All Forum Posts by: Jonathan Jennings

Hey Melanie,

Thanks for starting this thread, I've learned a lot from reading through everyone's stories. I am a first time investor that took on a major project and definitely made plenty of mistakes along the way. Below are a few of my biggest:

Project: Converting a mixed-use building into a 5-unit apartment complex. 

Challenges: Parking was very minimal (0.15 acre lot located in a up and coming downtown district in central FL). Due to it being over 4-units I had to get a full set of MEP Plans including a 13r fire suppression system. Tons of unknown variables as the original structure was built in the 1920's, then added on to in the 1970's and then again in the 1990's (luckily by a licensed GC who lived in the home previously). 

Lessons Learned:

1: When dealing with architects and engineers have a clearly defined timeline for completion. I was told roughly 4-5 weeks (around the time COVID hit, so I can understand some delays). However, I did not get my final set of MEP plans until 7 MONTHS after my initial down payment. Solution: I will negotiate a discounted rate if the deadlines that are in writing are not met in the future. 

2: I can see why a lot of seasoned investors would not undertake a project with so many variables. Structural issues, lots of reinforcing, and unknowns behind every wall cost me about $100,000 over budget. Solution: On smaller projects going forward I'm going to budget 20% of the project cost for unknown variables.

3: Get all quotes in writing and as detailed as possible! I dealt with a lot of "miscommunication" from the subcontractors along the way with all the change orders. Solution: From now on anytime a change order is happening I will get a quote in writing (at a minimum of a text message if it's on the spot).

4: Value my time. I have spent hundreds of hours on this project. This has taken me away from my other full time business which pays my bills. I'm lucky that my team was able to continue operations without me around full-time, but I was constantly playing catch up as a result. Solution: From now on I will get quotes for every aspect of the rehab so I can run my numbers without any involvement. If necessary, I will step in on parts that will result in a major price savings...but not helping subs on all parts of the project. 

Below are a few pictures of the 5-plex. We're roughly 60 days from completion and have passed all MEP inspections as of last week. As long of a journey as it's been (almost a year) I'm glad I took on the project. It's been like a 4 year degree in a 1 year crash course #runtowardhard as they say. Can't wait for the next deal!

Investment Info:

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

Purchase price: $295,000
Cash invested: $400,000

Finishing up a major renovation for my first deal. Converting a mixed-use property into a 5-unit apartment complex in downtown Tavares, FL.

The original structure is one of the oldest properties in Tavares (1920's) and was added onto in the 1970's and then again in the 1990's. It was a mixed use building consisting of 3 offices and a 2-car garage downstairs, a 3/2 single family home upstairs, and a detached office/single car garage.

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

I was looking for a 5+ unit deal and couldn't find anything for sale in the areas I was looking that met my criteria. So I thought outside the box and took on a huge renovation. I've learned a TON (mostly what not to do and what I should of expected haha).

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

MLS. It had been on the market for over 180 days with no real interest. I checked the tax records and noticed 2 years worth of back taxes so I figured they would accept a low ball offer. It was on the market for $395k and I offered $260k. After inspections and a few weeks of negotiations we settled on $295k.

How did you finance this deal?

I financed the house purchase first and the construction loan after the demo was done and the final set of plans had been developed and approved. COVID really slowed down the process. It took me over 6 months to get my MEP plans.

How did you add value to the deal?

Converting a Tavares eyesore into what will soon be the nicest place to live downtown.

What was the outcome?

I'm 60-90 days from completion. All of the MEP inspections have passed and insulation and drywall will be going in this month. My plan is to refinance the property once I have renters in it and have seasoned it for at least 6 months.

Lessons learned? Challenges?

ALOT:
- There's a reason a lot of experienced investors wouldn't undertake a deal like this (unknowns, delay's, and insane price increases on materials to name a few).
- Not getting all quotes in writing/extremely detailed sets you up for "miscommunication".
- The larger the rehab, the larger your "unknown tolerance" in the budget needs to be. All-in-all this project cost about $100k more than I expected it to.
- Value my time: I've spent hundreds of hours on this project.

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

Tammy Vinson - local real estate agent
Gail Baker - local lender

Both are amazing!