All Forum Posts by: Diane Menke

I recently explored some old towns in Berks/Lehigh Valley. 

It was good to see Reading is blooming again, with many new immigrants starting small businesses. Pride of ownership shows with the shiny new small business fronts on the main streets. 

Other local towns also seem to be on the rise. 

I have a lead on a few multi families in the area. Prices are very good against rents. 

I'm interested to hear from others investing in the area, as well as agents and property managers there. 

Thanks! 

I have experience in SFH buy holds, renovate to flip, and I co own an award winning design build remodeling company in Philadelphia.

I want to get into multi family in 2021. 

I am in contact with the seller of this property, situated over 4 parks, in proximity to each other. Seller is offering financing. 

When I ran the numbers through a calculator, the CAP rates and returns look VERY GOOD.

To me this looks like a 24 month, force appreciation, cash out refi, hold. 

I do not have experience in trailer parks or in a property of this scale. I would like to find someone I can team with. Ideally they would bring most or all of the cash into the deal. 

Socrates I favor option 2 as well. Splits cost a bit more to install but look great and are quiet. They can cool and heat. I would make your plumber/HVAC pro guarantee the tankless water heater units will operate to a minimum standard..A hot water tank provides 80 gallons of water at X temp for 30 min....something like that has to be in the contract. I would ask the plumber to insure the tankless is at least that good or better. There may be tax benefits to you. And the higher efficiency will be attractive to the tenants who have to pay to use them. 

Investment Info:

Single-family residence buy & hold investment in Phila.

Purchase price: $172,000
Cash invested: $55,000

A solid but drab SFH. We did minor upgrades and repairs, added 1 full bath, and after COVID delays, finally rented the property at $2300 per mo.

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

Great appreciating area, great upside, familiar property, fair price

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

A long time agent friend presented it to me.

How did you finance this deal?

Hard money to BRRR

How did you add value to the deal?

Light renovations, new kitchen, some minor repairs, added a full bath to the walk out basement, reorganized the basement space

Lessons learned? Challenges?

COVID had us stop work and it caused huge delays. Our favorite agent was closed so we asked another agent to get it leased. We ended up firing that agent after many months and went back to our favorite agent who got it rented in 10 days!

Hi Owen. I think this might be over complicating what should be a simple deal? 

I like commercial lending for projects like this. Looks like you have the cash to do it. 

After renovation, rent is confirmed at $1200? 

I like to do 70-75% acquisition lending w 100% renovation lending that rolls over to a 25 yr fixed loan. 

I do like to pad the renovation budget a little to cover contingencies. 

If you are managing the renovation, add in 10-15% for that "fee" so you get paid for your work. 

Lender will lend up to 80-100% ARV depends on lender. Ideal lender is a local credit union or local bank who holds paper.

Using this approach, you still put in the $12K + closing costs but the renovation should be covered. 

ARV at $135k means you get about $101K in lending (20 yr 4.5%) which will cost you about $650 per mo + taxes.

Your calcs should show the property value increasing over time. It could be 3% but we have houses doing 8% per year or more. 

Hope that helps. 

Keep us posted. 

I'd suggest taking some accounting classes. Learning to understand financial statements is a must and not too hard to do.

I second the idea that you work for someone already investing real estate.

Build up your BS meter. There is a lot of BS in this business and you need to be able to recognize it.

Good luck!

D

Ellis is right the information is not complete. 

The asking price is high given the rents.

The owner financing is also high at 7%, 20% down.

You should be able to get commercial lending, 20% down, closer to 4%, 25 year term. I would not pay more than the "1% rule" I like closer to 1.2-1.5.

Maybe work on your numbers on a few more deals, make it very comfortable to do the calculations. And find a commercial lending broker who will take time to educate you on the details of the #s.

Good luck! 

D

Thanks Andrew, You said it more efficiently than I did! 

Hi Andrew, 

Tough lessons learned. 

I have flipped a few, done some BRRs, and I have bought to hold. 

My other business is a design build remodeling business. For that business I must manage my clients funds well so each project comes in on time and on budget. Same goes for my side projects naturally. 

I have subs I call in for my side projects or better yet, I like to try any new subs out on my personal projects before they get to my private client projects. 

Over the years, I have had subs say they want to "team up" on my flips or buy and holds. Yet it never seems a fit when I discuss things a little deeper with them. 

They always they over value their time's value spent doing manual labor. 

They do not take into account other costs like insurance, carry costs, cost of time, opportunity costs...

They always undervalue my time and expertise finding the right project and the money to do it, working weekends holidays and nights. 

If they don't have actual skin in the game, as in they have put at risk personal money, they don't seem to be willing to prioritize my project. 

They think just showing up is worth a lot. But if the lawn needs mowing or there is sweeping to do, a problem to solve...shrugs shoulders not their problem right? 

They imagine they will be able to take on side jobs same time as this project. 

They think its "OK" to not make the profit planned for when the project is first examined, i.e. they think failure is OK. 

It is for these reasons I haven't yet found other contractors to team with. I will hire them but I won't put my money at risk with them. I think it comes down to the difference between employees and business owners. Anyone doing flips has to treat that flip like a business, not a job. 

Cheers and better luck on the next one! 

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $35,000
Cash invested: $9,000
Sale price: $225,000

This was a large brick 3 story 3 bed, 1 bath house with a yard.

The kitchen area was very large as was the combined dining living room area. It was great for folks who wanted to do group living. It's near a college in a college town so this made sense for renting it. The feature all our tenants liked was the space.

The house was sold to us by a church that used it as a rooming house for folks trying to reintegrate into the neighborhood.

The area was still a bit rough but improving.

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

It was a no brainer cash cow at a very low price in an up and coming area.

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

An agent we worked with found it for us on the MLS.

How did you finance this deal?

Commercial lending + cash.

How did you add value to the deal?

We renovated the kitchen, the bathroom, replaced windows, roof, some wiring and lots of cleaning and paint.

What was the outcome?

We had years of good rental income, refinanced at least 2x to pull out cash, and we still make a few bucks when we sold.

Lessons learned? Challenges?

This house had a large addition on the back which made it great for group living tenants. But the addition was not to code structurally, and we knew we would have to take it down and rebuild it if we decided to continue to hold it. That didn't make financial sense so we sold it. We no longer buy houses with portions of the house outside the area of the basement foundation as buy hold properties.