All Forum Posts by: Cory Iannacone

@Joshua Levine I just closed on a 2 unit last month at 4.5% interest. A couple years ago I ended up with rates as high as 5.6%.

@David Oechslein that’s higher end vinyl plank from Home Depot in that picture. I couldn’t save that part of the hardwood in the house. Anything else you see stained darker was original wood that I refinished. They don’t make hardwood floors today like the Original hardwood floors from 100+years ago. I’ll save and refinish it any time I can.

@Kyle McCorkel Thanks! I just closed on a 2 unit last month and have an offer pending on a 10 unit property now.

I forgot to add, this property (along with all my other properties) was located in Harrisburg, Pennsylvania in a revitalized area in a historic district referred to as Midtown and Olde Uptown.  

Here's an update from this Article with all the details--numbers, photos, lessons learned from Deal #2 which was part of my journey from 2 to 18 Units in 12 months:

https://www.biggerpockets.com/...

In December 2019, I had posted an article outlining 8 separate deals I put under contract (totaling over $1M in real estate) in 12 months. Here’s that original article here--From 2 to 18 Units ($1M+ in Real Estate) In 12 Months. I also promised to provide more details on each deal. When I wrote that article, I already had completed my first purchase and rehab. Those details were laid out here in this article--Newbie: Another Rehab in the Books (With Pics & Numbers).

I finished that first rehab at the end of October 2017, and had it rented out November 1, 2017. One week later, I had made an offer on my second property, which is where my From 2 to 18 Units ($1M+ in Real Estate) in 12 Months journey started. Here’s how Deal #2 went down with all of the numbers, pictures and lessons learned.

A couple of things that are worth pointing out—especially to anyone else who may be in the same position I was in 2.5 years ago. First, I believe the hardest property you will ever buy is your first property. As a new investor who has never purchased a property, you have to get over the biggest hurdle of them call—FEAR. You are spending more money than you have ever spend before, and you are spending it on something you have never done before. It feels like a huge risk at the time, and you spend so much time worrying what will happen if it doesn’t work out perfectly. Here are my takeaways for anyone sitting in that same position I was in 2.5 years ago:

1. It is okay if the deal does not work out perfectly. I will tell you, none of my deals worked out exactly as I anticipated. Some actually turned out better than even originally expected (getting higher rents than projected). Others cost me more money (some a lot more), than I anticipated. And guess what—its okay. It wasn't the end of the world, and everything simply worked out.  As a buy and hold investor, you are in it for the long run. Any unanticipated costs / expenses will most likely be recouped over the long run.  

2. The most important thing to do is to purchase your first property. Once you do one (no matter how it goes), you will learn from it, and, more importantly, it will give you the confidence to make your next purchase and continue to grow. Once I did my first property, I couldn’t wait for my next one—literally.

3. I was following the BRRR strategy, and it didn't work exactly as it was supposed to. But guess what, see Point 1 above. I was still able to pull money out of my properties and continue to accumulate more properties. The best part about BRRR—even when you fail to implement it successfully, you can still win.

Okay—let's get to the details behind Deal #2. Deal #2 was a completely vacant 2 unit property I purchased from a wholesaler who purchased at an estate sale and listed it on the MLS.

The Seller asked for $105,000, which I said I would agree to. But then the Seller got 2 additional offers (allegedly), and asked everyone to submit their best and final offer with a deadline set. I upped by offer to $110,000, which was accepted. After it was accepted, I asked the Seller to increase the sales price to $116,000 and provide $6,000 in Seller help. That helped me to keep my closing costs down, as money was tight at the time.

Funding the Deal: I did a conventional loan through the same bank I used for my first deal. At the time, they were offering a loan program where I could buy the property in my LLC's name, and they would loan 80% LTV with a 10/1 ARM (rate locked in for 1st 10 years) and amortized over 30 years. That was a huge help to get higher cash flow from the property.

I had to bring around $25,000 to the table to close. I used a HELOC I had set up for my down payment and closing costs. I also used my HELOC towards the rebab costs.

