents run in the $750 to $950 range for newly renovated homes.
One Week Whirlwind
During our first and only visit to Oklahoma City (thanks, COVID), we met several real estate agents, a lender and one contractor. Everyone knew everyone. We got referrals for property managers and got a tour of the various neighborhoods from a local. With our six-month-old in tow, she was surprisingly patient, cooperative, and adorable, at just the right moments. After a week of familiarizing ourselves, we headed back home to Colorado in weather the Sooner State is known for: torrential downpour and thunder.
We left committed to investing in Oklahoma. We knew who we wanted to have on our team and Chad made most of the calls to firm up commitments with our new agent. We sent thank-yous to all the people that shared their time and expertise with us.
Pulling the Trigger
In August 2019, our agent found a deal for two houses from a single owner that were a few blocks from each other. Renovations expected were mostly cosmetic (flooring, drywall patches, paint etc.). The numbers looked good and after some deliberations, we alerted our agent that we were ready to move forward. It was an all-cash deal for two properties for $87,000. Chad interviewed a couple of property managers by phone and we went over the pros and cons of each before making our selection. We still haven’t met our manager in person, but I was able to FaceTime with her.
By early fall, we had two properties in our new OKC portfolio. By the end of the year, we had tenants lined up and we were collecting rents for $795 (2 beds/1 bath) and $950 (3 beds/1 bath), thanks to our amazing property manager at Hometown Realty.
Deal Snapshot of the 3/1 Property:
|PRICE (Purchase, Close, Reno)||$61,000|
|Cash on Cash Return||30%|
|Total Square Footage||720|
Each month, this property generates $200 in cash flow and $200 in equity. After our tenant was in place, we initiated a refinance to BRRRR (Buy, Rehabilitate, Rent, Refinance, Repeat) the property. Our lender allowed us to take out a loan based on the purchase price plus the renovation cost. No seasoning, or required time to own a property before issuing a loan, was necessary. We left about $8,300 in after the refinance, which helped us increase our cash-on-cash return (COC). We used those funds to purchase another property a year later, with some additional funds to complete the renovations.
Cash on Cash Return = Net Operating Income/Total Cash Invested
Since these initial purchases, our agent merged with a contractor so their shop is now full-service. InvestOKC finds properties and has someone at the ready to begin the rehab. Both sides of the business are run by a husband/wife duo that have complementary skills.
Our third deal was off-market and happened in early 2020. This house was not habitable. The electricity and water was off. It needed to be completely renovated from the electrical panel to the plumbing to the roof. The renovation cost was expected to exceed the purchase price (it did by about $5,000).
We used our past experiences with the previous two houses to streamline the renovation process: consult our property manager. She received a copy of the scope and she informed us what she needed to command the highest rent. Then our contractor went to work. When asked about finishes and colors, my short answer was that as long as it made sense for the market and our property manager was good with it, that was all I needed to know.
Our strategy with rehabs is to provide a fully renovated and functional home. We decided that having new plumbing, updated electrical and HVAC, etc. would minimize the need for maintenance and give us at least 15 years before we’d need to replace anything (a lesson learned from one our first property purchase). On top of that, we can roll renovation costs into the refinance so doing everything upfront allowed us to pull additional funds from the property when we BRRRR’d.
In two short years, we’ve invested $145,000 of our own money, reinvested more than $100,000 and are enjoying a portfolio ROI of 60%. We feel validated as a Memphis turnkey company has recently moved into the area and is also scooping up properties. We plan to continue to expand in this market and start evaluating a new one to diversify.
Want to learn more or have questions? Email me:
GET OKLAHOMA CITY SMART
- Presentation PDF: Long Distance Real Estate Investors Group Presentation
- Oklahoma City Government Site: Metropolitan Area Projects (MAPS)
- Property Manager – Hometown Realty
- RE Agent & Contractor Team – InvestOKC