All Forum Posts by: Jeff F.

I believe it's time to put this to bed. First, I want to thank all of you here on BP, and all of those specifically that have helped me while I've been working through this deal. Everyone Who commented in this thread, it was enjoyed and appreciated, and specifically @Jerry W. , @Mindy Jensen, @Bill S. , @Sam B. and many others (Sorry, You are appreciated but this is a long thread). 

So since the last update, I've gotten the following done:

- Personally increased demand for local housing approximately 15% + from last time I updated (Im basically a magician). 

- Filled the units and have consistently increased rent as vacancies come up

- Painted the trim on the outside

So this has been a long road to this refi, but I was finally able to get this property closed out - I've now pulled out just about everything, including my downpayment and this is still providing 2k or so per month of revenue. The interest rate crash has helped (thanks Jerome!) and I've been able to lock in a 10 year, favorable rate. I've got great tenants, and great interest and i'm looking forward to finishing the last of what's left (windows & landscaping) and then calling this a semi-success. 

they say in real estate you make money or get an education. This probably fell into the latter category, but this was/is an important part of my story. I am consistently wrong on apprasial values (in a bad way), consistently wrong on what I can get for rent (in a good way) and am looking forward to continued improvements here so I can make this a little more seamless.

For those that are just catching this, read through everything - it's a ride. Happy to provide a better update when the Ink is dry. 

This is probably going to be one of the last updates (I'll do the last one after a refi).

Things now have stabilized at the property, and it has been a long road. It has been throwing off some good cash, but I'm still hanging on to a lot of the debt related to the improvements. I'm hoping to get all those taken care of with a better cash flow record during appraisal (for a higher value) and a lower LTV. That day cant come soon enough.

A few final improvements for the next 12 months:

1) I recently had the trees trimmed. The place looks way better

2) Replace windows

3) landscaping at the property

4) painting the trim

All in all, im probably looking at putting another 10-15k into the building before it's truly where I want it, but right now its doing pretty well. Hoping to get all the money I lent the company back sometime soon. 

Hey @Braden Hobbs -

I have a commercial policy on a 7 unit building in cheyenne, done by Timberline insurance. They've been good to work with, but in my experience your rates are fairly cheap. Cheyenne gets clobbered every summer/fall by hail, and lots are over-exposed in the area. If you can do better that's great, but I'm not convinced. I've had issues just getting insurance on an owner occ sfh in town (early 2018)

It's almost time for another update. I'm exactly 32 months into this project, and thankfully the updates have not come as fast and furious as they were early on. 

Things have finally started to stabilize at the property, and have been continuing in that direction. While i'm still hanging on to the debt from the rehab of the property, I'm happy to report that the 7 unit has 8 producing units! I rented the shed/garage (the one that had a space heater + cats in it when I started) and all others are now full. I've had about 1 month of good income off it, which  has helped, and I've also been able to raise the rent a bit as things go forward and tenants change. I've got a lot of good tenants in there at the moment and am not expecting any major expenses on the interior of the structure. I'm starting to get the outside of the property cleaned up, and am planning on trying (again) for a refi in the fall. Hopefully i'll be in a better position, but for now, i've got the monthly rents up to 4785 (from approx 1500 when I bought it) and I've gotten expenses down (The building now is using less energy completely full than it was 3/7ths full when I bought it, and the water/sewer/trash has gone down as occupancy has gone up. 

Gross rents are 4785

Expenses are in the 2400/mo range

Hey @Jon Dang -

How did close go? You should be fine here. I had a similar situation on my 4 unit - they had to evict someone right before closing so we moved close. I agree with everyone here - taking an empty unit is better than a bad tenant. 

It has been a LONG While, but I've finally (I think) got this building under control. 

I was able to find a new contractor and get some small problems taken care of at the large apartment & get it rented. Tenants who were looking to move out for more space ended up moving into it, so it worked out well for everyone.  I gave it to them a bit below market, and further discounted it because he's going to take care of the shoveling & lawn at this property. Having a tenant do it for a bit of money has been something that has been pretty successful for me in the past, so I'm happy to not have to worry about it. He's also been doing some light maintenance for me, which has been a huge help. 

I had a tenant move out, as well as the above tenants move into a vacant one, so I had a pretty tight feb/march (there was an empty at another one of my units as well). I ended up getting some significant work done on all of them so while they were not producing the were costing me money, but I really am happy with how they turned out in the end. I was able to raise rent on each of the units that ended up coming empty and got some good tenants in there, so im going to be +1000 or so per month in may vs feb, which will be nice.

