All Forum Posts by: Jason Macht

Thanks @Jonathan Klemm! I was able to pull capital for 2 HELOCs + cash on hand for the down payment. I also brought in an investor with a ~10% stake as well.

Investment Info:

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

Purchase price: $1,115,000
Cash invested: $223,000

This is a mixed use building with 5 one bedroom rentals and 1 commercial space, located in the West Town neighborhood of Chicago, IL.

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

I've been working to scale up in size. This deal offered me an opportunity to do both 5+ units as well as a commercial space.

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

This was actually on market, but did not receive a lot of attention. It was listed at $1.3M, which did not pencil out. I reached out directly to the listing agent and managed to negotiate what would typically be paid to the buy side agent as a credit to my purchase. So net-net, I paid $1.115M for the property after negotiating on price and crediting the commission back.

How did you finance this deal?

This was financed with a commercial loan from US Bank. 20% down, 3.25%, 25 year am., 5 year term.

How did you add value to the deal?

Raising rents. Upgrading units with new appliances, painting, and other cosmetic updates.

What was the outcome?

Purchased for $1.115M. Appraisal came in at $1.21M. I'll aim to continue to raise rents and update units. We should be able to refinance most of our money out in 3 months.

Lessons learned? Challenges?

Never give up on an over-priced deal. Always negotiate. Figure out how you can have some leverage or bargaining chips in the deal.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I reached out directly to the listing agent. I do this so that they are incentivized to work with me as they typically can get the full commission, e.g. 5%. In this case, I was able to use that to discount the purchase price.

I wanted to share some lessons learned from looking back at my first real estate house hacking deal.  This is the first deal I ever attempted and it turned out to be a great success.

Lesson #1: Real estate is a long term game

I still own the 1st place I bought back in 2010 and it has generated the best return to date as well as enabled me to invest in additional deal due to the appreciation. I did not see that when I first started out, but the seed that was planted has blossomed beautifully.

Initially I ignored real estate investing because it felt too slow and too expensive at the time. But have since come to learn that there is not get rich quick. Investing is a lifestyle designed to improve your lifestyle over time.

Lesson #2: House hacking is the best way to get started

At the time, I didn’t know it but I was house hacking. The first deal was a 3 bed / 1 bath house I bought for $135,000 and rented 2 bedrooms to guys I found on craigslist.

With that, I essentially lived for free. The only thing I regret is not doing more of this back then. It wasn’t until 2017 that I refocused my energy on real estate.

Lesson #3: The BRRRR Strategy is the path to real wealth

Combining house hacking and the BRRRR strategy is the most powerful investing tool I've found to date. By living in a 1-4 unit property, using a 3.5% down FHA loan, forcing appreciation through improvements and then pulling out your equity with a cash out refinance or HELOC, this is how you grow your portfolio and recycle your cash into additional investments. Then repeat the process.

Lesson #4: Analysis is more like “Guesstimation”

Don’t succumb to analysis paralysis. The numbers will never be perfect. You are simply approximately what you assess to be a high likelihood of success. Unexpected things will happen for better and for worse. That’s OK.

Deal Update (as of July 2021)

Purchase: $135,000

Appraised: $300,000

HELOC: $90,000

Cashflows: ~$500/ mo (after expenses & cap ex reserves)

The PMC had been "in contact" with the rent assistance program, but clearly wasn't getting through to the right people or the root issue. So it just require a bit more drive to get some answers. 

I wanted to share a story of when things go wrong, what it takes to overcome the challenges along the way, and 3 lessons I learned from this experience. More specifically, I had a case of a tenant that was over $6,500 behind in rent, I was handcuffed by eviction moratoriums, and how I was able to collect 10 months of back rent plus another 4 months for the tenant to get back on their feet.

Lesson 1: No one cares about your money more than you

When you hire out property management, best case you have someone you can trust, that doesn’t nickel and dime you, and takes care of your tenants and property. However, COVID wasn’t in the contract and no one was prepared to handle what came from it. Initially I relied on my property management company to navigate the eviction moratorium and rent assistance programs, and they did as good of a job as they could.

But 10 months laters, there still was no rent assistance money and no progress. So I actively stepped in. No one was going to work as hard as I would to get the rent I was expecting.

Lesson 2: Taking action is the only path forward

Still around and waiting will get you nowhere. In order to make progress you need to take action, massive action. In my case, I sought out the rent assistance program myself. Unfortunately after dozens of calls and left messages, I made no progress. So I found the CEO of the organization, googled until I found an email address and wrote them a compelling message about the circumstances. I had a call from an advocate the next day. Take action. Be resourceful.

Lesson 3: Persistence pays

Even after I made contact. It took another few dozen emails, checks-in, and follow ups until the application was complete, approved, and a check was cut. All in all, start to finish, the process took 2 months. In the end, I’ll be receiving 10 months of back rent + 4 additional months for the tenant to get back on their feet. $9,100 in total.

Reposted complete story here: https://www.biggerpockets.com/...

