All Forum Posts by: Brent Tarnow

Hi Mohammed, good luck with jumping into real estate. I'm sure you'll do great. If you want to connect, I can share some lessons learned from house-hacking a 2-unit, and then a 4-unit, in the Bay Area with FHA financing. It's gotten harder over the years, but it's still doable. In any case, I'm always open talking about investing strategies!

Alex Miller of Pacific Trust Mortgage.  He's my main guy and I'd be happy to introduce you

Hi Jesse, yes, it was fully vacant.  And I knew the area very well, so guessing at market rents was pretty easy.

Investment Info:

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

Purchase price: $1,000,000
Cash invested: $300,000

5-unit Berkeley property, purchased with seller financing

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

Under market rents allowed the property to sell at a reasonable price. Used seller financing to buy runway to survive low rents while units turned over.

It is in an incredible Berkeley location (near Whole Foods), it's a gorgeous Victorian, and it will retain and gain value over time.

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

On market deal, but we were the first to identify that the seller (an aging retiree) didn't want a big chunk of change but preferred monthly payments. Wanted to avoid a tax hit and save the balloon for her granddaughter. So we helped achieve her goals. Therefore, we won the deal without coming in at the highest price.

How did you finance this deal?

Seller financed (see above)

How did you add value to the deal?

For the seller, we gave her just the contract she wanted, including allowing her to finance the sale.

We took the one vacant unit and did short-term rentals (in Berkeley, still easiest to do 30-days or more) for visiting students, professionals and nurses (the hospital is 2 blocks away). Huge premium on those short-term rentals

What was the outcome?

Still own it today. Another unit has turned. Deciding on selling versus holding.

Lessons learned? Challenges?

The City of Berkeley lived up to its reputation, both with fees and administration as well as protecting tenants. I'm in the middle of a big (ridiculous) tenant dispute now, after they refused to pay, refused entry to the building, refused to provide an information. Inheriting tenants in Berkeley is risky and vetting new ones is very important.

Investment Info:

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

Purchase price: $1,305,000
Cash invested: $100,000

Vacant 4-unit in North Oakland, on market, purchased with FHA financing. Small cosmetic rehabs, good tenant selection, and it cash flowed from Day 1.

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

After a smaller owner occupied situation with the duplex, we moved into one of the units in the fourplex. The strategy worked once, so we replicated it.

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

On market deal, but it wasn't marketed very well, which is something I always look for. Also, the building was mixed use (one commercial space) that turned off many would-be investors in a property in such a good location. We paid a small premium so that the seller would choose our offer despite the FHA financing.

How did you finance this deal?

FHA. People in the Bay think it's impossible, but many sellers will patiently wait if they (a) trust that you know what you're doing and (b) make it worth their time -- i.e. add $10k to the purchase price for the extra month the closing might take.

How did you add value to the deal?

Mostly small cosmetic improvements -- kitchen upgrades, paint, etc.

What was the outcome?

Lived there for 3 years for free, now it's cash-flowing nicely.

Lessons learned? Challenges?

Commercial spaces are slightly different than residential (obviously), but it's not rocket science. And in some ways, the long term leases that you negotiate with those tenants can be a positive.

Investment Info:

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

Purchase price: $750,000
Cash invested: $30,000

Vacant duplex purchased with FHA loan in Temescal neighborhood in Oakland. Owner-occupied for 9 months and refinanced out of FHA to conventional financing (so I could use FHA financing on next deal). Modest cosmetic upgrades for value-add. Has cash-flowed ever since.

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

House-hacking, plus FHA financing for low down payment

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

Found the off-market opportunity while touring another property, just asking questions of the agents and meeting as many people as I could

How did you finance this deal?

FHA

How did you add value to the deal?

New roof and some electrical upgrades. But the rest of the value-add came from small cosmetic upgrades -- expanding driveway, fixing fence, landscaping, etc.

What was the outcome?

Still holding it, refinanced again, cash-flowing nicely

Lessons learned? Challenges?

If you can do FHA financing, do it. PMI is a small price to pay for getting into a Bay Area property for ~$30k. You can always refinance later.

@Calvin Kwan

Did you get this sorted out?  I know a very good lender who has gone through this issue and would be happy to help

@Jacob Garcia

Hey man, good luck and welcome to investing in the Bay Area.  Chris Mason is a great guy and he'd take care of you, but if he doesn't work out I'm happy to introduce you to a guy I've used for most of my small multifamily deals.  

I'd also be open to a conversation about the different neighborhoods and approaches if you are interested in swapping ideas.  I'm in the market for my next deal and putting heads together is usually productive.  

See link for details.  Also posted in residential properties, because it is an existing four-unit.  But it is zoned for 8 units and owners have drawn plans and begun process with city to entitle 11 units.  Great development opportunity in prime Oakland spot.  

https://www.minngo.com/515-sycamore-st-oakland

VACANT in Uptown Oakland!!! Previously used as a 4-unit building, the possibilities for this property are endless. This stately building in the Uptown neighborhood could continue generating income as a fourplex or could quickly be upgraded to a 5-unit per advice of contractor and architect. Current owners have also begun the entitlement process to bring it to its highest and best use – 11 units. Incredible development opportunity in one of Oakland’s trendiest neighborhoods. This opportunity can suit anyone. Low down payment financing available for owner-occupiers. Vacant cash-flow property is perfect for investors. Entitlements pave the way for developers. Seller financing would be considered. Come check it out and explore it for yourself. Three of the units have well-designed layouts with oversized bedrooms. The other unit is a newly updated studio. City views from the top floor. Large back yard is ready to be converted into an urban oasis

See link for details.  Posted as multi-family here, but will post separately as a development opportunity.  Owners in process of getting entitled for 11 units. 

https://www.minngo.com/515-sycamore-st-oakland

VACANT in Uptown Oakland!!! Previously used as a 4-unit building, the possibilities for this property are endless. This stately building in the Uptown neighborhood could continue generating income as a fourplex or could quickly be upgraded to a 5-unit per advice of contractor and architect. Current owners have also begun the entitlement process to bring it to its highest and best use – 11 units. Incredible development opportunity in one of Oakland’s trendiest neighborhoods. This opportunity can suit anyone. Low down payment financing available for owner-occupiers. Vacant cash-flow property is perfect for investors. Entitlements pave the way for developers. Seller financing would be considered. Come check it out and explore it for yourself. Three of the units have well-designed layouts with oversized bedrooms. The other unit is a newly updated studio. City views from the top floor. Large back yard is ready to be converted into an urban oasis.