All Forum Posts by: Jake Hartnett

Congratulations @Jackie Sladky, I also just had an offer accepted on a 4-Plex in Saint Paul. This will be my first proprty.

I was having the same issues as you, high prices that are not justified by the rents. I started networking like mad, going to REIA groups and telling everyone what I was looking for. I got some good leads on off-market deals but the one I am pursuing right now I found on Craigslist. If your current deal falls through I recommend forgetting about finding a deal on the MLS. Comb Craigslist FSBOs, go to REIAs, call property managers and ask if any of their clients' buildings are for sale, send mail to properties you like, call "for rent" posts on craigslist. You will probably get the best deals from the worst landlords (because they are bleeding money and are sick of the hassle) so call the ones with no pictures, or bad pictures, the ones that don't list the rent, have misspellings etc. If they have nice pictures and clear information about the property they probably have a good head on their shoulders, and they will probably not want to sell or want to sell for more money because the property makes money.

The areas where I see potential deals are Powderhorn/Phillips in South and some neighborhoods in North in MPLS, and Midway/Frogtown, W 7th, and the E and W side of Saint Paul. The housing stock tends to be older in these neighborhoods but there are always some newer builds. Personally, I think there is a significant drop in value when you get older than 1920. Some of these neighborhoods I listed can be a little rough, so I look for an independent coffee shop/cafe, coop grocery stores, and trendy bars moving in. If you see some of that activity there is a good chance the tenant pool will improve over time.

Its really competitive right now, so the good deals go to investors who dig deeper.

Happy Investing.

@Account ClosedCheck out the Land Academy Podcast in your poking around before you buy the Investor's Toolkit. His podcast is way more actionable than Mark's and he seems more legit. From what I have gathered he is the one who taught Mark the business and sells deals to Mark wholesale that Mark then sells retail. So everything Mark is saying about marketing for land is not based on experience. Its obvious in the course that his passion is sales. So if I were to buy a course today I would seriously consider the Land Academy course. I'm not sure what it sells for.

Even so, if you are already mailing and getting calls you are more than halfway home.

Johnson King PLLC. Rates are $175/hr for junior partner and $250 for Senior. Its only two of them so you will get to know them and they you. Plenty of experience with Real Estate and business law and they invest themselves.

Obviously pay your balance every month.

Never close an account.

Different types of credit (like car loan, mortgage) will help. Be careful here. Don't spend money you wouldn't have spent anyway. It could cost you thousands of dollars to raise your score 100 pts a few months faster.

New credit sources will temporarily lower your score, so plan when you want to get that mortgage and don't open any new accounts for a few months before.

Make sure you never use more than 10% of your limit. You want to always use your card but never seem like you need it. When I started with a secured card it was only a $200 limit, so I set up a $5/month donation to a charity and set up auto pay so I never had to think about it, and never even carried the card. After about a year I was flooded with offers from the major card companies.

Good Luck.

Originally posted by @Dan Coleman:

@Jake H.-the answer for almost all RE related questions is "it depends" but if I were you I would not house hack a 4plex unless you are trying to execute a value add strategy. To those who do not know basically a fixer upper where you are forcing the appreciation by increasing the condition of the property and by doing so, also increasing your rental income. If you don't buy it in this manner you may end up stock with the property. Market values for a 4plex will not swing as much as a SFR or Duplex.

Its important to handle each purchase correctly before the whats next, especially starting out. I say this because the whole point behind a house hack is to acquire a property for 3.5% down. Ride the market until you have enough equity to refinance into a 20-25% conventional loan package. 4plexs and 3plexs function more like commercial properties being that if they do not cash flow they are not worth that asking price or amount you are plugging in. The emotional aspect of the purchase is not present like a SFR or duplex.

A duplex will mirror more closely whatever is happening in the retail SFR market. You could by a duplex and sit on it and depending where the market is and in a few years refinance out and had done nothing to the property beside live in it. A duplex simply appeals to more people inflating its market value.

