All Forum Posts by: Brendan Chisholm

Ronald, I keep wrapping my head around that one. I have experience with apartments, so I have been looking at mixed-use properties. Ideally, I'd look to identify a similar business as the apartment deals (i.e. acquire value-add / distressed properties, stabilize, refinance, hold long term term)

Thanks Sam! Are you able to share the link for GWA?

Hi All,

I am based in Fairfield County CT, and am an active investor / general partner in apartments in the Southeast.  I am looking to build my network in my backyard of active non-residential commercial real estate investors. I am not limiting myself to Fairfield County though. I am just trying to be in driving distance. I am now starting to explore the opportunity that exists in this space.

Feel free to reach out to me here or via email

Investment Info:

Large multi-family (5+ units) commercial investment investment.

Purchase price: $7,050,000

70 Unit Value Add Apartment Syndication in Rock, Hill, SC.

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

Partners sourced through broker relationships

How did you finance this deal?

Debt: Non-recourse Bridge to Agency Loan

How did you add value to the deal?

Asset Management and Capital Raise

Investment Info:

Large multi-family (5+ units) commercial investment investment.

Purchase price: $4,200,000

53 Unit Distressed multifamily asset in Newnan, GA (30 miles southwest of Georgia). Property is now stabilized and we added an additional unit. Going through refinance now

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

I was asked to join as a General Partner

How did you finance this deal?

Debt: Non-recourse Bridge to agency loan
Equity: Syndication

How did you add value to the deal?

Assisted identifying a debt broker that could source non-recourse debt. Now handling a large portion of the asset management.

@Jaron Walling

I greatly appreciate your insight and your thoughts.

I will be the first to admit that I overpaid for the property. We have done a few upgrades for the apartment. However, we are noticing now that it is not moving the needle. Prior to the pandemic, and a continuing trend since the end of 2000's / early 2010's my market and county's home prices were decreasing. Only until recently, these homes are starting to appreciate. However they are still positioned below where they were a decade ago. 

The style of condo we own (i.e. Communal Hallways and Elevators) are not seeing the appreciation that is occurring nationwide. The days on market are also considerably higher than the rest of the property types. This rising tide is not lifting all ships.

In the Summer of 2016, my wife and I made our first real estate purchase. We bought a 2 bedroom / 2-bathroom condominium in a Northeast city’s downtown area. When we initially bought the condo, we had all intentions of renting it eventually. Fast forward to 2020, we are almost ready to move into our new home. Now we have been flip-flopping on whether we want to rent or sell..

Two of our goals at the onset of 2020 were to first find a new home, and second rent this condominium. When we spoke to our mortgage broker for pre-approval, we asked that they provide us approvals based on carrying two mortgages. We were and are incredibly lucky that we were approved for our new home’s mortgage while carrying the current mortgage. While getting our future home under contract, my wife and I started to conduct analysis market comps for similar style properties to see if the condominium would financially pencil (*full disclosure, I should have done this in 2016*)

When we were approaching our closing date on our eventual home, we ramped up the market research. I noticed that during the summer months (and to an extent today) that comparable rents would offer minimal returns. The return on equity and Cash on Cash had small to no margin. I began questioning whether that the rental was the optimal strategy. We wanted to explore another option.

Shortly after we closed and started our rehab, we continued to hear and read that home prices were rising. Days on market, supply, and mortgage rates were down. Living in a market that has seen a decline in home values for the better part of the decade, we thought we might as well strike while the iron is hot. We put our condo on the market.

What we found out quickly, the demand in single family homes did not carryover to our condominium. Although home prices were rising, the value of our condo, and similar style condos were flat. After a couple price reductions, we are now at a point where it does not make total sense for us to sell. We were again stuck contemplating the big question whether we should rent or sell.

After Living here for four years, putting 20% down on a thirty-year mortgage, most of the monthly payments have been made towards interest. We have equity in the property, as we have been able to make additional payments each month to pay down principal. However, with little to no appreciation in the value of our condo, it would be a stretch to make the money back on our initial investment. 

Now that we have an approximate date to move in (knock on wood), we still have the opportunity to rent the condo. It will still offer minimum cash returns. The return on equity is also still low. BUT this is the beauty of real estate, there is more than one way to make money. Even with a smaller cash on cash return, there is the opportunity for principle pay-down while we have it rented. Depending on how long we hold it, and if the market remains flat, we will have paid down the loan even further. And who knows, the market for condominiums could change over the course of our holding period. If so, great. However, I will not count on it.

