1 of 3 properties purchased out of a 1031 Exchange package, using a 40% down payment from my solo 401(k) and a non-recourse loan from First National Bank of America brokered by Mark Robbins (Lending Resources Group). Closed 12/16/2022. Currently leased below market rate through the end of November 2023, but still cash flows. Market rent is $1200, debt service is $339/mo. Appraised at $120,000 (CMAs have it at $130k, so I guess we'll see what it's worth when I'm ready to sell).

What made you interested in investing in this type of deal?

I started out looking at turnkey and a 1% R/V, realized that was not much of a thing at the late stage I was entering REI, decided to purchase properties with an agent and do any necessary repairs or rehab with the help of a property management company, seeking deals where a little value add would go a long way.

How did you find this deal and how did you negotiate it?

Met Randy Charboneau on BiggerPockets while looking for cash-flowing areas. He piqued my curiosity when he brought up Muskegon. Once we settled on a strategy, we planned to make an offer on a single property that ended up being part of a 1031 Exchange, so we ended up making an offer on a 3-property package. Randy submitted an offer that was 19% less than asking, which was accepted, and we negotiated some repairs and repair money as well.

How did you finance this deal?

Down payment out of solo 401(k). Because the properties individually were too inexpensive to get non-recourse loans, I went through a broker I found on Sense Financial's website, Mark Robbins/LRG, and he was able to set me up with First National Bank of America, which offered me good terms on a single loan for all 3 properties at 60% total LTV.

How did you add value to the deal?

Purchase price relative to ARV based on Randy's CMAs was 52%. Basically the existing rent on the 2 tenant-occupied properties covers the debt service for all 3, giving me a chance to do any work on the 3rd property needed to achieve maximum rent with an annual lease.

What was the outcome?

Closed on 12/16/2022. Not all repairs were made before closing, or made to satisfaction. More work scheduled. Seller left $4k with title company for my property management company to hold for repair payments.

Lessons learned? Challenges?

Learned my comfort zone with neighborhood classes. Learned a lot about non-recourse financing, and that you can't really get loans below $75k. Decided I'm not keen on having so much money tied up in properties I plan to hold. As they were purchased well below appraised value and CMAs, and cash flow so well, they will provide a nice return to my 401(k), so I can't complain. For future deals, I intend to leave as little non-bank money in the property as possible after refinancing.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Randy Charboneau gets MVP. I also appreciate the fine professionals at Sense Financial for getting my solo 401(k) set up so I could make this deal with my retirement funds. Mark Robbins of Lending Resources Group saved unknowable amounts of time, energy, and frustration helping me quickly find a bank that would bundle all 3 homes into one loan. Lighthouse Property Management was very responsive and helpful in providing market rents and quickly on-boarding me and the new properties.