2-years since I started in Real Estate- 43 Units

[Luke G.]

I'm not necessarily a new member, and I've debated back and forth on doing this for the last month, but I think this post could help others get started.  A little background about myself, I live in a small town in northwest Wisconsin and I'm a physical therapist at a local hospital and my wife is an RN and we currently have a 4 month old at home (who also has lovely RSV so mom and dad are taking PTO to deal with sick babies!).  We both have respectable but not extravagant W-2 incomes, but we look good on paper with high credit scores and long-term wages that support banks approving us for loans relatively easily.  I've had one or two close friends from college get into real estate, and I wanted to learn more about it, which I did through this wonderful website, reading most of the books on here, and ended up buying my first investment property in December of 2016.  In the 2 years since this is what I've done.

I did my undergrad at a university within a 2 hour drive of my home-town and both of my buddies understood this market well, so student housing was my first foray into real estate.

First deal I bought was a 3-br SFH for 85k that was currently rented for 900 in my old college town. Initial appraisal was for 93k, but I worked a construction loan of 9k into my loan as I was planning re-doing the kitchen and bathroom and simply adding a closet to another large wasted space to get it to a 4-br. Because the appraisal came in so well, I only was required to have 10k at closing and the expectation I was going to self-fund the rehab. I refinanced in December of 2017 with my new shiny kitchen and bathroom and a new signed lease of 1500$/month. I refinanced at 130k, and with my bank they allow an 85% LTV on purchases so I pulled out pretty close to 30k to purchase more properties. Still cash-flowing at 350$/month after the refinance.

Second deal was a 2/1 duplex that I paid 93k for in July of 2016.  No major updating and no major value add, just wanted to get my feet into something as I had cash.  Currently rented at $1200/month, is in a B location in terms of student housing.

Third deal was after the refinance, found an off-market 4-plex (2/2/2/1) that rented for 1650, but realized it was under-rented as well as likely poorly managed from a distance. I bought the property for 162.5k in May of 2018 with the seller taking a 10% note and 5-year balloon so I had spent roughly 8k out of pocket. Spent roughly 8-9k finishing a bathroom the previous owner never did, refinishing hard-wood, evicting a non-paying tenant, and generalized deferred maintenance. Current rents in place are now sitting at 2650/month. refinance came in at 215k, I refi'd into an 80% LTV which leaves me with 20k to go buy something else and the seller's note is satisfied. Still cash flowing at 500$/month.

Fourth deal was from the same property owner I bought the 4-plex from, was a 2/3 duplex I bought in July of 2018.  Not a primo student rental, but once again under-rented.  I closed at 97.5k (appraised for 105) and current rents are sitting at 1320/month.  Seller took a 10% note, I had 4500 into it at closing and now cash-flowing at 260/month.

Fifth deal was with a partner (buddy that lives in AK), I certainly didn't need him on this, but he wanted to get into real estate and I told him I would assist so he could learn and eventually do the same in AK where he lives.  Payed 140k for a B area student rental that was under-rented, will have students in next cycle (may-may) at 1850/month, we will be re-doing the kitchen/bathroom in one of the units this spring and this was figured into the purchase and loan (another self-funded rehab with a lower down payment).  This is currently on a 5-year balloon, but will refi out of this into a 10 year after the rehab is complete.

Sixth deal (my most recent) was a B- area student housing I payed 107k for, current rents are at 1275 with not great renters.  Next student cycle I will have them at 1400 with very little work on my end.  This is the last of my personal portfolio, which is now generating around an 8k rent roll with almost 2k in cash flow as well as having money currently sitting from a refi to go buy another one. 

This also doesn't include a larger partnership I am a part of that did one large deal (at least for me), and 2 other smaller ones.  We bought 21 properties for 1.2 mil (appraised value 1.6), seller took a 20% note on (which he defaulted on as well as he guaranteed rents for a commercial space then could not come up with the money based on the terms of the note), also had 80k of proceeds at closing for repairs needed on several of the properties.  The 20% mortgage was satisfied because he couldn't come up with 7500$s, even given 90 days with a certified letter.  Long story short, we were into this one as well as 3 other smaller ones and the total portfolio's rent roll is now 20k and cash flowing 7k every month.

All of my loans are on either 7 or 10 year balloons with a 20 year amort. I realize there is some risk involved here, but in order to keep growing I need to keep leveraging to an extent. I have at least attempted to space out my balloon's so their not due at the same time in order to hedge my bet some. My plan is to continue to buy smart for the next 4-5 years and then take a step back and see where I'm at. I have no plans to touch any cash flow, and every cent I make goes into funding more properties or improving my current ones. I also have a HELOC on my primary, but I don't use it, simply there if a great deal pops up or if I need some cash quick for whatever reason.

Biggest contributor to my success has been my property management.  Being a part of their investment group has opened doors for me to buy off-market properties, as well as open another revenue stream for myself in the future.  It truly is a win-win situation, I get first look at deals and they get the opportunity to keep growing their management.  They have expanded significantly and are up to north of 1000 doors as well as representation of 30 different investment groups.  They manage from Fox valley all the way to east metro and Rochester MN.  As far as my personal goals I am looking to begin expanding closer to home.  My next task is to take on Western wisconsin, New Richmond/Hudson/, and East Metro.  

My manager isn't a sponsor here so I won't say names or any of the like, but feel free to PM me if you have any specific questions on the management side of things or on specific lenders as I have built a pretty solid relationships on both of those fronts.  My ultimate goal is to be out of the medical field within the next 5 years and be doing real estate full-time, but I'm very aware my current W-2 salary helps significantly with the loan approval process.   

Short term goal for 2019 is buy an apartment complex, I've now gotten family/friends requesting to invest with me and I'm still teasing out the best way to make that work for everyone.  I'm really looking to start networking and getting into the east metro and western WI so send me all your colleague requests so we can help each other expand!