All Forum Posts by: Elliot Rivera

Investment Info:

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

Purchase price: $194,000
Cash invested: $20,000

Duplex purchase in Linton Oaks.

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

Taking over properties with deferred maintenance with opportunity to repair and bring rents up to market rate is R&S core strategy. This type of deal is consistent with those efforts.

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

Found portfolio on MLS. Negotiated some closing costs and discounts off of ask based on some issues found during due diligence.

How did you finance this deal?

Commercial lender. 25% down payment, 10 year IO option with 30 year term to improve cash flows.

How did you add value to the deal?

Cosmetic improvements, reface bathroom shower, paint, light fixtures, plates/outlets, etc.

What was the outcome?

Achieved COC returns in excess of 10% and projected longer term IRR of between 16-18%.

Investment Info:

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

Purchase price: $194,000
Cash invested: $20,000

Buy & hold investment to mirror LLC's strategy.

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

Found the deal on the MLS. Purchased 3 duplexes at once.

How did you finance this deal?

Commercial lender. 30 year term with 10 year IO option to improve cash flows in near term.

How did you add value to the deal?

Cosmetic updates, painting, resurfacing bathroom, fixtures, etc.

What was the outcome?

Achieved COC returns in excess of 10% with IRR projections 0f 16-18%

Investment Info:

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

Purchase price: $194,000
Cash invested: $20,000

Buy & hold investment purchase in Linton Oaks.

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

Expansion of current LLC holding strategy.

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

Found deal on MLS. It was for 3 duplexes purchased simultaneously so out of town investor could complete 1031 exchange.

How did you finance this deal?

Commercial debt through LLC. 10 year IO option over 30 year amortization schedule to improve cash flows.

How did you add value to the deal?

Cosmetic improvements (paint, siding repair, landscaping).

What was the outcome?

COC return in excess of 10% with projected IRR of 16-18%.

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

Dada McGlynn has been our Gainesville area RE agent for some time. We would recommend her services to others without hesitation.

The numbers and your personal situation will dictate that answer. Personally, I believe in only entering into an investment that cash flows (with conservative estimates). 

Great book that argues for sometimes purchasing properties with negative cash flow is Buy and Hold forever by David Schumacher. In it he discusses the idea and how/when/if this concept would be suitable.

Best of luck @David Franz

Investment Info:

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

Purchase price: $220,000
Cash invested: $85,000

Distressed quad in Pine Ridge, purchased to renovate and bring rents up to market rates. Renovations ongoing (complete as of 4/15/2021). Unit 1 rented at $900/month from former rent of $575/month (Units 2, 3 and 4 pending). Estimated completion and full occupancy as of 5/1/2021. This would achieve Cap rate of 12.4% with cash on cash return of 13.8%. Property was over budget but rented at above conservative pro forma estimates.

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

Our firm specializes in finding smaller multi-families that are either under performing market returns or have considerable deferred maintenance.

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

Deal was found from realtor owner that brought up property after another deal we were negotiating with him fell through because we could not come to terms.

How did you finance this deal?

Conventional financing. 30 year fixed, 25% down.

How did you add value to the deal?

There was considerable deferred maintenance. But the structure was sound so it was mainly cosmetic upgrades and a roof. Units were gutted (flooring, fixtures, paint, bathroom and kitchen remodels), we also repaired and painted the exterior of the building.

What was the outcome?

We have rented the first unit already at $50/month above our estimates with pending applications in on the other units. Property IRR will finalize in the 16-20% range.

Lessons learned? Challenges?

Prepare and estimate worst case scenario always! Delays and surprises are inevitable.

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

Dada McGlynn has been my RE agent in Gainesville area for a few years. Her husband Alan is also an excellent resource for funding. Couldn't recommend either more.

Not easy to answer without reviewing all of the numbers. But, here are the positives; mortgage rates are near historic lows so debt is not expensive. With that, comes a corresponding upwards move in pricing (as debt becomes cheaper, buyers push prices higher). 

When you evaluate real estate the numbers will always dictate your decisions. What is your required ROI? IRR? What is the "opportunity cost" of taking the line of credit on your home? Do you have an investment property lined up? A team in place? In short, if the property meets your ROI and the LOC interest is addressed from the investment it should make sense.

As you can see there are a lot of variables to consider. Hope this helps! Good luck.

Investment Info:

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

Purchase price: $220,000
Cash invested: $70,000

Distressed quad, purchased to renovate and bring rents up to market rates. Renovations ongoing. Will update post to show completion accordingly.

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

These are the types of deals our firm seeks. Absentee landlords or properties where deferred maintenance is apparent.

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

We work with a group of realtors in the area who we have done multiple deals with and are well aware of our investment criteria.

How did you finance this deal?

Conventional financing.

How did you add value to the deal?

Exterior upgrades include: new roof, siding, screens, landscaping, paint. Interior upgrades: new flooring, kitchen and bathroom renovations, paint, fixtures throughout, lighting, appliances (as needed).

What was the outcome?

Renovation for this property is ongoing as current tenants turnover. We have applied this formula on multiple deals already so we are confident in projections.

Lessons learned? Challenges?

Always be conservative and account for uncertainty. Covid has presented a number of challenges to landlords and it is important to be cognizant of the impact to processes, people and bottom line.

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

I have had a great experience with Dada Mcglynn (ReMax) and Alan at Advisors Mortgage Group.

Economic occupancy rate is actual "rent received" versus what the leases indicate. So, the property could be 100% occupied with leases. But the economic occupancy could be at 50% if two of the tenants are not paying or are not current. 

I would recommend examining the property from either a repositioning standpoint; Meaning, what is the ARV? What is my ROI based on cost + improvements? OR looking at it with from an ROI perspective of "as is" with the newfound rent rolls.

A common mistake that new commercial property investors make (I realize this is not a commercial property but the advice still applies) is purchasing the property and assuming you can make improvements with the net income that you receive from tenants versus capital reserves. I am guessing that is the plan here. I would strongly discourage that approach.

If you own the home outright it is essentially "a cash out mortgage" most still refer to it as a cash out refinance. But in the end it is semantics. The result is the same. The bank loans you "X" collateralized by the asset. 

You can obtain a mortgage at any point of ownership not just at acquisition.