All Forum Posts by: Joseph Lyons

Hey guys! My partner and I are about 2 months from closing around 15 units in a Des Moines historical district! We’ve been having a hard time with our insurance agent. He said he can’t submit the policy to underwriting until we give him the historical district’s architectural requirements.

He wants to know what will be required in the event or significant damage or a total loss. For example, will we have to salvage original materials, source materials similar to the original, rebuild to original spec etc. 

We have made many phone calls to find the documents the agent has requested. We found their regs online with the help of our city planner. He submitted them to underwriting, and the carrier (Auto Owners) doesn’t want the policy. Now, there are dozens and dozens of multifamily properties in this district. I spoke with the senior city planner about my agents concerns. He sort of laughed and said, Insurance shouldn’t be an issue for you. Everyone here is insured…. Exactly! 

So, who are my multifamily owners using to insure your properties in historic districts? And have you had similar issues? Obviously replacement cost is the safer bet, but does anyone just carry an ACV policy on historical multifamily? And what are you paying? The city planner said, if you continue to have a hard time w your agent, make some new contacts, bc it shouldn’t be too difficult. I’m going to see if the seller will give us a copy of their policy, so that may help. However, seller may not provide, as we don’t have that as a required doc for DD in our PSA.

Thanks all!

@Brandon Bohlender i sent you a private message with info for lender 

Quote from @Mike L.:

@Joseph Lyons

If you are set on doing a cash out refi, I’d do the 3 year term. As the other guy mentioned, for a cash out, you’ll certainly be required to have held the property for 2 years.

If you don’t have to cash your money out, that 20 year term on a 25 year schedule is really attractive (if you can get this on a refi, do it). It’s attractive because towards the end of your 20 year schedule you’ll be paying your principal down much quicker at the beginning. You may even ask for a 20 year am schedule and 20 year term so it gets completely paid off.

Just revisiting this post after what feels like an eternity. I ended up going with a 3 year fixed rate period, as I knew I’d refi after reno. I finished the reno on all of the units in 5.5 months. Based on some of the feedback, it seems that that’s not common. But I’m in Des Moines, Iowa, not California, so the backlogs that we’re spoken of were non existent. There was one full gut, and the rest were heavy cosmetic (cabinets, floors, paint, fixtures etc). 

Once the rehab was a month from completion I approached my lender about getting an appraisal for a cash out refi. He was on board. He set up an appraisal with the soonest available appraiser and the appraisal came back in excess of our expectations. We are now in infinite return territory, as our basis is now zero (rather its negative, since we came out with a profit). This all occurred about 7 months from the final purchase date. We left the first loan alone and did a second mortgage (10 year fixed, 25 year am) instead of a full refi so that we could keep the attractive rate that accompanied the loan in November 2021. 

We now have an offer in on a 14 unit that is firmly within our abilities to take down. So much development in 7 short months. Sky’s the limit guys. Thanks for your help. 

Quote from @Jeff Johnton:

Good morning Joseph,

Have you 'driven for dollars'? Drive around and look to see what multis are out there. Once you get the address you can find the owner and at a minimum, send a letter. There's potential for that to open a conversation. 

You could dedicate 1-2 hours per week on that or just take the long way home when you are out and explore different areas.

Check Craigslist for rentals. If someone says they are looking for a tenant, call them and ask if they are interested in selling. They may not be at this time but six months down the road could be different.

Good luck and I hope it goes well!

Hey Jeff - that’s great advice. Though I’ve had a hard time tracing the addresses back to a contactable person/entity. Typically the holders of the properties we’re interested in are LLCs. And the only contact info we can find is the registered agent. Oftentimes that registered agent is a 3rd party company who is serving for a fee and dispenses zero contact info. Have you had any luck skiptracing LLCs? 

 
I’ve never tried the Craigslist method you mentioned. That’s a smart idea. Thank you.

Quote from @Darson Grantham:

I’m fairly involved in the smaller multi world of DSM real estate, if you got 6 units for around 32/unit that type of deal just doesnt come around very often. 

But if those are your criteria, be patient and keep grinding!
we do an investor meetup friday mornings at 7am - 8:30 am at smokey row downtown!  

Every single Friday for the last 2+ yrs

Thanks for the encouragement Darson. I work out of town, so I’m not able to make the Friday meetups. Do you have any other meetup dates/times or opportunities to connect?

