All Forum Posts by: Derek DeVerna

Investment Info:

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

Purchase price: $135,000
Cash invested: $4,000

Four family building located in the Five Points neighborhood in West Toledo. This property was purchased through the utilization of a FHA loan. For this reason, I will be moving into one of the four units per the loan's requirements. After seller closing credits and the real estate commission (I represented myself as the buyer's agent), I ended up brining less than $1,000 to the closing table. Before rents are raised I should be cash-flowng a little more than $200 per month to live in the property. The goal is to bring the building's net operating income up through a combination of raising rents and making the tenant's responsible for their own gas/water bills. I will likely refinance out of this deal after one calendar year and look to use another FHA loan to purchase a similar style building.

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

Utilizing the FHA loan option to purchase as many units as possible.

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

I located this deal on the MLS and represented myself as the buyer's agent.

How did you finance this deal?

FHA Loan

How did you add value to the deal?

Will increase NOI through a combination of raising rents and splitting water/utilities amongst existing tenants.

What was the outcome?

Being paid to live in a 4 family building in a neighborhood that I actively invest in.

Lessons learned? Challenges?

FHA loan's can be a pain to close. We ended up extending the close date two seperate times in order to close the deal. I would allow more time to close (45 instead of 30 days) when writing any future FHA offers.

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

I represented myself and will do this as many times as possible moving forward.

@Andrew Ager I would put a packet together with your property financials (from BP Calculator), comparables, and estimated rehab budget. Be sure to give this packet a cover page and place it in a laminated report cover ($1.79 at Walmart). This will look professional and let whomever you are presenting to know that you are serious. Best of luck to you. 

@Ryan Dusel Coincidentally, I decided to take part in this challenge yesterday morning. I simply cannot find a way that taking part in Sober October could affect someone negatively. The self control and disciple required to complete the challenge successfully can only help someone in all aspects of their life. Best of luck to you. 

Stephanie, 

It looks like you've already taken the first step! A wealth of knowledge can be found within these discussion forums. I would also advise listening to as many Bigger Pockets Podcast episodes as you can. This should help give you at least a basic understanding of Real Estate Investing, which you can parlay into real world conversations. Look for groups or meet ups to join and expand your network. Best of luck to you. 

Thank you, 

Derek 

@Michael P. The tenants that I inherited have not caused any issues and are incredibly grateful for the effort my team has put into the place they call home. For this reason, I haven't had to think about other options. With this being said, I definitely appreciate your insight and will absolutely look into a short term rental option. It seems like that could be a super lucrative venture in this part of town. 

Investment Info:

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

Purchase price: $35,000
Cash invested: $25,000

Two Family Brick Duplex near Toledo Hospital. Both units came with inherited tenants at $450 per month each ($900 total). The plan is to make significant interior/exterior improvements while increasing the monthly income of the building to $1,100 per month. This will allow us to take advantage of a hybrid BRRRR model and refinance when eligible in January. The goal is always to re-harvest all of our initial capital back out of the deal so we can continue to build the portfolio.

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

The property is located very close to Toledo Hospital. We also wanted to add more brick to the portfolio.

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

I found this deal on the MLS and represented myself as the selling agent in this transaction.

How did you finance this deal?

Commercial 15 year fixed rate loan at 5% interest.

How did you add value to the deal?

We added a new roof/gutter system, exterior paint, landscape cleanup, interior repairs, and plan on raising rents.

What was the outcome?

We have cash flowed on the property this entire time and the inherited tenants could not be happier with all of the improvements that have been made.

Lessons learned? Challenges?

Inherited tenants can be incredibly loyal if they feel like they are being listened to. They hybrid BRRRR model allows one to leverage even more efficiently than the standard BRRRR model.

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

Find an agent that understands your investment philosophy and can align that with your goals.

@Joshua Gutierrez Congratulations on your recent retirement and thank you for your service. 

I believe that $50K cash flow per month within 11 years is totally possible with a strong mindset, your current financial situation, and the right investment opportunities. With this being said, it certainly will not come easy. 

The BRRRR strategy is definitely powerful enough to help you meet this goal. However, I think you would need to take advantage of a cheaper market in order to hit your goal. You would also need to do a ton of projects within that 11 year time frame in order to hit your desired cash flow goal of $50K per month.

For this reason, I would advise you to look into BRRRR'ing small apartment communities (5-12 units). These properties are valued based off of the amount of income they generate vs. what other similar properties are worth (like single families are). This gives you much more control over the value of your property. These buildings should also cashflow much more than a single family home. For this reason you would have to complete far less projects in order to hit your goal.

You probably shouldn't dive right into these larger projects, as they are much more costly and difficult to manage. Perhaps you can begin with a small BRRRR project (1-4 units) and scale up from there. Please let me know if I can help in any other way.

Thanks, 

Derek DeVerna

@Ben Rishwain

First of all, congratulations on stabilizing a building that large. I am sure that feels awesome from your position. 

My commercial lender in Ohio will refinance properties for me as soon as the asset has been stabilized. There is no "seasoning" period, which has the potential to slow your scalability down considerably. With this being said, my commercial lender is local and only works with investors in my market. 

I am sure that a similar lender exists in California. You will just have to find them! You have already completed the most difficult part of the process on this property so I am sure you can handle sourcing a lender. Best of luck to you. 

I am fortunate enough to live in Ohio, where houses are very affordable in comparison to many other markets. For this reason, I have never had the desire to buy an investment property out of state. 

I would venture to guess that the criteria from investor to investor varies, so what is it exactly that you look for when evaluating a potential long distance deal? 

Any insight is greatly appreciated and should go a long way in helping me assess where I can add value to those non-Ohioans looking to invest in my state.  

@Shanae Swaby I do not think that you are crazy. Every class of neighborhood has countless successful and unsuccessful landlords. I believe that any real estate investor can have a great deal of success in any neighborhood providing they have a solid strategy/business plan. 

Each neighborhood class has its own specific advantages and disadvantages. I enjoy buying properties in C class neighborhoods that I see transitioning to B class neighborhoods. This has worked well for me in the Cincinnati, Ohio market and I am now practicing these same principles in Toledo. 

Please feel free to contact me with any questions regarding the Real Estate Investment market in either of these markets. I enjoy helping individuals take advantage of the cash flow opportunities the great state of Ohio has to offer. 

Best Regards, 

Derek