All Forum Posts by: Eileen McCue

I invest in mid-coast Maine and have found cash flowing deals.  Contractors can be pricey here and taxes are higher, but rents are good, demand is very high, so vacancy is a non-issue and we get our pick of great tenants. Also, appreciation, while not a guarantee of course, is likely to continue to be strong here. 

The market is very tight so we are not even looking at anything that gets listed unless it has been sitting for a while and has lots of deferred maintenance and opportunity for forced appreciation.  

We have found that purchasing properties where rents are below market and then doing rent repair, while it doesn't look like a cash flowing deal at purchase, will typically have good cashflow within a year or two.  We are long-term investors, so purchasing a property and taking a year or two to stabilize has worked well for us.

@Lance Dutson We are in the northern midcoast area in Maine and had an issue with an appraisal coming back low recently, too.  Ours was on a mixed use property with few good comps (small rural markets and unique properties are tough) and an appraiser coming from a very different market (southern Maine).  The appraiser did use comps from our market, but pulled properties from 3 and 4 years ago, adjusting those sales prices for market appreciation over that time. Still seems like he could have found better comps.  Luckily for us the number came back high enough for us to make it work, it was only about $40K low.  We already are almost $4K in for this appraisal (it is a bit pricier partly because it is a mixed use building, but I think appraisers are charging a lot more these days since the market is exploding and there is more work than appraisers to do it) so we don't want to fork out another few thousand dollars. Ultimately we are confident that the value is there and we will be holding this property long-term, so we are also confident that it will appreciate over time.

We did reach out to our lender who spoke with the appraiser, but the appraiser did not seem willing to make any adjustments.  We did not push on it since we can make it work and also did not have great comps in our back pockets either.

In your situation with such a vast valuation disparity and comps to back up your number, it might be worth going back to the bank and having them reach out to the appraiser, or asking the bank if it is ok for you to contact the appraiser directly with a cordial letter making your argument and asking them to consider the comps that you have found.  Rookie Podcast #25 with appraiser Josiah Smelser might be worth a listen, he talks specifically about disputing appraisals: https://www.biggerpockets.com/...

It also may be worth the cost to get another appraisal, especially since the difference you are talking about is over $100K.  Looking at the bigger picture the cost of another appraisal would pay for itself.  I am not sure how the lender would handle it (throw out the first appraisal? average the two?) so it may be worth reaching out to them as well to discuss options.

Good luck, Eileen

@Lance Dutson

Thanks @Chelsea A., congrats on the house hack! I will definitely look in to Mechanics Savings, sounds like they have some creative options!

@Will Stewart thanks, Will.  Sounds like this is just part of the market here at the moment.  Definitely adjusting my spreadsheets to account for the increase!

Investment Info:

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

Purchase price: $415,000
Cash invested: $40,000

This 6-unit building is in a very good location and 5 of the 6 units are 2-bed units, which is uncommon for a larger MF in this area (most are all 1-bed units in larger buildings). There is additional opportunity for appreciation based on continued rent repair and further improvements to the building.

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

We wanted to grow our portfolio and add some larger properties.

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

We were working with a realtor on another deal and this was a pocket listing that he was getting ready to post on the MLS and asked if we'd be interested.

How did you finance this deal?

Initially with owner financing (4.75% 30 yr amm with 3 yr balloon, 12% down). We have since refinanced into a commercial loan (4.25% 25 yr amm fixed for 5 yrs) so no longer have to worry about the balloon.

How did you add value to the deal?

We created a plan for rent repair, the seller let tenants know this would be coming which was helpful. We met with each tenant to discuss our plan which developed good relationships and eliminated turnover. The seller removed 2 problem tenants prior to acquisition, allowing us to renovated those units. The appraised value went up to $470,000. We have also targeted insulation projects to mitigate heating costs and make the building more comfortable for tenants.

What was the outcome?

We have a well performing building, solid tenants and continued opportunity for further rent repair and forced appreciation with further improvements to the building (exterior trim painting, new paint and updating flooring and appliances in units with long-term tenants).

Lessons learned? Challenges?