As for criteria, my partner and I have discussed that waiting for a carbon copy of our last deal is not the right play. As much as we’d like to get liveable units for 32.5 per, those deals just haven’t come up as of late. So we’re not entirely inflexible on that. Do you notice any economies of scale as you move into larger properties? (Ie you get a volume discount the more units you buy). We’ve considered the opposite may be true- when you get into larger properties, they’re multifamily by design rather than conversions. It almost seems like cost per unit increases as you get into larger properties for that reason.

Do you have any advice as far as generating leads or if that’s even a worthwhile pursuit. I’ve considered that it may be an uphill climb trying to directly reach sellers interested in selling 10+ units. 

Thanks again for your response. Hope to connect soon.

Hey guys- I was just listening to the most recent episode of the BP Podcast (ep 629), and Brandon was talking about networking and getting on the BP forums. It’s inspired me to make this post.

My partner(wife) and I finished rehabbing a 6 unit building in Des Moines a few months ago. We purchased it in December 2021, on market. We completed a cash out refi a few weeks ago. Our BRRRR was a success. We have been actively pursuing our next investment for the past 6 months.

We’ve been in contact with commercial agents and residential agents. We have done preliminary analyses on all the properties that have come to market that match our basic criteria. We haven’t found any deals that are on par with our 6 plex. It was c class, value add in a decent neighborhood for 32.5k/unit. Four 1/1s and two 2/1s. We realize we found a great deal, but we also know that it wasn’t a once in a lifetime deal either. 

Does anyone have some C class value add multifamily similar to what we found in December. We don’t mind a big project. We want to be in Des Moines proper. We want to stay under 700k. If you don’t have a potential deal, do you have an idea on how to produce leads for this kind of deal? Or are there any multifamily meetups in Des Moines you can share? Also, if any multifamily investors in Des Moines are interested in meeting up, we’d love to get something started. Thanks!

@Scott M. Ok, so you wouldn't even offer a trial unit? (Ex. I'll pay you a GC fee to reno one unit (no partnership). If it goes well. We can explore the idea further.)

We've met. He walked the property and made the proposal. We've spoken for about a week. But no, I don't know him on a personal level.

My partner and I are a few days from closing on our sixplex in Des Moines, IA. (Purchase was 194.9k) Each of the six units need various levels of rehab. One just needs a coat of paint. While another needs walls and ceilings entirely replaced. We have ~30K for the interior reno (materials and labor). Think paint, floors, and fixtures.

Most of the contractors have submitted standard bids. But one rather plucky contractor has offered to act as general contractor for all 6 of the units. Additionally, he'd serve as the maintenance man as things come up.

In lieu of traditional payment, he has offered the possibility of becoming a partner or getting an equity or revenue share.

This is our first time considering an arrangement like this. We can afford to hire it out. But we're looking to buy back some time. And keeping more cash in our pockets now is appealing.

I know there are many factors to consider before offering someone any type of partnership. His references are solid.

1. What are the main considerations you have used to qualify/disqualify a contractor for a partnership or revenue share? (If you haven't done this exactly; what would your considerations be?)
2. What questions do you ask the contractor?
3. How can you ensure that they follow through with the plan/work?
4. How much would you offer for overseeing a lipstick rehab on a sixplex?
5. What questions am I forgetting?

Before we make any final offers of equity or revenue sharing, we'll consult with an attorney first. Thank you in advance for sharing your knowledge!

My partner and I are a few days from closing on our sixplex in Des Moines, IA. (Purchase was 194.9k) Each of the six units need various levels of rehab. One just needs a coat of paint. While another needs walls and ceilings entirely replaced. We have ~30K for the interior reno (materials and labor). Think paint, floors, and fixtures.

Most of the contractors have submitted standard bids. But one rather plucky contractor has offered to act as general contractor for all 6 of the units. Additionally, he'd serve as the maintenance man as things come up. 

In lieu of traditional payment, he has offered the possibility of becoming a partner or getting an equity or revenue share. 

This is our first time considering an arrangement like this. We can afford to hire it out. But we're looking to buy back some time. And keeping more cash in our pockets now is appealing.

I know there are many factors to consider before offering someone any type of partnership. His references are solid.

1. What are the main considerations you have used to qualify/disqualify a contractor for a partnership or revenue share? (If you haven't done this exactly; what would your considerations be?)
2. What questions do you ask the contractor?
3. How can you ensure that they follow through with the plan/work?
4. How much would you offer for overseeing a lipstick rehab on a sixplex?
5. What questions am I forgetting?

Before we make any final offers of equity or revenue sharing, we'll consult with an attorney first.