All Forum Posts by: Craig Parsons

Investment Info:

Large multi-family (5+ units) buy & hold investment.

Purchase price: $258,000
Cash invested: $26,712

Mixed use Residential/Commercial Building

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

Looked like it would cash flow and have further upside potential

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

Well I was in the store of a gentleman and I mentioned to him that if he knew of any real estate that I may be interested in to let me know. The next day he told me of this place. He proposed it to me as a great potential STR and I agreed but also figured I would rather get started with a long term rental as there would be less moving parts. Eventually he helped me broker an owner finance deal with the previous owner.

How did you finance this deal?

Seller financing and private money for down payment

How did you add value to the deal?

The 5 apartment units were at least $200.00 under market and the downstairs commercial unit was completely unoccupied. Since then we remodeled 3 of 5 apartments raising the rent by an average $233/ unit on the renovated ones and $100 per unit on the non renovated ones. We also got a tenant for 1/3 of the commercial space which adds another $750 per month. Still have plans to renovate the last 2 units as well as change the remaining downstairs commercial to residential.

What was the outcome?

So far so good it cashflows a little over $1400 / month

Lessons learned? Challenges?

This was a bit of a rude awakening for me. i had planed to do all the renovations myself but even though I was the owner I was not allowed to do plumbing or electrical as it is a "Commercial Building" and they needed licensed contractors for those two parts. This kind of blew up my budget and time schedule.

Investment Info:

Large multi-family (5+ units) buy & hold investment.

Purchase price: $258,000
Cash invested: $26,712

Purchased this place on an owner finance contract. The 5 apartment units were at least $200.00 under market and the downstairs commercial unit was completely unoccupied. Since then we remodeled 3 of 5 apartments raising the rent by an average $233/ unit on the renovated ones and $100 per unit on the non renovated ones. We also got a tenant for 1/3 of the commercial space which adds another $750 per month. Still have plans to renovate the last 2 units as well as change the remaining downstairs commercial to residential as housing is at a premium in this market.

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

Looked like it would cash flow and have further upside potential

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

Well I was in the store of a gentleman and I mentioned to him that if he knew of any real estate that I may be interested in to let me know. The next day he told me of this place. He proposed it to me as a great potential STR and I agreed but also figured I would rather get started with a long term rental as there would be less moving parts. Eventually he helped me broker an owner finance deal with the previous owner.

How did you finance this deal?

Seller financing and private money for down payment

How did you add value to the deal?

Remodeled units and added tenants.

What was the outcome?

So far so good it cashflows a little over $1400 / month

Lessons learned? Challenges?

This was a bit of a rude awakening for me. i had planed to do all the renovations myself but even though I was the owner I was not allowed to do plumbing or electrical as it is a "Commercial Building" and they needed licensed contractors for those two parts. This kind of blew up my budget and time schedule.

Quote from @Benjamin Aaker:

Also consider who has decision-making capacity. Is your 80% ownership going to mean you make all the decisions? Is your partner comfortable with your decisions on when to refinance, sell, tenant relations, etc?

Yes thank you for mentioning this.  I will take no money unless I am in charge they are to be "Silent partners"

I have a property that has a balloon payment due by the end of the year.  I was expecting a full cash out refinance on a BURRR  but the  banks wont do the loan yet as I still have more work to be done.

We are considering seeing if a family member wishes to buy 20% of our project. Their money would be used to finish rehab as well as pay off the current lender. Once 100% complete the plan is to cash out 70% LTV and then split the proceeds 80/20 with my investor. After that the investor would retain 20% equity in all future rental income and property value. Is it that simple or am I missing something? Is this a fair deal for both sides? Thanks! Existing loan 55K Current Value 310k rents 3250/ month gross once rented which will be starting in about 2 months. We already have multiple people interested in renting. So the numbers are fairly safe. IDK

Personally while I would definitely attend a virtual meetup, I would much rather attend a live one as I feel it is more intimate and allows for more networking.  That being said though do whatever it takes to grow the group.  

Quote from @David G.:

Hi, can anyone clarify if the Cash on Cash formula includes the principal payment or only interest expense? 

I't seems people count the principal paydown as an expense so you do not count the paydown as a return on your investment. From what I understand the people like David Green just consider the mortgage paydown as a bonus. So when talking to the "experts" around here you do not count the principal as income even though it is creating you wealth over the long term.

@Alfred Blake. Good question. The way it works out I basically break even. However the property is only 60% occupied and the occupied units are way under market value. So over the next year I plan on increasing revenue by 25%

@Cade Gardner absolutely it's effective I bought one 2 months ago from a tired landlord. I figured out what her monthly net was and then increased it by 100 bucks so from my payments she has zero hassles and more money. I paid enough down just to cover closing costs so she didn't have to pay to sell the property.

Contact the building department, explain the situation and see what they require to convert to residential.  I bought a similar residential/commercial building they were happy for me to convert the commercial to residential as housing is at a premium.  They gave me some requirements so I can have plans drawn up.  I'm in the planning stage now.

Do you have a minimum city size to qualify a project?  How are upfront fees handled?