This was our first time exploring seller financing, so negotiating that was interesting. We chose to get a Broker Price Opinion at acquisition. Since we were using a dual agent and this was our first larger multi, it was important for us to have a 3rd party opinion of value even though we did't need a full appraisal. It was a lot of work on-boarding existing tenants but well worth the time to develop those relationships.

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

Yes! Sam Mitchell (Worth Real Estate) was our excellent realtor and we would highly recommend working with him. He was very easy to work with, very communicative, and we felt good about working with him as a dual agent on this deal. the BPO was done by Tim Dutch and was timely and thorough. For the refi we worked with Ben Sprague at First National Bank, always great to work with!

Investment Info:

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

Purchase price: $415,000
Cash invested: $40,000

We purchased this 6-unit building

It is in a very good location and 5 of the 6 units are 2-bed units, which is uncommon for a larger MF in this area (most are all 1-bed units in larger buildings). There is additional opportunity for appreciation based on continued rent repair and further improvements to the building.

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

We wanted to grow our portfolio and add some larger properties.

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

We were working with a realtor on another deal and this was a pocket listing that he was getting ready to post on the MLS and asked if we'd be interested.

How did you finance this deal?

Initially with owner financing (4.75% 30 yr amm with 3 yr balloon, 12% down). We have since refinanced into a commercial loan (4.25% 25 yr amm fixed for 5 yrs) so no longer have to worry about the balloon.

How did you add value to the deal?

We created a plan for rent repair, the seller let tenants know this would be coming which was helpful. We met with each tenant to discuss our plan which developed good relationships and eliminated turnover. The seller removed 2 problem tenants prior to acquisition, allowing us to renovated those units. The appraised value went up to $470,000. We have also targeted insulation projects to mitigate heating costs and make the building more comfortable for tenants.

What was the outcome?

We have a well performing building, solid tenants and continued opportunity for further rent repair and forced appreciation with further improvements to the building (exterior trim painting, new paint and updating flooring and appliances in units with long-term tenants).

Lessons learned? Challenges?

This was our first time exploring seller financing, so negotiating that was interesting. We chose to get a Broker Price Opinion at acquisition. Since we were using a dual agent and this was our first larger multi, it was important for us to have a 3rd party opinion of value even though we did't need a full appraisal. It was a lot of work on-boarding existing tenants but well worth the time to develop those relationships.

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

Yes! Sam Mitchell (Worth Real Estate) was our excellent realtor and we would highly recommend working with him. He was very easy to work with, very communicative, and we felt good about working with him as a dual agent on this deal. the BPO was done by Tim Dutch and was timely and thorough. For the refi we worked with Ben Sprague at First National Bank, always great to work with!

Investment Info:

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

Purchase price: $268,000
Cash invested: $35,000

Purchased as a house hack/live-in reno project. This is a large duplex in a great neighborhood where we wanted to live. The ARV appraisal came in at $409K and covered the acquisition (with no money down) and some of the work that needed to be done. We were OK paying some of the reno cost out of pocket since this is our home and in a neighborhood that we wanted to live in. Now we get the benefit of the other unit being rented and paying the mortgage.

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

This house hack was our way to afford to live in the neighborhood we wanted. We have our mortgage paid by our tenant and expect that appreciation will be strong as well.

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

This house was on the MLS for quite a while. We figure it sat for so long because it was too big for a single family and too small and pricey per unit for investors, and it was pretty ugly. The cedar shakes were so old they were falling off the building. We wanted to live in the neighborhood and while we would not have touched it as a pure investment property, it works for us as a house hack. We used a realtor and I think the sellers were motivated since it sat so long.

How did you finance this deal?

A commercial loan based on ARV, it was originally at 5.5% I believe, but we have since been able to get that reduced to 4.25%. We were able to get into the deal with nothing down at close because the ARV was so strong.

How did you add value to the deal?

We refinished flooring, updated electrical, rehabbed a bathroom and the kitchen in the front unit. We also painted the whole front unit and added a closet. We resided the building, painted the garage to match and repaved the garage driveway. We also added a door to the garage for easier access to the back yard and had the basement professionally insulated with spray foam.

