The following is a transcript from my interview with Ruben Galindo. The audio and video are available through our channels here if you're interested:
Michael Liddicoat 0:02
Hello investors and welcome to Episode Two of dissecting the deal. Our guest this week is Ruben Galindo.
Welcome, everyone. This is your regular dose of dissecting the deal. I am your host, Michael Liddicoat. It is a pleasure as always to get a chance to look at an opportunity from an investor find out how they acquired it, what they paid for it, and at the end of the day, how it's earning money for them. This week, we have an awesome guest. His name is Ruben Galindo. Ruben is out of San Antonio, Texas. He currently has seven investment properties. And today we're going to talk to him about a property he found on Google and was able to turn into a house hack. Go figure. While talking with Ruben, he decided to name drop a tool that he's been using. And I want to share that with you guys. It's cozy.co. It's an online property management software. And in our discussion, Rubin talked about how he uses it to accept rents from people. And there's some other features that he's he's not using it for, that I thought were kind of neat and worth looking into. One was it has some expense tracking stuff. So you can actually tie all of your expenses directly to that property so you can see how it's performing. And then it also has communication tools. So if you want tend to be able to request repairs, or upload photos to you and videos and let them know when contractor is going to be visiting and all that sort of stuff. It has some built in tools that I thought were pretty neat. So that's today's name drop. Thanks, Rubin.
Ruben Galindo 1:48
RUBIN, thank you for agreeing to come and be on the show with us. We're really excited to have you talk about about the opportunity, the deal that you're talking with us about. So let's start off first with what type of asset class was this deal. So this was a single family home that I acquired. It was a pre foreclosure situation. And kind of how I came about that foreclosure or pre foreclosure situation was, I had just kind of googled here in the in I live in San Antonio. So the bear county website I just started looking for I just googled bear county foreclosures, and Oh, cool. website popped up. And I clicked on that and just started doing a little bit of research because I had never really looked into it. And since I already had, I think at the time, I had already for four properties. I kind of know the areas that I like to invest in. So I specifically was looking at those areas. Okay, and and I saw a house that was in a neighborhood where I currently had two other rentals. Okay, great cash flow and rentals. And I love the neighborhood. It was actually the same neighborhood where I acquired my first property four years ago. So I knew it pretty well. I knew the values of the home, I knew the rent comps. So I was pretty familiar with with that specific neighborhood, and all the comps that come with it, whether it's
the fair market value and the red comps. Sure. So
Michael Liddicoat 3:21
no, so that I was okay, so you knew the neighborhood, you knew the market you had already purchased in that neighborhood. You were you found a pre foreclosure list that you were looking through it by just googling, which is Yeah, great. So you know, not buying lists, just finding the list, right? Um, and so you find the property.
Ruben Galindo 3:39
What's the next step? So I actually found like four different properties in the areas that I wanted to invest in. And so I wrote it, I sat down, typed up a letter and actually hand signed it. And I sent it. I didn't get a response. At the time I was living out of town. I was down in South Texas and McAllen. And that weekend, I drove up to San Antonio, because we have family in San Antonio. And I went in door knocked at these at these addresses. Really, no one answered. Surprisingly, right. But hey, that was okay. I left my business card and I left a little note that was interested in their property. And lo and behold, one of those residents gave me a call in the middle of the week and say, Hey, we got your card, we got your note.
Point, can we talk?
Well, if they want to meet in you know, in person, I said, I'll be there Saturday. So we made, we made those arrangements. I drove back up to San Antonio, when it came straight to that house. Again, I had already done my homework on that property because I like I said I already knew kind of the values. I looked up the square footage on the appraisal website for the county, and I was able to figure out right away what the appraiser
value or the value of the home market value should be. And the only thing I did not know if what was the condition of that home? That was the unknown. Right? So at this point, do you do you have a strategy going into this? Are you thinking, I guess, are you thinking you're going to buy and hold this? Are you thinking that you're gonna do buy and hold? Okay, so you've already got a plan. I own three other properties in this neighborhood. I'm definitely buying holding this thing. Right. Right. So and obviously the the goal is always to try to do the at least a 1%. Right, the 1% rule. Now buying off the MLS? I haven't, you know, I bought the other two off the MLS. The first one, I did acquire the 1% actually a little bit above the 1%. The second one that I acquired, I did not, I was probably at point nine. Oh, okay. You know, so not quite the 1%. But it's it's above the 1%. Today. Okay. Yeah. Yeah. Why? And all the other stuff? You got it to where you need it? Yeah, yeah, definitely actually doing real well, now. Great.
