All Forum Posts by: Evan Kline

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $265,000
Cash invested: $43,000

We came across this house on market. I knew it was under listed by quite a bit, purchased for $265,000, during DD it appraised for $325,000.

We moved in and did a small kitchen remodel, then furnished the property and listed it as a mid-term rental.

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

Initially the equity we were walking into

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

This was sitting on the MLS for 8 days (which at the time was twice as long as normal). It was priced at $285k, which was already underlisted. We came in and offered $265k, they countered and asked for a higher price and higher DD money. We accepted the higher DD (since we knew we would close) but said we were firm on price. They accepted.

How did you finance this deal?

Conventional loan.

How did you add value to the deal?

We did a light rehab on the kitchen: painted cabinets, new hardware, new backsplash, new countertop. Otherwise the house was in pretty good shape.

We also furnished the home for use as a mid-term rental.

What was the outcome?

House is 100% occupied and is cashflowing about $800/month for us.

Lessons learned? Challenges?

Bigger properties work for mid-term rentals. We tried to split the house into two "units" and rent them individually but that didn't work as well.

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $265,000
Cash invested: $43,000

We came across this house on market. I knew it was under listed by quite a bit, purchased for $265,000, during DD it appraised for $325,000.
We moved in and did a small kitchen remodel, then furnished the property and listed it as a mid-term rental.

We were a little stuck on how to actually use this property. It's 4/2, 1800 sqft which is a little bigger than we normally buy. We initially tried to rent the home as two separate furnished units, but ended up simply renting the whole home. It's been occupied 100% since then.

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

Initially the equity we were walking into

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

This was sitting on the MLS for 8 days (which at the time was twice as long as normal). It was priced at $285k, which was already underlisted. We came in and offered $265k, they countered and asked for a higher price and higher DD money. We accepted the higher DD (since we knew we would close) but said we were firm on price. They accepted.

How did you finance this deal?

Conventional loan.

How did you add value to the deal?

We did a light rehab on the kitchen: painted cabinets, new hardware, new backsplash, new countertop. Otherwise the house was in pretty good shape.

We also furnished the home for use as a mid-term rental.

What was the outcome?

House is 100% occupied and is cashflowing about $800/month for us.

Lessons learned? Challenges?

Bigger properties work for mid-term rentals. We tried to split the house into two "units" and rent them individually but that didn't work as well.

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $265,000
Cash invested: $43,000

We came across this house on market. I knew it was under listed by quite a bit, purchased for $265,000, during DD it appraised for $325,000.
We moved in and did a small kitchen remodel, then furnished the property and listed it as a mid-term rental.

We were a little stuck on how to actually use this property. It's 4/2, 1800 sqft which is a little bigger than we normally buy. We initially tried to rent the home as two separate furnished units, but ended up simply renting the whole home. It's been occupied 100% since then.

Hi Martin, a little late to the party but we have a BP meetup in Winston-Salem the last Thursday of every month at Fiddlin Fish, a local brewery. Obviously not going to come too often if your investing from out of state but I can get you included in our Slack channel if you'd like.

My wife and I invest in mid-term rentals around the 2 hospitals we have here. We've done enough business and worked with enough people it finally made sense for me to get my RE license, so in addition to our own stuff I specialize in helping other investors in Winston Salem, primarily residential. Happy to connect if Winston-Salem is on your radar!

@Chris Seveney

Human psychology. People aren't rational most of the time. So many people had previously asked her for owner financing she firmly decided that was something she didn't want to do. 

I'm sure I could have negotiated for seller finance given time, but because of what I walked into, instead of fighting an uphill battle and trying to overcome that pre-conceived notion I offered a similar creative finance option that was called something different. Because she had never said "No" to a lease option before, that at least got my foot in the door. 

Do you have data I can look at that suggests that's high? It's possible owner use is baked into the 70% number, but the model breaks at about 35% occupancy. 