Unfortunately, im still carrying a bunch of debt on the property, and have not yet found a solution for it. I'm going to keep working at it and try to refi in the coming months, but who can say at this point. Right now, it's going alright, but things are far tighter than I'd prefer them to be. This hasn't been a super quick & rosy deal like I had imagined with with me wandering off with a 6 figure cash out check after all debt but it's still going to be alright (I hope). I've been able to significantly increase the rent on the building, and hopefully that'll increase the value. Here are some final numbers

Gross rev: 4270

expenses: 2577

That's where we're at for now, and there's still a few ways to make this better. The studio is currently empty and i'm leaving it that way for a while to build up some cash/pay down some debt. It's awkward and would be hard to rent, and after the last tenant took apart the plumbing it's been unrentable anyway. 

Once that happens, the next step is to get the electrical worked on, which im currently paying because the building isnt separated out. it's costing me $300 of that 2577 per month, but up until now it has been small potatoes. It's probably the biggest expense at the property I that I can reasonably pass off. 

I had taken to calling it a dumpster fire for a while....funny thing about that is that I ended up getting an early morning call from a tenant about.....a fire in the dumpster next to the property. Some of the siding was melted, but other than that I was pretty lucky. 

Been a while, so time for an update.

I was able to get the building under control once it was self managed but while I had started work finishing the last unit, the contractor just skipped out. Id whine and they'd show up for a day then take a week off. What was promised by Thanksgiving is still not done (Feb 16) and I finally had to get rid of him. The quality of work significantly deteriorated and the only way you could get them to fix something was not paying until they do. To this day - they'd emails/call etc 3-4 times a day if payment was 5 min late but I emailed them about not finishing a job I've paid for and haven't heard anything.

I've still got 5/7 units full, but I've completed the refinance. It came in at 390k and I'm carrying 45k+ in debt that I thought I'd be able to cover (and then some - I figured my lowest refi possible was 450k). In addition to being wrong on the appraisal, the bank forced me to move from 80% LTV to 70% LTV, which hurt a lot.

I'm working a plan forward but it's taking time. The biggest unit isn't quite done, so I'm still down revenue which hurts but I can't fill it until I finish it.

I'm not sure this will be the huge deal I thought it was early on, but it's still good for now.

New Update: 

I was feeling pretty good about myself for filling 3 of those units in this building last time. That, of course, did not last long. One tenant backed out after becoming non-communicative when I sent the lease and asked for the deposit. 

One tenant had already paid, and the person occupying the unit that she was supposed to get declined to leave. I filed the 72 hour notice almost immediately and even offered him $250. None of that was enough to budge him, and he ended up overstaying his welcome by a week. He got NOTHING out, and I had to pay quite a bit to get it de-junked & cleaned.  The cleaners didnt do a good job, and after almost 2 weeks with a very patient future tenant, she decided that she didnt want to bother with this place anymore (I do NOT blame her) so I let her out of the lease before she moved in. 

So after being quite pleased with myself for filling 3 units in 3 days, All of the sudden I had 1 tenant move in, and was looking at one tenant moving out and wanting to break the lease they signed. All of the sudden, my revenue was cut by about 60% and my expenses were the same. Since there's been so much ongoing rehab, and EVERYTHING is more expensive, im starting to run low on funds (again). 

I was able to re-lease the 2 that ended up not getting filled (at a slightly higher rate) which is good and will help with the appraisal, but it's not all sunshine and roses.

I had a tenant in one of the units remove some of the plumbing in the shower (do not ask me why) and started to cause some water damage in the units below him. Thankfully, it was caught early, but after that (the 2nd time) and the rent check for him never coming, he got evicted. I'm working now with my insurance company to file a claim. He didnt provide renters insurance as he was supposed to, so now i've got to deal with all of this on my own, plus im out a tenant right at refi time. Unfortunately, that didnt matter because that guy will cause more damage than value he can add and is a total operational liability. While he didnt get out within the 72 hours he was supposed to, he was a few days behind so that was good enough. 

So out of ALL The tenants my property manager put in, there is 2 left, and the ones that are gone, all 3 had to be evicted, and all 3 overstayed their 72 hour notice. this is the "fun" part of being a landlord that you always read about. 

2 of the 3 were in brand new rehabbed units, and both caused some fairly significant damage, and one unit may be a total loss, as far as flooring is concerned. This is very upsetting to me - mainly with the property manager. They watched me sink tens of thousands of dollars into this building, and then after I had done so, found AWFUL tenants at rents BELOW what i told them they could accept, who were then kind enough to do significant damage and otherwise not take care of the property, causing more losses. 

Lesson here is that NO ONE is going to care for your investment as much as you are. 

Second lesson is that your problems with tenants are taken care of on the front end through good screening

Overall, im OK with where the building is at the moment. I've got 5/7 units full, one of those is currently being rehabbed (albeit slower than I wanted because it was damaged by the "plumber" living above it) and the one that just had an eviction. Everyone knows me and is communicating well, and has been paying on time. 

Hopefully, now that the difficult work is likely or mostly done, I can get back to getting this thing in shape for an appraisal. based on the bank & timelines from the appraisers, it likely wont end up with cash in my pocket until January, which sucks because im carrying a TON of debt related to the property, and most of it at this point has gone on credit cards.