That depends on the bank, so I always encourage to shop around. Typically 6 months "seasoning", some require 12. With HELOCs, I don't think they require this, however, I did have to negotiate getting the full 90% LTV due to their requirements.

I wanted to share my story of how BiggerPockets helped me get from $0 to over $1,000,000 in real estate assets. Here I share with you how I found this deal, how I determined if this was a good deal, how I negotiated the deal and won the deal, how I financed the deal,, and how I made it to close on this deal. As with any goal or dream, they never come easily, but with enough focus, determination, and hard work, you can get what you’re after.

#1 - Finding the deal

I essentially found this deal by accident as a result of having Redfin search alerts set up, this deal popped up in my inbox when the deal fell through and it was delisted. I looked at the property, the price, the size, and the area and had an inclination that there was something there.

Leveraging PropStream and TruePeopleSearch.com I was able to track down the owner and email them directly. I was talking to him later that day.

#2 - Underwriting the deal

Over the years, I’ve developed my own property analysis calculator and input all of the numbers, including assumptions around vacancy, cap ex, repairs, etc. Based on what I expected I could get for rents in the area, the cash on cash return was well above my target of 10%. Typically I use rentometer.com to assess rental prices and have found that fairly reliable. FB marketplace is great too.

In addition, I believed that when fixed up the property could be worth closer to $1.3M. They were asking $1.15M, so there was upside potential.

#3 - Getting the deal

Now the property had already been listed and the owner wanted me to work with their agent. One trick I like to use is asking the listing agent to be my agent as well, this way they can earn both sides of the commission and are incentivized to work with me.

As a part of this process, I also aimed to develop a personal relationship with the owner by reaching out directly, complimenting how well they took care of the place and reiterating that I would be living there myself and looked forward to further investing in the property.

After going back and forth, we landed on $1.1M + ~$15,000 in closing concessions.

#4 - Financing the deal

Now to be clear, I was not prepared to take down a $1M deal. I did not have $220,000 laying around in the bank, so I had to get creative. I knew it was a good deal and had to figure it out.

Unfortunately the deal was too big for a low down payment loan (e.g. FHA). So a full 20% was required for an owner occupied 4 unit building. Initially I explored partnering with someone to no avail. I then assessed what assets I did have and how I might be able to leverage them.

Here’s how it came together:

• $70,000 in savings
• $10,000 in a brokerage account
• $30,500 from a 401k loan
• $90,000 from a HELOC on another property
• $40,000 from a HELOC on a 2nd property

Total cash available... ~$240,500. Just barely enough to cover the down payment and have some reserves.

#5 - Getting to close

After several long hours at the closing table at the title office. The deal was closed. I closed on a Friday and collected rent on a Monday. In addition, we negotiated to have the owners rent the place for two weeks, which they paid up front in addition to prorated rents for the month.

Deal Update: June 15th, 2021

I successfully got the property appraised at $1,300,000 and landed a HELOC on a 20 year term at 90% LTV with a 4% interest rate. Now it's time to roll that money into the next deal!

I wanted to share a story of overcoming obstacles and 3 lessons I learned along the way with executing the refinance step of the BRRRR strategy. I was able to effectively double my money with a little persistence and drive, going from $115,000 to $230,000.

Lesson 1, all banks are not created equal

Time and time I’m reminded of this and have figured out a couple of things.

• Understand that banks differ in their policies and requirements
• Talk to 10+ banks, especially credit unions or local community banks
• Some banks don’t offer certain products. Other banks don’t offer certain products to certain types of customers; they’re all different.

Here’s one personal example of 3 different product structures I came across and was able to refinance the money into the 3rd banks pricing:

• Bank 1: HELOC / 10 year / Prime + 2.25% (5.5%), up to 100% LTV
• Bank 2: HELOC / 20 year / Prime + 1.25% (4.5%), up to 90% LTV
• Bank 3: HELOC / 20 year / Prime + 0.75% (4%), up to 90% LTV

Lesson 2: Influence what’s in your control

When refinancing a property, set up your appraisal for success.

• Pull comps
• Provide the appraiser information
• Provide before & after photos of the property
• Seed a target price (for them to hit)

Lesson 3: EVERYTHING is up for negotiation

• Rates; APR, points, etc
• Term
• “Minimum Requirements”

In this most recent deal the bank told me that I could not get the full 90% LTV because I had not yet had 12 months of "seasoning" and the could only loan up to the purchase price. It was 2 months from the 12 month ownership period. I asked the loan officers to go back to the underwriter and ask for an exception.

As a result I was able to go from a $130,000 line of credit to a $230,000 line of credit.

Current status of the project

• Closed on the loan
• Paid off my initial lines of credit
• Lowered interest rate and payment to 4% on a 20 year term
• Obtained an additional $50k to invest
• Have the option to extend credit line to $300k with a lower DTI ratio

Thanks! Originally this included a more detailed overview in a video, but that appears to have been stripped out :-(