@Dale K Poyser Thanks for the response. We're in the process of finishing a BRRR we'll be pulling at least $80k out of, if this deal ends up going through we'll apply the money to the cabins, if not we'll continue with our current strategy, (investing in B+ neighborhoods for long term and mid-term traveling nurse rentals).

The seller knows the planned use case - as I mentioned in the post this was the whole premise of the deal. I came in and said I would build up the financials for her by running the property as an STR so it would be a more lendable asset.

The cabins are in good shape - and 75% of the furnishings are serviceable. We did a walk through of the property last weekend and estimated $5k per cabin. 

After we did a walkthrough with the seller and talked with her face to face she indicated she would want a longer of period of time to move off the property. So in my offer I proposed a revenue split for 4 months (and during the slow season STR-wise) while she moved 100% off the property, then when she was 100% off we would convert to a Triple Net lease. So as long as we're up and going by the end of the 4 months we will have minimal holding costs.

Hey all, 

I think I'm heading the right direction on this deal, but wanted to ask the community to point out any flaws or issues. 

THE DEAL

36 acres, 6 cabins next to national forest in western NC. (there's an "office building" on the property to that could potentially be upfitted to a 7th unit, but I'm leaving that off for the purposes of the numbers)

Asking price: $2.5M

Rent: AirDNA for the area + personal research = ADR $250 X 6 cabins @ 70% average occupancy rate = $380,000/yr potential revenue

The seller has been trying to FSBO the property for over a year at this point.

When initially contacted her she immediately said "I'm not interested in owner financing" before I even brought up any potential terms - so I'm sure she's been flooded with folks just spamming her with texts and emails not getting to actually know her and was sick of being asked. But to summarize what I learned from speaking with her:

1. This property was primarily used for family/personal purposes. She did have the property listed as a STR in the past but did not have any meaningful financials to share. It hadn't been listed since the pandemic.

2. Her motivation is: her extended family has migrated north, so she wants to replicate the property, just closer to family. Apparently they have already broken ground on the new construction, but are hoping to relieve the financial burden with this sale.

3. She is allergic to the term "owner financing." However I floated the idea of a lease option and she generally was open to a creative deal when I took the time to explain it to her. 

I said something to the affect of, "I can't get a loan without financial history on the property, and as much as I'd like $2.5M in the bank to purchase in cash, I don't have that. So if you allow me to occupy the property and build up 2 years of financial history for you, I can get the loan and get you the money."

The main strategy I've talked with her about is a lease option - we agree on a purchase price today, and agree on monthly lease price, and length of the option.

So my questions are: 

1. Knowing she's very opposed to anything close to "owner financing" do you think this is the best strategy? 

2. Are there any terms you would be sure to include in the option? One term I'd like to add is, if the property doesn't appraise at the end of the option the option extends for 1 year. Or something to that affect.

3. How would you handle capital expenses in this situation? For example, everything is furnished, and its OK, but it has a "grandma's cabin" vibe (which is literally what this place was for her family) and they really need about $5k/cabin to be the best in the area (which would be my goal). Or additionally, how would you structure a roof replacement, etc? I'm planning on positioning this to her by saying "This deal can be a gradient scale where you retain more control and also more liability, or we receive more control, and take on more liability, where on this scale would you be most comfortable?"

4. As far as additional reasonable terms for the sellers benefit to make her feel safe do you have any suggestions? If I can make her feel secure on the terms I think this will go through. I believe she trusts me personally now, as much as one can after talking for a couple weeks. And my wife and I are meeting her in person this weekend (hence this post!) which I'm very confident will win her over with who we are as people. But the terms need to feel good to her too. 

Anything else I'm missing? 

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $250,000
Cash invested: $28,000

This property came off the MLS (Jan 2022), and is in a very desirable part of town, but had inherited tenants who were a pain and dissuaded most people from even looking at the house (they wouldn't let the listing agents take pictures of most of the home, so listing was terrible, etc). Appraisal came back at $301K during closing. ARV $375.

