All Forum Posts by: Clinton Cook

I have been recently looking into this and it seems like a no-brainer if you can find the right property. @Stanci March did you move forward on the property in the other state. If so, do you have anything you can report back on? 

I hate you haven't received any response to this because I went to write this exact forum post but found this one first. Have you moved forward with the idea? If so, what have you learned? 

I dont have an enormous income but would be looking to sell off some excess tax credits I would have left over sounds like you might be interested in purchasing for a discount in the event I move forward. 

I am looking to use the BRRR strategy on a 8 unit complex where owner financing is involved. He owns the property free and clear. I have done a similar deal in the past and I was effectively able to :

1. 10% down have the owner hold the loan.
2. Rehab the property with my own funds
3. Raise Rents significantly 
4. Refinance the whole property into a commercial loan with a lower interest rate. 

I hope to approach an older gentlemen I have a lose connection with who owns a small 8 unit complex to do something very similar, but what I have been told that the owner will likely want to hold the mortgage for 15 yr fixed period at a set interest rate and with no early pay off. He is effectively using this as his retirement income and doesn't trust the stock market and does not want to have to find somewhere to put his money but still wants to earn a higher interest rate than the bank. He also likes this idea because he will no longer have to worry with any of the day to day headaches.

I will need to renovate the property and raise rents in order to make the deal worthwhile. My concern is this. 

1. If I use my own funds for renovation. I am afraid it will be almost impossible to get a commercial loan and the bank take second position in order for me to recapture my investment in renovation. 
2. If the bank wants a first position mortgage then it is unlikely since this gentlemen is relying on this for his retirement that he will be willing to take the second position. 
3. Even if he did take the second position, I am still not sure a bank would like that because the loan amount would be now be very small. 

This scenario is still somewhat hypothetical because I have not approached him about the property yet, but knowing this desire to stay invested in the property and not having a good solution has made me question whether I could make this a win win for both parties. Since I am using much of my own capital for the renovation I like to pull this back out after renovations so I can redeploy that money in the future. It would be tough to keep my momentum going without having access to the money spent on renovations. If anyone can help me out with this or offer up any options that I am not thinking of it would be greatly appreciated. 

Thanks in advance.

I am still a newbie myself so I don't want comment with a lot of advice but I will tell you about my experience and maybe it will help. The owner I purchased from had 20 yrs of deferred maintenance and had not even been in a single unit in over 15 yrs. He didnt even have the keys to the units. He only raised rents one time in 20 yrs as well. It was however in a class A- neighborhood. 

It is a 5 unit that the owner held financing for and I used my cash to pay for all renovations. This allowed the owner to hold the mortgage and gave me the opportunity to go in and renovate, triple rents, and stabilize the property over the next year with strong leases. My exit was to refinance and pull 100% of my cash out while still maintaining good cash flow. I am potentially able to do this because I have increased the value of the property significantly in the process. From my experience banks will lend anywhere from 75-80% of the value of the property. 

The renovation part of the plan was a success. I have long term financing with the owner (15 yrs). However the refinancing part has been a little bit of a challenge. Very few banks are excited about it. They simply did not seem interested. I had to call over 25 banks and I finally found 3 that genuinely wanted to work with me. They were actually better terms than many of the mid size banks who were less interested or just found it bothersome. Focus on the smaller regional or community banks. You should find some. I am in the process right now of getting all the paperwork compiled so if everything goes well the plan will have taken a few months longer than expected but ultimately worked out. Keep in mind thought that almost all of the banks I spoke with have a 5 year balloon and typically will not amortize longer than 20 years. I did find one bank willing to verbally commit to a 7 -10 yr term depending on appraisal. 

Hope this might have helped in some way.  

@Ken P.  Long story. I currently have 2 Units occupied and 2 were vacant when I purchased it and I now have access to 3 units due to one voluntary move out. I will be complete with 2 units in mid-February and the current tenants will move into those at slightly below market rent.(still over double there current rent) Even though their units are livable they are in desperate need of repair and it is just not feasible for me to make the repairs needed while they occupy the space. The two tenants I currently have are fantastic and they asked to stay as they have been living there for over 25 years. They call it home. They agreed to make the new rent payments and were actually excited to finally get the place fixed up. Strategically I will work with them as I know they will truly take care of it like it is there own and I feel they will be long term "Pay on time" tenants and prevent a lot of turn over. They were putting there own money into the apartment making fixes when the old landlord would do nothing. Additionally they grew up in the close knit community and know everyone including future tenants, so on top of the regular tenant screening they will provide an extra layer of verification. Probably only halfway there at this point. Completing two units will help give me a second wind.

Great read. Thanks for sharing. I currently have 5 unit complex that is in disrepair. I got it for a good deal in a great location. It was built in 1965 the rents were never raised and no repairs were ever made, only patches. Rents will be tripled after repairs are completed and will increase consistently in the years to follow. I am working to update each unit (new kitchen, bath, HVAC, WH, Windows, Flooring) while working a full time job, wife and kid on the way, and managing 3 other SFR's. 90% is contracted to good subcontractors but it is still a lot of work. This was very encouraging to see all that you have been able to accomplish while working a full time job. Thanks for the detailed report.

Thanks for the info. Looks like I will be going with the Vikrell tubs.

I appreciate the advice. I have this same type of tub in my personal home for over 5 years and have not had any problems yet but worry about what tenants may do to it. 

Again thanks, and look forward to anyone other thoughts as well. 

I am new to multifamily I purchased a 5 unit apartment complex and among other things I am renovating the bathrooms. The property is 50 yrs old and has never been updated and maintenance has been deferred for the last 15 yrs. Each bathroom has to be gutted due to water damage to floor joists. 

I am looking for advice in the bathtub choice.

1. In talking with the local supply house they recommended a Sterling Vikrell tub. It is not a fiberglass tub, but some type of through color polymer. It runs about $175 but there is a 2 week lead time. Concern susceptible to harsh chemical cleaners if used by tenants. 
2. My other option seems to be an enameled steel tub that will run me about $120. Concern chipping and rust. 
3. Then there is cast iron which is out of my price range at about $350+. Seems to be a 75yr product

Either tub will have a tile shower surround. 

The apartment is in a B class area and will bring rent of $650-700 per month for a 2bd 1bth  apartment. I will be renovating the apartment with the intent to hold the property for the next 10 -15 yrs and looking for the best value option. 

Your thoughts are appreciated. 

Thanks,