All Forum Posts by: Cory Howes

Investment Info:

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

Purchase price: $392,000

Duplex and separate tiny home on 2.75 acres with 600+ feet of Lake Superior frontage, private boat launch. Currently using as a short term rental.

https://airbnb.com/h/tiny-agate-on-lake-superior

https://airbnb.com/h/catharbor-greenstone

https://airbnb.com/h/catharborcoppersuite

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

I've always wanted to own lake frontage

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

MLS

How did you finance this deal?

1031 Exchange and 5 yr balloon

How did you add value to the deal?

Remodeled all three units.

What was the outcome?

It has become a very successful short term rental. It's the busiest units we own. Average of 80% occupancy.

Lessons learned? Challenges?

Setting up 3 airbnb units in 6 months has been exhausting.

I think i'm burned out!!!
Actually, I know I am.

Good Day,

I am a part time real estate investor based out of Marquette, Michigan, and am now getting my feet wet with development.

We bought a 40 acre forested parcel within the city limits of Negaunee, MI. We have acquired all permits, and passed planning and zoning, and even received 1.2 million in TIF (Tax Incremental Financing) to reimburse us for the cost of running new roads, and city utility infrastructure. We split 1/2 of the 40 acres into 27 residential forested lots, that range between 1/3 and 1/2 acre. 

Speaking to multiple realtors in the area, we have not yet seen a decline in our real estate market, with multiple over asking offers all nearly all homes within Marquette and Negaunee. My business partner and I thought that be creating vacant city lots (in a beautiful forest setting), that folks would want to buy lots and build their own homes. We have gotten some interest, but not nearly as much as anticipated. 

I'm looking for any advice as to how to get the spark going, or for any potential investors who'd be interested in building home and or duplex's.

Our lots are cheaper than any thing else on the local market, and range between 30-50K depending on size and location.

To me, I feel like a larger construction company would be needed to build at scale to help reduce the cost of construction, but then of course, that requires a huge amount of capital up front. 

This is a booming area, just miles from Lake Superior, and has some of the best access to incredible mountain biking trails, fishing, water falls, cross country and down hill skiing. 

https://www.travelmarquette.co...

Looking forward to hearing any and all advice. Thanks in advance! 

Cory Howes

Investment Info:

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

Purchase price: $392,000
Cash invested: $40,000

Duplex and separate tiny home on 2.75 acres with 600+ feet of Lake Superior frontage, private boat launch. Currently using as a short term rental.

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

We have been looking for lake frontage for years. The only way we can afford it in by renting via short term rentals. We have now secured over 600' of frontage!

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

It was on the MLS. We had our offer in within 24 hours.

How did you finance this deal?

1031 Exchange

How did you add value to the deal?

New appliances, new floors, plumbed a separate washer and dryer. Added gas heat and fireplace, and expanded the master bedroom.

What was the outcome?

We had 90% occupancy in January and February! Its already cash flowing. Excited to see what summer brings!

Lessons learned? Challenges?

Everything is expensive! Especially HVAC and plumbing!! Sheesh they make a lot of money per hour!

 Hey Dan, thanks for the insight! In my experience with appraisers, they have told me that if I put 50k into a property, It would be a home run if I got it reappraised for the extra 50k. I was able to achieve something similar on one building by refinishing an attic space and adding an additional master bedroom, bathroom and square footage. i.e. I bought a $201,000 2 story duplex, 6 bedroom total, unfinished attic space. With the completion of finishing the attic space, it added 750 sq feet. We also added a beautiful deck that adds as a separate fire escape to the second and third story. I've seen duplex's selling for 275k to 310k in this market, and my duplex appraised for 245,000. I gained 44k in equity, which is about what I spent in material alone (I did the majority of the work). But if I would have hired it all out, it would have cost 100k to do all the work, and the re-appraisal reflected just a portion of the true labor cost (my time was free?). I hear endless stories of folks getting excellent re-appraisals and pulling double what they put into it. But out of the 6 or 7 appraisals I've received, they always come in short. I may need to contest and show them some more realistic comps. I didn't know that was possible. Sounds like I need to pry a little harder. Thank you!

Hello BiggerPockets community, 

I'm hoping somebody may be able to shine some light as to why my appraisals are coming in much lower than current market values. I have been buying fixer uppers, both single family and multi family, rehabbing them, and they are not appraising for even close to what I know I could get on the open market. 

I'm trying to pull more equity out to continue expanding our portfolio, but the appraisals are coming in ~15 to 20% lower than expected. Is there any way around this? I've tried walking the property with one appraiser to explain all of the work we did to the property, but they honestly didn't seem to care. One time, I had an appraiser show up in a yellow BMW convertible, he spent under 5 minutes walking through a duplex, left, and charged me $750 for an appraisal that I felt was not accurate as to what it would sell for on the MLS.