Again, like I said, so I came up to San Antonio met up with the owners of the house. And, obviously, out of respect to them, I wasn't about to say, Hey, I know you're kind of in a bind. Obviously, that's a very similar situation. So I wanted to respect them and, and just said, Hey, I'm interested in your property. Like, I'm just asking to see if you're interested in getting rid of it. And they they're the ones that kind of
said that they were in a certain situation, financial situation, and they were looking at needing to get rid of it. And time was of essence for them.
And because of the fact that there was, I think it was missing some flooring. The carpet had been taken out, and it was just bare concrete. Oh, okay. Right. So and they didn't have the money to fix that.
And really, that's all that was wrong with it. That's all that was wrong with it. So.
So I asked him, I said, Well, what is it that you're What are you trying to get for the house? You know, I'm just curious what it is that that you want for the home? I said, because I as an investor, I have a price in my mind. And from an investor perspective, there's a certain number that I have to work with. And if it works for you, great. If it doesn't, I totally understand I respect you and I'll move on.
So I said, but I like to take a look at the house first. So I took a look at the house. And like I said it was just the carpeting that had been taken out because they had had a leak. And the refrigerator had, I think there was a problem that frigerator at the time and some water leaked and got the carpet wet. So they just cut it out, because I guess it was just too wet and destroying it. So after I toured the house, I'm like, Man, this is great. This is easy. You know, just replacing the carpet completely is going to be
an easy task. Not single story. Two story, single story. single story. It was a four bedroom, two bath house. Oh, okay. Yeah. So it was a nice home and had a real nice tuff shed in the back, like a I think it's like a 10 by 12. So it's pretty big. Very cool. Yeah. So that was, that was good to see back there. Okay. And obviously, they were not going to take that. So when we started talking numbers, and I told him, Hey, this is the price that I can offer you. And I said, but at this price, whatever I have to pay to get you out of this foreclosure, obviously, we have to subtract that. And then whatever's left over, is yours. It depends on what your balance is. And obviously, they had to, they couldn't be upside down, right? Because then that wasn't gonna work. So fortunately, they had, they did have equity in the house. So when I gave them that price, to me, I was acquiring that property at about 45 to 50 grand in equity. Okay, so that was my target number.
And so, they agreed to it. They agreed to it, I broke it down for them. Kind of just wrote it on a piece of paper just to give them an idea how this was going to work. And they ended up having $17,000 still left in equity. Wow. So they walked away with that money. Oh, that's great. Yeah. Especially with somebody in a situation like a pre foreclosure and stuff where they're, you know, they're, they're not in the best situation. Right. Right. And and here's the thing, I was a little nervous myself. I had never done that. You know, I bought all my other properties off the MLS. Sure, but man, I was willing to try something different. You know, I'd heard I've heard other investors talk about, you know, subject twos and things of that nature. I had never done it. I was like, man, I
I'm gonna figure it out. But yeah, so I hired an attorney to draw up all the paperwork. I told him what I was trying to do. And he drew up the paperwork. And he drew, he drew it up as a wraparound. Oh. So the agreement with the sellers was that,
that they would need to hold the lien in their name for up to 12 months, I needed up to 12 months and to for me to refinance, and I needed that time, simply because I was in the middle of another deal. Oh, okay, I was already under contract. And I still I would just got under contract. So I still had about 30 to 40 days before I was going to close on that property. So this came about, and now I'm a little nervous, you know, how am I going to do two deals at one time? Well,
the money I did have was already committed to the house that I had under contract, I didn't have any more money, so at least not to invest in. So what I did is I knew I had another property that I purchased two years before that night, I bought it with some, I think $35,000 in equity when I acquired a property, and I knew had already appreciated. So I had about 80 grand, I think in in equity at the time. So I did a cash out refi. And I ended up pulling out 40 grand. And with that $40,000 I was able to acquire this property.