There are a few lessons from my first real estate purchase. First, you make money when you purchase. We paid retail for the property, and in a non-appreciating market, it is difficult to make money with a small holding period, in our case four years. Second, this is specific to my condo, HOA fees account for almost fifty percent of my monthly expenses. There will be less capital expenditures to worry about over the holding period, but this is an expense item to account for when purchasing into an HOA. Third, every investment needs a business plan. As part of your business plan, there needs to be multiple (exit) strategies. In our case, it was to either rent or sell the condo. For every investor, understand what you want to do during purchase, ownership, and selling of the property.

All of what I have written is A GOOD PROBLEM TO HAVE. I am trying to make decisions not just now, but that will be beneficial to my growing family for the long term. Everything that is written and I have talked about above is valuable experience.

I recently wrote about my experience with closing a Fannie Mae Homestyle loan and going through the vetting process for general contractors. Fast forward sixty days, and I wanted to provide some insight into renovation itself.

My wife and I closed on a home at the end of June. Considering the circumstances, the closing process went seamless. To be honest, it was actually quite eventful. My wife and I sat at the end of a long table with our attorney at the other end. We also had 10 month old son with us as well. To say the least, my son provided all of us quite a few laughs. After closing, we found our way to the home to start the before and after pictures.

The dumpsters were dropped off the same day. Sledgehammers began to swing and demolish walls. I won’t bore you with all the details of the interior renovations. I will say that we are now sixty days into rehab, and the interior work is maxed out as we wait for permits. Until we receive the approval, we are not able to start sheeting rocking, and all the other next steps. At the time of this writing, we have lost close to twenty total days. As we patiently await these approvals, I will impart some lessons learned for the group.

Let’s first give everyone the obvious lesson, very few things go according to plan. Always have a contingency plan in place. This rehab will be my family’s eventual home, but if this was a fix n flip you need to align expectations on the timeline. Our initial expectation was to be in the home by October. However we got our hopes up that we would be in by Labor Day. We reverted back to this expectation of October once rehab slowed. My family and I are fortunate to reserve funds for paying two mortgages. If you are flipping a home, be conservative on your timeline to finish. Create multiple scenarios to understand the costs for the hold period.

Second lesson learned, there will be rehab issues, minor or major, after you start the interior tear down. We have been fortunate to only encounter minor issues. It was a small plumbing issue and a need to replace lead pipes. This made a small adjustment to our plumbing costs.

Further to the point above, and a third lesson, costs budget are estimates. Until the work actually begins to happen and is complete, it is a business plan that will guide and level set expectations for what the costs may be for the project. Certain line items will go below estimate, while others will be above. In the end, you hope you can stay below or on budget. Fannie Mae Homestyle Loans require a 10% contingency reserve, it is best that you do the same for flips.

Last point, and I highly recommend you check with your local municipality and state on this one. About thirty days after submitting our building plans, I found out that there are regulations pertaining to improvements to homes located in a flood zone. I was aware that our property lied in a flood zone. We have insurance covering it. What I did not realize is that in Connecticut (and again, check with your local municipality and state) is the following Zoning rule:

Although your property lies, in part, within a known flood hazard area, your submittals indicate that the improvements, shall be generally confined to the building footprint, and are not “substantial” per the “Flood Regulations” – meaning that the cumulative cost of the work will remain less than 50% of the fair market value of the structure.

In view of the above, no special flood hazard, coastal, or inland wetland permits are required at this time. Please note that the “substantial improvement” provisions of the “Flood Regulations” are cumulative over a period of five (5) years from the time of the first repair/improvement. In this instance, any improvement conducted before (five years from issuance) that push the cumulative costs of the fifty percent (50%) threshold will require you to structurally floodproof the entire building to the strict stands outlined in the regulations.

Knowing this regulation now, explains why one step of the permit approval was delayed. Luckily, the renovations fell short of the 50% threshold and were approved by the Environmental Protection Board. If you are planning renovation / improvements in a flood hazard area, please keep this in mind.

For now, we will keep our heads up until we receive the permits and approval. We are gaining valuable lessons for the potential next fix n flip opportunity. This specific experience reminds us to temper our expectations. I hope my experience so far helps anyone that runs into similar situations. I’ll share some insight after the project is complete.

I wanted to use this month’s blog to stray a little bit away from the apartment investment content. This month, I will focus on residential real estate. A goal of my wife and I was to find a new home. In particular, we wanted to find a fixer upper. We set out to find a home, while keeping our condominium to eventually renting it out. We needed to be able to qualify for another mortgage. After being pre-qualified at the beginning of the year, we began to search for a new place to call home.