From the outside, It seems that appraisers look at what I paid for the property, then look for comparable houses that sold for around that price, and then come up with a price that has appreciated minimally compared to the amount of work we have put into the homes. 

Am I just having bad luck with appraisers, or is there a way around my conundrum. Without accurate appraisals, the BRRR method is no good!

Hey Scott, Thanks for the input.

The rail line is actually not too noisy or bothersome according to the surrounding neighbors. I spoke to a developer/contractor who put in a small development about 15 year ago on the other side of the tracks, and he said the folks buying the houses never found it to be a deterrent. 

Marquette, like many areas, is seeing massive growth. The main job industry in the area would include the mines, University, hospital, forestry and tourism, the ladder which is rapidly growing. Marquette seems to be the Missoula, or Boulder of the Midwest. It doesn't have the mountains, but it sits on the biggest lake in the world (surface area wise), and has some of the top rated mountain biking and trail networks in the US. 

Talking to realtors, over 50% of the houses being sold in the area are from out of state buyers; either investors, or people who are now able to work remotely and are moving to the area now that they have the opportunity to. 

We have looked into the Section-8 subsidized units, which there is a demand for, but there seems to be a higher demand for standard to higher end units. I don't have precise data as far as number of days rental units stay on the market, but everybody I've talked to has a waiting list, or they will receive 50 plus applicants for a decent apartment within 48 hours. I manage 15 units in the area, and If I advertise, the unit is always rented within a couple days. 

So I'd say demand is extremely high, supply is low, but I'm sure that can change rather quickly. Is there a good way to track that other than pure local hearsay?

I'd say you can 100% buy a 16 unit apartment cheaper than the cost of building right now, but I have not seen anything like that come on the market. It seems most people are holding on to them with rents going up as fast as they are. 

Contractors are for sure backed up, some out to the end of 2023 already. But luckily I have found a couple different ones who are interested in being a part of this project. 

This is right off the main "back road" or connector route from Negaunee to Marquette. It is well maintained and plowed before many of the other side roads are. 

Bears, deer, wolves, and if you are lucky, big sneaky cats are in the area, but you are lucky if you have the opportunity to see them.

Thanks again for the comments, much appreciated. If you are ever in the UP, look me up!

Barry, I would absolutely like to chat. This is the proposed site plan. Parcel B was initially going to be apartment complexes, but there would be great opportunity for townhomes, condos, or small multifamily apartments. The property is directly adjacent to a very popular network of biking, walking, and snowmobile trails. Maas street is the back door into Marquette. I'd love to hear what your thoughts are. We are very open to suggestions. Thanks!

Over the past few years I have listened to a significant portion of the Bigger Pockets podcasts, but I don't believe that I can remember one episode about building new large multi-family apartments (10 units plus). I recently purchased a 40 acre vacant parcel in Marquette County, Michigan, and am in the planning phase on how to develop the land. We plan to do a combination of subdividing and flipping lots, but what really interests me is to create a long term cash flowing investment, as opposed to a one time sale of a lot. I realize that the cost of construction materials have gone up, but the numbers still seem to work! I have gotten a quote to build a 16 unit (32 bedroom) 2 story apartment complex, that will create a 7-15% ROI from the calculations I've done.

I'm just surprised that more people aren't looking to build new, and if they are, I have not heard much talk about it on Bigger Pockets. 

I would love to hear any insight from anybody who might be building new multi-family. 

I own the land, but my next biggest hurdle is trying to find the 20 or 25% down to build. 

Hey Jeremy, Do you still have the Duplex in Marquette? Rents have sky rocketed in the last two years. Wondering how the investment has been going. We are looking to partner and or expand our portfolio. 

Investment Info:

Other other investment in Negaunee.

Development project. 40 acres within the City of Negaunee. Looking for investors to partner: Endless opportunities. Large and small multi-family potential, townhomes, condos, single family, or modular homes are all possibilities. Excellent location!

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

I work as a forester and walk through vacant property to assess timber value.
This is a 40 acre parcel located within the Negaunee City Limits. The parcel is beautiful, close to Marquette, in a rapidly growing area. Endless opportunities for projects across this 40 acre parcel!

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

MLS

How did you finance this deal?

Private lender

How did you add value to the deal?

Looking to create a PUD (Planning Unit Development) in order to have the possibility to build large or small multi family units. Currently undergoing Phase 1 which will be a subdivision of ~30 parcels. Phase 2 we hope to build large multi-family. Phase 3 will potentially include cabin rentals, next to the Iron Ore Heritage Trail. Ideal for mountain biking and snowmobiling.

What was the outcome?

In progress! Hoping to find partners to help get multiple projects going at once.

Lessons learned? Challenges?

Development is much more complex than what I thought, but everything is figureoutable!