Ultimately for 3 & 4plexs, investor are the primary buyer pool. In my opinion 3 & 4plexs should be in their own class of property. If you by a 4plex incorrectly or at full market value you are at risk:

1.) You will not have enough equity to sell.  3.5-5% equity is not much, especially considering you need 6-10% to cover you're selling costs.

2.) Not being able to refinance, as mentioned above the market appreciating alone for 3 & 4plexs will most likely not change enough to get you to a 20-25% equity position in any meaning amount of time. I'm projecting I don't know your goals and cannot define "meaningful" but from your initial posit it sounds like you are ambitious and have access to money. You may not want to wait the 4-5+ years for the market to get you to where you want to be.

To tie my point in, people tend not to over pay in the investor market. 4plexs are classified as residential properties and have to be evaluated as such using the comparable approach  it is what it is. So that means these properties will be judged by comps or other 3 & 4plexs that have sold in the last 3-6 months. The demographic of buyer that buys these 3 & 4plex properties again tend not to over pay. This fact in its self suppresses the  appreciation for all 3 & 4plex properties, an appraiser will only comp 4plexs to 4plexs. An appraiser is not generally going to make an adjustment for that duplex down the street that sold. Their going to use a 4plex half a mile away. With this being said the comps wont swing with the over arching housing market trends but only the 3 & 4plex market trends.  Housing hacking a 4plex that has not been purchased correctly could leave you paying the difference when it is time to refinance the property. 

Sorry for being long winded, in my opinion the mechanics of a successful house hack happen when being very calculated at the point of purchasesing. If you are not calculated you will just be deferring to pay the 20-25% down payment instead of avoiding it. 

Give your first purchase as much thought as possible because if purchased correctly it will afford you, your second and third properties. Worry only about the first purchase and depending on its success that will dictate the whats next.

 Great Points Dan, and thank you for this generous reply.

Your point about duplex buyers being more willing to overpay for properties is exactly the reason why I am less interested in them. They just don't seem to cashflow because there are too many retail buyers willing to pay more than their value as an investment. The fact that this doesn't happen on 4-plexes is fine with me because I don't plan to sell. A duplex being more exposed to the whims of the retail buyer is double edged. The value could drop as easily as it can increase. For that reason I would like to get into 5+ units as soon as possible because I have more control over the value.

Your point is well taken that I may not be able to significantly increase the value of the 4-Plex. The only control I have comes in the form of additional income I can show when I refi, and whatever the appraiser values my improvements, so I will have to think in terms of an appraiser's valuation when I am making my repairs and updates.

Great food for thought.

Thanks.

Welcome to BP Jeff,

I am currently looking for a 4-Plex in Saint Paul or Minneapolis but I haven't seen a lot of activity on the MLS. Let me know if you hear of anything off market.

Thanks.

Thanks Dylan Swanson, I view comps as a fiction and only useful in the short term on a flip. The real value of a property is the ROI.

I am primarily interested in small multis in the Saint Paul, Minneapolis, Minnesota markets. Eventually I would like to be doing 5+ unit properties because valuing them and forcing appreciation based on performance makes a lot more sense to me than comps and market whims.

The lender is a close personal acquaintance. Both of us know the terms are generous, but he is excited about it anyway. The 5% down may not apply on non owner occupieds, though the amount of equity is probably more important than the actual down payment. We are in this together, I don't want to default more than the lender wants his money, for personal reasons. Nothing is set in stone yet. Just ideas thrown around at this point.

What would you seasoned investors do if you had unlimited private money with the following terms: 5% down 6% interest 7 year balloon 25 year am I'm just starting out with some education and some property management mentorship but no real experience. I'm planning on house hacking a 4-plex, but then what's the strategy? Would you make sure you have more equity before buying another property? Partner with someone who is more experienced and bring the money? Refinancing with the same lender is possible, but perhaps not on the same terms, but still very good terms relative to the lending market and CD/bond market at the time of refinance. Any thoughts are welcome. Thanks.