Rehab Costs. I initially put $46,000 into the property. Later, after the rehab and placing tenants, I installed central air in both apartments ($9,000). Here’s a breakdown of what I did and the costs:

Labor. 29,176.53   

- New Railing and Spindles– Exterior of House

- Remove damaged flooring

- Refinish and Stain Hardwood Flooring

- Install Vinyl Plank Flooring on Floor 2

- Install ceramic tile flooring in baths and Unit #1 kitchen

- Paint Interior (Walls / Ceiling / Trim)

- Install New Kitchen Cabinets Unit #1

- Paint Kitchen Cabinets Unit #2

- Subway tile kitchen backsplash and Unit #1 shower

- New Plumbing throughout house toilets / sinks / garbage disposals / tubs / faucets

- Install new light fixtures and recess lighting in kitchens

- New doorknobs and hinges throughout

- Replace electrical outlets and switches

Materials - 2 Apts (Home Depot)...............$8,201.93

Stainless Steel Appliances – 2 Apts (Lowes)....$3,300.00

Quartz Counters – 2 Apts ............. $1,800.00

Electrical repair / rewiring ............ $2,696.20

Replace hot water heater................ $1,025.00

Install Central Air Conditioning and upgrade heat........ $9,000.00

TOTAL............... $55,199.69

Gross Rents: $2,125. Apartment 1 is a first floor apartment—1 bed / 1 bath that currently rents for $900. There is a longer term tenant in the apartment. Market rates could justify an increase to $985.  Apartment 2 is two floors, 2 beds, 1.5 baths that currently rents for $1,225.

Mortgage: Prior to a cash out refi, my mortgage (PITI) was $857. I did cash out refi on this property, which enabled me to pull approximately $25,000 out of the property. The cash out refi increased my mortgage to $1,079.

Cash Flow: Here are the current cash flow numbers:

* A couple of things to note on my cash flow numbers. I have not had any issue renting out any of my apartments. I typically have a new tenant move in the day after an old tenant moves out. So, my vacancy is minimal. I self manage, so I don’t have to pay the property management cost. I did include it and account for it so that I could always have someone else manage the property one day and it would still cash flow. My repair expense is minimal because the entire property has been rehabbed. I did also include an expense item for Cap Ex, because inevitably that will come up. In short, there is a reserve of almost an additional $450 on top of the $445 cash flow number above. So, after paying all my reoccurring monthly expenses, there is still an additional $900 left over on this property.

As I mentioned above—this was a BRRR which did not work out perfectly. I ended up putting more into the rehab, but that also meant I ended up with a higher end apartment, with everything essentially brand new, and great tenants and 0% vacancy. Even with an imperfect implementation of the BRRR strategy, I have a strong cash flowing property and was still able to pull out enough money to use towards a down payment on my next property, which I will provide the details on next.

PHOTOS: In the meantime, here are the before and after photos of Deal #2:

@John Lutkenhoff I have only used one private money lender so far.  I am constantly speaking to people about what I do with real estate and why I love it.  That has definitely peaked people's interest.  I believe if you find a good enough deal, it shouldn't be hard to find money for the deal.  The challenge is usually finding a truly good deal; not finding the money. 

@Corbin Jones The first rehabbed I used a number of credit cards--Home Depot and Lowes no interest credit cards. I also had my own cash. I had $40,000 saved up when I started. About $25,000 of that went to the downpayment and closing costs to purchase my first property and the rest of the cash went towards paying contractors. I also worked out a payment plan with 1 contractor to pay him over several months (even after the rehab was complete). Future purchases and properties, I used a HELOC on my personal residence, no interest credit card loan, private money, Hard Money, and also cash I received back as I cashed out refi'd on properties after they were rehabbed. Also keep in mind, as I was rehabbing and stabilizing properties, I was also building my stream of cash flow from rental income. I have always just poured any proceeds from my REI right back into my REI.

@Claude Beauregard I have not seen any impact with the demand for rentals.  And I doubt that tenants will stop renting simply because of COVID-19.  Personally, I have seen no impact.  I just rented out an apartment that was coming vacant this month without any issue.  

@David Oechslein there were 2 reasons people told me not to put money into rehabs on rentals: 1) they are just rentals and tenants will just damage them and not take care of them, and 2) they didn't think I would get the rent amounts I was asking for.  Turned out there are plenty of good tenants out there--you give them a nice apartment, and they turn it into a home that they take care of.  I actually have waited to take photos of my apartments until the tenants move in, because they stage it so well.  And there was definitely a market for these nicer rentals, which tenants were willing to pay higher rent for.  I couldn't fill my apartments fast enough, and at one point, I had tenants giving me holding deposits on properties that I had not even closed on the purchase (let along rehabbed the apartment).   Here is a good example of how my tenants keep my apartments.  I actually waited for both tenants to move in before getting photos done.