The the owners were, I think seven or eight months behind. So I had to make that payment upfront to stop the foreclosure hurt. Right. And like I said, they still had $17,000 that they weren't going to be able to walk away with. But the agreement was that they would get at $500. Up front. Okay. And then they would get the other 80 $500 when I refinanced. And again, all this was written up and signed, you know, we went to a title company I did as a notary, she did all the paperwork for me. So in and so how did you find the lawyer that wrote this up for you, man, I just called call, I just called an attorney. You know, I just google real estate attorney. Hey, Google seems to have been the winning factor in this thing. Yes, yes. And that's what I did. And he wrote it up for me. Awesome. Okay. All right. So I'm at, I want to go back a couple of steps before we get get to the end of it. So you walk into this home, you talk to this couple, you take a look. And this might seem like an obvious question, but how did you know that? Yes, this is a deal. I think you may have already said it, but I just wanna make sure people hear it is you knew it was deal because well, I knew the rent comps for this property was going to be at least 1550 or above. Okay. And my target price was around the 150. And the offer was 152. So when you made that offer, you said that this was your market, you knew what your strategy was, you knew buy and hold. So in your mind, this is buying hold on turning this into a rental and 152 is going to be my 1% rule. Oh, yeah, yeah. Okay, great.
Michael Liddicoat 13:19
Awesome.
Okay, so you get a lawyer, they do the wrap around, you talk to the title, everything's going good. You have that problem that every investor wants, which is I've got too many deals and too many, you know, offers going out at the same time. And so once you do that, you're, you're you're working on the first one. How do you get to closing on this?
Ruben Galindo 13:41
Uh, on the on the refinance or on? On? Yeah, so you, at this point in the story, you you've paid them, they're at 500, up front, you told I'm gonna get your other 85 once we once we get to closing, okay, you've pulled out your cash from one of your other properties. So you've got cash in order to do the refi on what happens next. Okay, so let me back up a little bit. I can tear it up a little bit. So so when we get into the agreement on how we were going to do this transaction, we went to the title company, and at that point, they deeded the property over to me, because I needed to make sure that the property was going to be in my name, right. So that was the initial.
I don't know if the proper word is close, but that was the day that it was deeded over to me that they followed me to the local credit union that was pre COVID. And yeah, this was in January.
Yeah, this was pre COVID. It was in January, and they follow me to the local credit union. I had their statement from their bank, which was Wells Fargo that had all the instructions, you know, the wiring information where the money had to go to stop the foreclosure had all that information right there. And right there in front of them, you know, at the teller said, Hey, I need to wire it.
Was 7570 $500 or so I said, I need to wire this money right here to this account of a law. And they got it done. I said, Now I need a cashier's check for 8500 bucks.
So, at that moment, they walked away with 80 $500 plus their back payments would have paid for the property was already in my name at that point, but the financing or the mortgage was still in his name. And that 80 $500 was for them to you know, start making arrangements to move out and find another place to go. Sure. And which is a great point. So you you at this point, have the deed to the property, you've stopped the proof, you've stopped the foreclosure process. What were your terms on them getting out? Did you go we had talked about that before we did all this and they said, Hey, we need about 30 days. I said, Okay. All right. Now,
I think one of your questions was, you know, what would you have done different? I think I would pinpoint an exact date. Because they kind of pushed it, they pushed it back to like a week. It was not the end of the world. But you know, I just didn't want it to continue and continue. Sure. So yeah, like it's got to be so you said you did this beginning January. So like February 14, guys, you're done. You're out Valentine's Day somewhere else, like it's right. And it happened a week after that. So no big deal when the end of the world. That's why I held on to that second half as well. Right. So that was kind of that that little motivation to get going do what you need to do so I can acquire the property so I can start working on getting it refinanced. Okay. So, so they move out and at this point, are you still in the working on the wraparound refi process? Uh, yes. So, so when when we did the wraparound, the agreement that the attorney wrote up was the wraparound. That was the agreement that I took it to title, right. That's where we processed all the paperwork. Right?
I was a little nervous, because I didn't know how Wells Fargo was gonna respond to that. Yeah, cuz I've I mean, I haven't had any experiences with doing any foreclosures personally. But I know that that's always one of the pitfalls of you know, is the bank essentially going to say no, you know, do your caches all do once you change title, and here we go. And we're off to the races and we are with the arrangement is right. So so my plan was, Hey, I'm going to make the payments, obviously, right? I don't want to raise any red flags or anything like that. And also, my goal was, I need to get this refinance as soon as possible. I'm not going to wait 12 months, and I didn't,
about mid May or towards the end of May. I went ahead, got it refinance. And now it's 100%. of my name to the mortgage. Wonderful. Yeah. So so I don't have to worry about that anymore. Great, which is, yeah, that's the last one to worry about, especially having, you know, their name potentially tied to a property or owning that sort of stuff. So and then Is this the point where you're buying hold strategy took a turn? Yes. So actually, actually, so that was, we did the transaction, we did it to property over in early January, mid to third week in February, they move out. So the property was after it was vacant, I started the renovation, I had it repainted completely on the interior to make it one solid color. And then I took out all the carpet and had vinyl plank flooring installed. Okay. So you know, that didn't take very long that took like a week. Sure. It didn't take very long at all to do all that. And, well, about mid March, I was notified that I was able, my job allows me to transfer back to San Antonio. So I transferred back to San Antonio, and my previous home, what had been rented out already, so I didn't have anywhere to go.