The two of us were motivated to find a place to call home. We have been living in an urban setting for the better part of a decade. Luckily, we had an amazing realtor to help us along our journey. About halfway through our search, the world as we knew it halted due to COVID-19. There were restrictions put in place for viewings. We also found out from our lender that renovation loans such as the FHA Construction and Fannie Mae Homestyle loans were suspended. We contemplated if we wanted to adjust our criteria. We did, but we didn't move forward with anything on the market.

Around the end of April, we were informed by our lender that their renovation financing products went live again. That same weekend, my wife and I went on the MLS to find and identify properties to look at on a beautiful weekend day. Throughout this entire time, we were in constant communication with our realtor. We sent him the list of properties on a Friday night. He texted us shortly after receiving it and told us to meet him at a home around his place before we see the other houses.

Our realtor informed us when we met him that his neighbor was in the midst of moving to a new place. The neighbor’s son had been handling the cleaning and clearing out the house to get it ready for market. He asked our realtor if he knew of anyone interested in purchasing the property. Our realtor knew we were motivated and that we were approved buyers. With our masks on, we viewed the property one at a time, while the other scoped out the neighborhood. After both walking through, we knew we found the right one.

After some back and forth with the seller, we finally settled on the purchase price with the seller. Considering the comps in the neighborhood, we feel like we found a good deal. We were able to get the house under contract below market value. As of late homes have been going for at market value. Prior to COVID-19, that is an approximate 5% discount to appropriate list price. Properties going at appropriate list price has not been the case for my county in some time.

My wife and I emailed our lender and begin the work needed to obtain financing for either an FHA 203k Loan or Fannie Mae Homestyle Loan. We put together our initial forecast for the renovation costs and ensured everything complied with each loan. After going through all the details with our lender, we decided to go with the Fannie Mae Homestyle Loan. One thing for readers to note, is that the Fannie Mae Homestyle Loan requires a ten percent contingency reserves. For example, if your renovation costs are $50,000, the reserves will be $5,000. This reserve amount will be included in the final down payment requirement. Our closing was slated for less than sixty days after the offer accepted, so we needed to act swiftly. We needed to provide final estimates to our renovation lender within three weeks.

I started calling General Contractors immediately. I was able to line up six to separately walk through the house with me and get our estimates. This house is a split level, built in the 1960s, and is originally a three bed, two bath. After the previous owners’ children moved out, they converted one of the bedrooms into a dining room. Our intentions for the home is to convert it into a four bed, and two and a half bath. Knowing that this house would be the one we call home, we were a little more lenient on our budget. If this was a flip, the end product would be totally different. We were able to squeeze in all the walkthroughs almost immediately, and then we waited for estimates.

After receiving the estimates, we talked through each one with each general contractor. After some deliberation, we made our decision. The next two weeks comprised of subcontractors' walkthroughs, a walkthrough with our HUD inspector, multiple floor plan changes, and finalizing our appliances. During these two weeks, we had a mandated walkthrough with the HUD inspector. The inspector went through the details of how the draws will work. The inspector also mentioned that he will need the general contractor to provide him the estimates for his review. We were finally ready to submit the initial estimate to the HUD inspector.

After the HUD inspector presented the estimate to the lender, we were given the green light to order the appraisal. We waited with bated breath until the appraisal came back. And guess what?!? The post renovation appraisal came back lower than the purchase price and renovation costs. We knew we expanded our budget a bit to accommodate our wish list, but we were confident on recent comps that the appraisal would be higher. I called the lender to see what we could do. She calmed us down a bit and told us to send over the floor plans. Regardless of the appraisal, we could still close. The lender would challenge the appraisal and ask the appraiser to use our floor plans. A few days went by, and the challenge worked out! The appraisal came back almost 10% higher than the initial appraisal!! This new appraisal was higher than our purchase and renovation costs.

With all the numbers finalized, we discussed all our options with the lender. In some instances, with the Fannie Mae Homestyle loan, there is an opportunity to finance up to six months’ worth of mortgage payments in the loan amount. However due to the size of our loan, we opted not to pursue that option. Our loan amount was at the maximum amount prior to our interest rates raising by more than 1.5 percent. It made our decision an easy one. After submitting our most recent bank statements and pay stubs, we were ready to close!

Closing was the last day of June. It was uneventful, aside from all of us social distancing and wearing masks. After a couple hours or reviewing all the legal documents, we were handed the keys, the first renovation check, and the deed to obtain permits. The dumpster was dropped off a couple hours later. We are only a couple days in, and the entire interior is ripped down to sheet rock where appropriate.

I will provide regular updates on how this renovation progresses through my social media channels and this website.

@Braden C I contemplated converting the non-conforming 3rd unit into one of the units; however the seller did not waiver on the price.