All Forum Posts by: Ashley Thomas

Investment Info:

Small multi-family (2-4 units) hard money loan investment in Stockton.

Purchase price: $242,000
Cash invested: $38,000
Sale price: $400,000

1970s duplex in deplorable condition, but with dual pane windows and in good exterior condition, near highways and on a tree-lined residential street: complete rehab required in one unit and selective rehab in the other. I financed the deal with hard money, replaced the roof, repaired perimeter fences, and replaced the kitchen cabinets, lighting, appliances and flooring. The first unit took five months and I did it primarily myself; the second unit took a team one month to turn around and rent.

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

Rental income. I rent to travelling professionals who stay 3-10 months.

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

I look at local small multi-unit listings every single day and have bought two after precipitous price drops. The seller dropped her price suddenly by $50K in frustration at the lack of interest in a property inhabited by her drug addict brothers. I was among many bidders but had visited/analyzed the property in detail, did not have inspection contingencies, and won at $12K above the newly dropped asking price, seller to pay $5,000 closing costs.

How did you finance this deal?

I financed the deal with 25% down and hard money, with a $32,000 rehab budget.

How did you add value to the deal?

I have a fair amount of rehab experience and do the flooring and much more myself, so my budget was maintained. I am not afraid to market my properties and make use of several free and one furnished rental web site for this property. I had the seller pay for a home warranty that covers HVAC and it paid off generously.

What was the outcome?

This location rents itself and gross rent is $3150/mo. Expenses are $450 in water/garbage/wifi/gardener/home warranty/advertising, plus mortgage.

Lessons learned? Challenges?

At the time this was my only project in an area that was new to me, so I had time to do much of the rehab myself, taking my time and doing it right. As I learned which tasks I needed to delegate to the more skilled workforce I built a local team who could help me on later projects. I also learned to set strict limits as the previous owners showed up regularly to ask for favors. I refi'd with a conventional loan after the rehab.

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

Unfortunately my hard money lender, who I used for a future deal, too, is no longer in business after Covid-19. However I see similar deals and have spoken to some knowledgeable lenders with interesting programs that I'll likely use in the future.

My favorite way to get a little bit extra from the sales contract is to ask the seller for closing costs, repair costs, property taxes, etc in the contract or addenda to the contract; if the appraisal will support it, you can ask for quite a bit and just jack up the offer price accordingly. You might be past the point of doing that, but it's a strategy. Another method I've used is drawing out $20K from a couple of credit cards through their various programs such as 0% for 1 year (at 5% fee - Chase does a little better at 4 or even 3%) or against my credit line at 10% for 5 years (which I pay back super early). Hard money is usually an up front fix & flip loan where you document the rehab before the loan and have that rehab money to draw down as you go along. I've done it twice and it works, but again, you're beyond that and it sounds like you have a great loan program. My BofA Small Business account gives me a 22K credit line - you can see what changing banks can do for you. Just random ideas - I'm working on my strategies, too, and I am thrilled to hear you are getting a 15% down conventional loan! :)