All Forum Posts by: Jacob Lapp

@Drew Bursey

The way I look at it. When you put in an offer no matter how low, the response you get will either be

A yes (nice)

A no (find another)

A counter (moving in the right direction)

After I run numbers on a property and get an estimated mortgage/insurance/expense and compare that to what I can get for rents I get a number which is the most I would pay for a property and start my offer lower than this to leave room for negotiation.

My 2 deals

1st was a triplex original listed price 395k, it was listed improperly as a single family for 6 months. The day they changed to multifamily they dropped price to 330k I came out and asked if they were flexible on the price and they told me to send an offer. The numbers worked at 310k but were much better at 285k. 285k was the max I was ready to go. I offered 268k and we settled at 275k with 5k sellers assist.

60k under asking.

2nd was a duplex original listed price 240k my numbers worked at 215k. It was on the market for 2 months. I was not going to exceed 210k. My first offer was 180k we settled at 205k with 10k sellers assist.

45k under asking.

Not an expert but my advice is to not fall in love with any properties, set your price based on what works for your numbers and dont exceed that price. The worse thing that happens is they say no. A house is only worth what it sells for not what they are asking.

One of my favorite books that helped frame my mindset in this art of negotiation. Is Never Split the Difference By Chris Voss

Hope this helps good luck!

@Andrew Mowe

I did the same thing for my first property last year. It was a triplex and while I was living there we were cashflowing $350 a month (this was a white whale, I got a really good deal and ended up closing 120k under his original asking price).

After living there for a year I bought a duplex and rented my old unit and that triplex is currently cashflowing $1700 a month. At the duplex we just break even, so we are living there for free. Next year when we do the next one we will cashflow $1000 a month there.

It’s a good plan and you should stick to it! I wouldn’t limit yourself to a triplex in your search though look at duplexes and quads too!

It depends on your market but for me, most of the time if I can live there for free its a good deal!

@Shelon Hutchinson

I want to end up there as well! I was just recommending staying away from vacation rentals there!

@Ryan Howell

Awesome feedback thank you!

Hey everyone,

I’m on my second multi-family house hack and things are going well! In my new neighborhood there are a few 5-7 unit buildings near me (not on the market) that seem like great opportunities. I plan on going to the owners at some point and pitching owner financing.

I wanted to ask the group on what is good etiquette and how to properly structure a deal like this.

We can use one property as the example. 5 unit building in good shape. The last time they were looking for a tenant I called and they were asking $400 below market for rent. If those numbers stick to the rest of the building they are missing out on a lot of money. And to then use those numbers and other comps to arrive at the current value of around 380k.

My initial thought is to call again, see the status of the landlord and how they feel about the property (last sold 25 years ago) I’m assuming this place has done well for them and it might be time to get rid of the headaches. Ask them what it would take to get them to sell.

Then introduce the idea of seller financing. Here is where I want your guys input. For easy numbers lets say we agree at $400k owner financed for 15 years. $2,222.22 a month. With a one time initial interest payment of 50k (12.5% interest). The property taxes are around 5k plus insurance and other fees I’m estimating my monthly expense will be around $3500 and the updated rents will bring my cashflow around $2000 a month.

For the seasoned investors, if someone came to you with this deal how would you consider it? It seems like a win to everyone involved to me. Quick cash and passive income for 15 years to the seller with minimal risk because if I miss a payment it would terminate the agreement and they could keep my money and the property. And good cash flow for me!

My questions are

1.) At what point should I have an attorney and should I offer to pay for the sellers attorney (estimated costs)

2.) If you think my structuring plan is dumb (it very well might be I wont be offended) but explain why and what is a better way to structure this type of deal?

3.) If you have done something like this before how did it turn out?

Thanks!

@Jason Hines

So it was a strange situation. When I went through the open house I saw a picture on their wall and recognized the tenants they were friends of friends who I’ve met a few times. I actually had the guys number and called him, told him I was considering buying the place and he told me the previous landlord offered to sell it to them 2 years ago. But they didnt want to unclog strangers toilets haha. (Gave me some leverage to lowball his asking price) was asking 240k and got it down to 195k. So I talked to him on the phone prior to settlement. They kept the place in very good shape and because I knew their job history I did not have them reapply. When I raised their rent the only stipulation they had was they wanted to stay on a month to month lease as they are looking to buy their own house soon. Which was fine with me because the sooner they leave the sooner I can increase the rent.

To your second question, yes. My first deal was a triplex in Quakertown ( single family house with a detached split level duplex in the back of the same property) we rented the single family and the downstairs unit of the duplex. Luckily I bought this one completely vacant and was able to find my own tenants and charge what I wanted. Bought Aug 28 and both other leases started Sept 1. We lived in the top unit and enhanced the value with a nice paint job new flooring and added a ceiling fan, added a half bathroom in the single house and lots of exterior work. We were cashflowing $400 a month living there. And are now flowing $1700 a month with it rented. (Using facebook marketplace I put it up 2 months before our year was up with an anticipated start date of sept 1 to move in. So I had time to find solid tenants. The one tenant currently pays a little less in rent and takes care of the grass and snow.

So long story short. In 1 year we have created a free place to live and $1700 a month in passive income. The house hacking method has been working for me and I plan on continuing this method for 2 more properties hopefully 12 total units total and at least 5k a month in passive income. Then Save up to the point where I can put a down payment on a larger commercial apartment complex 10-30 units.

@Jason Hines

Congrats on the first deal! Where are you at in PA I just closed on my second multi-family in bucks/montgomery county and had the exact same dilemma.

They were paying $800 and I know I could get $1250. The number I needed to collect to cover the mortgage/utilities while we live there for free was $1120. I told the tenants of 5 years that they have been getting a really good deal and personally I couldn’t find another 2 bed 1 bath in the area for under $1250 and that the lowest I could offer them without losing money was $1150. I also asked them if there was anything I could do for the price increase I offered new flooring in the bathroom or new paint. I also did a lot of exterior work to the house which they saw and appreciated. They paid up the $1150 with no problem and we have a good relationship living there.

I hope everything works out for you guys!

@Tomiko Graves

I see an opportunity!

After you get it inspected assuming everything’s done right... Although they went behind your back to do this they seem like entrepreneurs also. This wasn’t a cheap update so they invested to make more money/offset rent. See if maybe you can build a relationship/ partnership with them. Give the option to pay a higher rent since they are probably planning on renting out themselves. Change your lease to protect yourself with them subletting.

If they don’t agree to pay more I’d start the eviction process.

Good luck!!

@Jason Cote

Besides for the resorts, Oahu is not a great place for tourism in general. If anyone is looking to visit Hawaii they will see the consensus on google saying to stay away. Not because it isn’t beautiful but the locals aren’t the friendliest to tourists. I have a good friend who’s been there for 25 years and its a great place to live but you have to earn respect as an outsider. Unless you are planning on staying there and building a reputation for your self I would invest elsewhere especially when your options are high priced homes that the rent numbers arent great or condos. Either way good luck!

@Kincaid Ryken

Rich Dad poor dad

Never Split the Difference

4 hour work week

How to Win Friends and Influence People

The E myth

There are many more but these are 5 that have helped me in a lot of ways. The audiobooks are all also available for free on youtube.

A side note I was 21 when I got my real estate license and 22 when I bought my first triplex. I would recommend getting your license whether you use it or not you will learn a lot about the process. (Then potentially save on your own commissions!)

Good luck!