So I told my wife, hey, well, we got a vacant property. And I had like 14 or 15 people lined up that wanted to see this house and I kept stalling them because I knew that it was going to be very, very soon before I knew whether or not I would would be able to come back to the San Antonio area. First I kept stalling and stalling them. And sure enough, I didn't get to transfer. And at that point, I just took it off the market. And me and my wife and my family moved in. And we're here currently. So we just closed on three acres of land about a month ago, month and a half ago. And in our plan is to build our forever home over there. Oh, very cool. But in the meantime, we're here and here's here's the beauty of this. Okay, so because I'm here living in it. My loan is an owner occupant loan right?
So therefore, the interest rates are lower versus an investment loan. Right? And there's really no money out of pocket because the thing appraised at 190,000. Oh, wow. Yeah. So you paid 152. And the appraisal comes back on the refinance. Oh, yeah. 192 easy all day long. Great.
And, and so I mean, it worked out great. It worked out real good. Very cool. So your strategy is, is just been put on hold a little bit, because you're taking advantage of an investment property you own to stay in it, while you guys are building your forever home. And then once you're out, again, you've got tons of equity sitting in this thing, you know, your market and what you're gonna get there, you already had people lining up, literally, you know, waiting to get in. So you're not worried about turning it into a rental and getting people in. So that's awesome. That worked out great, right. And here's the thing, Michael, the I have another property that's just slightly smarter than this one. And it's gonna come vacant in December, and I put it on the market, and I got it listed at 1650. And, man, I'm getting emails and text messages already about it. So I tell you, it's a great neighborhood. It's close to downtown, it's close to, you know, some major retailers. There's a Fort Sam, which is a army post is here, there's samsi, which is the San Antonio Medical Center is about 510 minutes away. It's just it's just in a great location downtown is about 10 minutes away. So it's, it's just in a great location, God. So I'll dig into the the rental numbers here in just a bit when we go number dive in. But you already started to answer one of them. You might have even answered both of these questions already. So what you did for the first time on this deal was the was the wraparound. Mm. Got this.
Michael Liddicoat 21:56
And then
knowing what you know now,
I think what you said earlier, is that what you do differently is in that agreement with the sellers who say, Hey, you guys, can you can have 30 days, but this date is your 30th day of what I got to have you guys, right? Yeah. And if not, then I would have to start charging something. And that's going to be deducted from that second half of that money that they had coming to them. Great. And that's great for you, because you don't have to actually go collect anything you're like, well, I'm just gonna start taking it off the top of this other money that I owe you guys. So, you know, if you want to get all of it, you got to get a move. Right? Right. Very cool. Okay. So this is part we're gonna really just run into the numbers and stuff. So purchase price on the property was 150,000 152,000. Okay, renovation costs. Let's see, I think I paid like 1200 dollars for labor on the paint, and I spent maybe $300. So that's about 1500. dollars. And then on the flooring, I think I spent 30 $100 on the flooring. And then I spent an extra thousand dollars to get it installed. So about four grand total. Yeah, so I mean, all said and done. I mean, cheese, your you know, not even Yeah, purse, on rehab. I mean, that's not. Yeah, no other miscellaneous expenses in this transaction, the lawyer, the lawyer was 900 bucks.
Okay.
And again, you didn't have to buy a list, because you just went and found it on Google and went looking. And then where are you hoping when you guys have your forever home built? You've already know that you've got a nearby property that smaller is going to go for 1650.
