All Forum Posts by: Christian Ehlers

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $720,000
Cash invested: $60,000

Househack/BRRRRR.
Taking advantage of low 5% down Owner occupied conventional loan, then fixing up the units 1 or 2 at a time, raising the rents, and then refinancing to lower the monthly payment and increase cashflow.

1 full gut unit and others were more cosmetic turnovers. There were two section 8 tenants here as well, navigating those programs can be a great way to increase cashflow if you tenant screen properly.

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

Great househack opportunity being one of the few 4 units for sale around the seacoast area, less than 30 second walk to the beach. It had some value add components to it so there was plenty of meat on the bone.

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

This deal was on market but was overlooked by most investors who either didn't understand section 8 programs, landlord tenants laws, or underestimated the current market rents because the rents in place were so low.

How did you finance this deal?

5% Down conventional owner occupied financing.

How did you add value to the deal?

Raising section 8 rents by using my industry knowledge and connections to the section 8 offices.
Renovating several apartments that hadn't been updated in 15+ years.
Removing problem tenants and re-renting to new market rate and respectful tenants.
Raising rents on existing tenants while maintaining good relationships with them and fixing deferred maintenance items.

What was the outcome?

Increased market value to appraisal above $900K in value, removing PMI from the loan, increasing cashflow and being ready for the next deal!

Lessons learned? Challenges?

Construction is almost always tricky to understand the costs upfront because of the unknowns, also really dialing in your renovation plan before purchasing makes things simpler and quicker. For some reason because I was going to be living there I was a bit more relaxed than I usually am, still turned out great though from buying a good deal.

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

My lender who I've personally worked with for over 5+ years now.
Title company for the same length of time.
Several great and cheaper contractors that helped me get the work done!

There's a New Hampshire Real Estate Investors Meetup tonight at 6pm in Manchester I believe, as well as a Simplified REI Meetup Tomorrow in Portsmouth NH at 6:30-8:30pm. You can find them on Biggerpockets, Meetup.com or by just googling Real Estate Investor Meetup Near Me, or something like that

 I'm assuming you mean when you pay off the remaining loan balance? In that case there is no longer a mortgage so there are no payments to have due on sale clause called on. 

A loan Assumption requires you to get pre-approved for the current in place loan as if you were a regular buyer, however not all loans are assumeable (primarily FHA and VA loans are). Contract for deed is essentially a work around to gain ownership and control of a property, keep the current financing in place but not allow the due on sale clause to be called because the Deed officially transfers to you at a future date (usually when the loan is paid off by selling, refinancing etc).

A good attorney will understand contract for deed in your state and be able to point you in the right direction. 

 2-3 Years is tough as you never know what the market will do, but a live in flip for example is much safer to assume an exit in 2-3 years as you force value through the rehab. If you can keep the property after the 2-3 year mark then I'd say go for that, selling properties is expensive and I'd rather see you keep more of your equity at that point. 

For sure there's tons of options and every lender is slightly different too which can get confusing. It seems like your best bets right now would be a HELOC so you don't lose the great interest rates you have now, and can pay yourself back once the flip is done. Another option would be bringing in a PML instead or OR in addition to your own HELOC funds, if you are worried about being stretched too think personally.

 You're referring to selling the Note itself correct?

If you need a primary residence or are willing to buy something new to live in you could do a "live in flip" to get started. This takes a lot of the pressure off of you because worst case if you don't get the values right on the back end of your first flip you can just live there a little longer until the market catches up, since you need a place to live anyways.

Ideally I'd start there and as you get more comfortable take on bigger projects and straight up flips. 

 Hey Christian I think somebody local to your market may be a better source to answer that specifically. However if a duplex is what can help you get started then go for it, that's the toughest part. If you are expecting you'll have to move far away within 2-3 years I'd be more hesitant to get into a property unless you can still make the numbers work with a property manager on site once you leave. 

rural areas can still be great investments especially if they have higher appreciation, lower rents, newer properties etc. If you are worried about being stuck with the home I'd find something that needs updating so you can improve the value, so you are far less likely to be "Stuck". Nobody knows what the market will be in 3 years but this will help you hedge your bets regardless of which direction it goes

Keep learning from the bigger pockets podcast and I'd recommend Set for Life by Scott Trench as Jerome did, as well as David Greenes new book Pillars of Wealth. 

For now it's about learning as much as you can, making friends with people who have already done it, and getting a good financial base so that you have somewhere to grow from. 

You're on the right track just thinking about these things at this age! I had the same fears when I was an agent at 21 but come to find out there will always be deals and always be business to be had.

Congrats! Getting started is the hardest part. Keep going and don't get caught up in the little details, think long term what this property will be able to do for you!