What was the outcome?

We are still renovating the rear unit, mostly paint and flooring, updating some bathroom fixtures. We will refi into a residential loan in the next few months and anticipate being above the original ARV, potentially allowing us to pull additional funds back out.

Lessons learned? Challenges?

The siding project went form a 4-5 week job to a 6 month one, it also went 20% over budget. It looks great and the work is high quality, so we won't complain too much, but we will definitely be more clear with contractors regarding overages and timing in the future.

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

Yes! We worked with Sam Mitchell of Worth Real Estate who was great and Ben Sprague with First National Bank on the loan.

Investment Info:

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

Purchase price: $268,000
Cash invested: $35,000

Purchased as a house hack/live-in reno project. This is a large duplex in a great neighborhood where we wanted to live. The front unit was vacant on purchase, so we refinished wood floors, painted and rehabbed the kitchen and first floor bathroom and swapped some rooms to even out the square footage and make the rear unit where we now live a bit larger. Now both units have 3 bedrooms and 2+baths. Siding needed to be completely redone as well. The ARV appraisal came in at $409K and covered the acquisition (with no money down) and some of the work that needed to be done. We were OK paying some of the reno cost out of pocket since this is our home and in a neighborhood that we wanted to live in. Now we get the benefit of the other unit being rented and paying the mortgage. We purchased with a commercial loan, so are planning to refi into a residential once we get a bit more of the work done in our unit.

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

This house hack was our way to afford to live in the neighborhood we wanted. We have our mortgage paid by our tenant and expect that appreciation will be strong as well.

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

This house was on the MLS for quite a while. We figure it sat for so long because it was too big for a single family and too small and pricey per unit for investors, and it was pretty ugly. The cedar shakes were so old they were falling off the building. We wanted to live in the neighborhood and while we would not have touched it as a pure investment property, it works for us as a house hack. We used a realtor and I think the sellers were motivated since it sat so long.

How did you finance this deal?

A commercial loan based on ARV, it was originally at 5.5% I believe, but we have since been able to get that reduced to 4.25%. We were able to get into the deal with nothing down at close because the ARV was so strong.

How did you add value to the deal?

We refinished flooring, updated electrical, rehabbed a bathroom and the kitchen in the front unit. We also painted the whole front unit and added a closet. We resided the building, painted the garage to match and repaved the garage driveway. We also added a door to the garage for easier access to the back yard and had the basement professionally insulated with spray foam.

What was the outcome?

We are still renovating the rear unit, mostly paint and flooring, updating some bathroom fixtures. We will refi into a residential loan in the next few months and anticipate being above the original ARV, potentially allowing us to pull additional funds back out.

Lessons learned? Challenges?

The siding project went form a 4-5 week job to a 6 month one, it also went 20% over budget. It looks great and the work is high quality, so we won't complain too much, but we will definitely be more clear with contractors regarding overages and timing in the future.

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

Yes! We worked with Sam Mitchell of Worth Real Estate who was great and Ben Sprague with First National Bank on the loan.

Curious to know what others are seeing for appraisal costs and timeframes for commercial properties currently.

@Kyle Baker@Kyle Baker and @Cody DeLong I am in Maine as well and am paying $3750 for an appraisal on a small (1000sq ft) mixed use building (1st floor offices, 2nd floor studio).  This feels quite high to me, we just refinanced a 6-unit over the summer and that appraisal was in the $1-2k range. We decided in the long run we can absorb the cost, but that price point is challenging to reconcile (the appraisal doesn't appear to be 4x better...and the time constraints are tough). Apparently there were only two appraisers that responded to my lender and this was the only one who could meet the 60 day closing.  I just put an offer in on a 5-unit and am concerned that the appraisal timing will be an issue for the sellers.  In the past we would have been able to offer to close in 30-45 days even with financing.  Seems like the market in Maine for appraisals is tight right now!

Thanks @Brian Mitchell  - good to meet you all, sorry that we got Zoom bombed, the conversation was great.  We will plan to catch you all at the next one!