Ruben Galindo 23:44
Obviously, we don't have a crystal ball. So we don't know, you know, when you guys are two years out from, you know, having home built and stuff. But if you had to rent it today, what are you hoping you'd be able to make on it? 1650. Okay, which again, easily is the 1% rule for you. And so your thought on this all day long? And my mortgage Michael is 1005. Man, so you're you're already cash flowing even with set asides and all that sort of? Awesome. Now, are you do your own property management? Yes, I do. Okay, so even more money in your pocket there? Mm hmm. Great. Now, one thing that you did point out that I want to make sure that you address for some people that are thinking about doing house hacking or stuff like that is you currently have an owner occupied loan on the property? That's what is going to change when you guys choose to move out? If that is sooner than you think it is? Is there gonna be any impact for you guys? As far as as far as on the loan? Do you do you have to be forthright and forthcoming and say, hey, I've changed to an income property or done you know, a that's our stuff. I mean, I didn't get into the deal with the intent to change the terms I mean, if they if the situation changes circumstances,
That's just life. But I think you're required to be in it at least a year. I mean, heck, we're already and we're already five months into it. So before you know it, I'm not gonna have my house built in five months. So it's, that's not even going to be a factor right now what I'm dealing with the dilemma I'm dealing with is, alright, it'll, by the time that my house is built, I will have been in this house for two years. So should I go ahead and sell it? And take that capital gains tax free? and apply it, you know, to another property? Or should I just hold on to it? And because I know it's going to cash flow very well? Sure. So far, that sounds like the four or five properties you have, you haven't really turned any of them. So you haven't had to think about capital gains tax and stuff. Now, this might be getting too into the weeds for some folks. But are you also planning on possibly doing a 1031 with any of these instead of straight? Not? Not at the moment? Because kind of my current goal is aside from getting my house built, I've always had a goal of acquiring at least 10 properties, right? Because my understanding is Fannie Mae kind of limits you at 10 properties or per person. Right? Right. So and so that's kind of my thought right now is acquiring 10 properties. And then at that point, right now, what I'm thinking is I'll take all the cash flow from all those 10 properties, and attack the lowest balance and just do the Debt Snowball, you know, and get rid of one loan. Now I only have nine financed sure I can acquire another one, you know, and I don't know how Fannie Mae will look at that. I'll figure that out at that point. And who knows, maybe things will change by the end? Yeah. Well, I remember, there's a guy that helped us get started up at our meetups, his name is Roger Wilson. And I talked to him a long time before I ever got into real estate. And he was like, yeah, you know, I just, I had this goal, I want to own 10 homes, because I figured if I own 10 homes, and I own freedom clear, and everybody paid me $1,000 a month, then you know, I'd be set I wouldn't have to worry about anything. And I think today Roger owns well over 500 properties. So one of those have like, yeah, as you said, like life goals change. Life happens you you get good at something. Right. Right. So and you know, and I've also been, you know, the other thought has crossed my mind is multifamily. You know, I haven't I haven't tried that yet. I don't have any duplexes, triplexes for plexus. So if I do decide to go in that direction, it'll be some it'll be no more than four units just simply because you know, once you get into five and above, that's completely true. different type of loan products and things like that. Well, yeah, you're into commercial lending, you're into, you know, lots of other paperwork and statements and all that sort of stuff. I'm yeah, makes total sense. People want to connect with you if they want to talk to you more about your deals, if they're interested in San Antonio market if they just want to hear more stories from you. What's the best way for people to connect with you? So I have a website and it's www dot San Antonio real estate investors with an s.com.
Again, that's www. San Antonio real estate investors.com. I'm also on Facebook, and I'm on Instagram so they can send me a message there as well. Very cool and no, no weird spellings or anything for Facebook and Instagram. Well, the tour a Reuben glendo brokered by San Antonio finest Realty. And in services, I think on Instagram is
Ruben g underscore Rei or something like that, or remember something like that.
Michael Liddicoat 28:43
Cool deal. I mean, to be able to go on and use Google of all things to just immediately find for properties, make offers on them cold call and and just, you know, knock on the door and meet somebody and have a deal that just works. Granted, Reuben had to get a little creative with the wraparound on the deal. But Holy cow, I certainly haven't found any deals through Google. That's for sure. But thank you, Reuben, for coming on and sharing your story with us what an awesome experience that was. He is an investor that is absolutely killing it down in San Antonio and has a great plan for moving forward. If you would like to connect with Ruben, you can find him at San Antonio real estate investors.com. And connect with him there. Thank you again to Ruben for coming on and being part of the show. If you're an investor and want to come on our show to talk about a deal you've done, email us at info at dissecting the deal.com I'd love to have you on and figure out how did you acquire it? How did you make it work? And what is it doing for you now, as always stay safe out there and we'll see you next time.
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