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

We live in the neighborhood and have a very good read on value and desirability, down to the block and street level.

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

MLS - we didn't negotiate, but knew we were walking into a tough situation the seller was just trying to get out of (tenant headaches) so were able to purchase $50k under market value, even in it's run down state.

How did you finance this deal?

HELOC from another property for 20% down + hard money for renovation. 7% interest only payments.

How did you add value to the deal?

Cash for keys to remove tenants, then cosmetic rehab. The front porch was an eye sore and we completely remodeled that, then refinished all the floors, painted all the walls, updated all the outlets, updated all the light fixtures.

What was the outcome?

Still waiting on a cash out option, but current price per sqft on the street has our home value at $375k-$440k
Property is rented @ $1,900/month on year long lease

Lessons learned? Challenges?

The biggest challenge was getting the inherited tenants out the door. It was pretty bad - they were refusing to pay rent, had lived there for 5+ years, didn't have a security deposit in place, smoking in the house, etc. and were pretty mad at us for "kicking them out of their home." They were currently paying $1050/month and market rate was $1850 which they weren't willing to come close to.

Engaging in a calm manner, acknowledging the situation sucked for them + offering cash to move early worked

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $250,000
Cash invested: $28,000

This property came off the MLS (Jan 2022), and is in a very desirable part of town, but had inherited tenants who were a pain and dissuaded most people from even looking at the house. Appraisal came back at $301K during closing. We paid $500 (Cash for Keys) to the tenants to encourage them to leave. They didn't have a security deposit with the previous landlord so we wanted to give them a cash incentive to leave the property in good condition.

Renovations were finished by May 2022, we listed on Zillow and rented within 4 minutes (literally) for $1900/month. ARV is $375k, we're currently looking for options to realize that forced appreciation since rates are so high right now and a cash out refi would significantly cut into cashflow.

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

We live in the neighborhood and have a very good read on value and desirability, down to the block and street level.

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

MLS - we didn't negotiate, but new we were walking into a tough situation the seller was just trying to get out of (tenant headaches) so were able to purchase $50k under market value, even in it's run down state.

How did you finance this deal?

HELOC from another property for 20% down + hard money for renovation. 7% interest only payments.

How did you add value to the deal?

Cash for keys to remove tenants, then cosmetic rehab. The front porch was an eye sore and we completely remodeled that, then refinished all the floors, painted all the walls, updated all the outlets, updated all the light fixtures.

What was the outcome?

Still waiting on a cash out option, but current price per sqft on the street has our home value at $375k-$440k
Property is rented @ $1,900/month on year long lease

Lessons learned? Challenges?

The biggest challenge was getting the inherited tenants out the door. It was pretty bad - they were refusing to pay rent, had lived there for 5+ years, didn't have a security deposit in place, smoking in the house, etc. and were pretty mad at us for "kicking them out of their home." They were currently paying $1050/month and market rate was $1850 which they weren't willing to come close to.

Engaging with in a calm manner, acknowledging the situation sucked for them + offering cash worked

I'm traveling to Boise, ID for a few days and if there are any BP folks who would like to meet up I'd love to hear about your market and any success stories you have.

Quick bit about me: I'm a newer investor in Winston Salem, NC. I also work for the largest real estate group in the city as their database manager. 1 house hack (duplex) 1 SFR, and working on two BRRRR at the moment for a total of 4 properties.

We do both Mid-term (Traveling nurses and business professionals) and Long-Term rentals. 

Refinancing the brrrr's this summer and adding in 2-3 more properties in Winston by the end of the year and also working on Seller Financing deals in the Appalachian mtns (about 1.5 hrs from me) to start adding in some Airbnb short-term rentals.

I'm flying in to Boise March 24 and flying out the 28th. 

I'd love to connect. Let me buy you a beer!