All Forum Posts by: Keenan Fitzpatrick

@Michael Morris

I’m not sure what you mean when you ask “Is this how it always is”. Do projects always turn out to be bigger? I like to say flips always take longer and cost more. It’s not entirely true but I’d bet on it if I were in Vegas. I’m looking to buy a flip and Allen probably is too. Shoot us a dm and maybe you can wholesale it to one of us. I’ll see what I can do to help you close it regardless. :)

@Allen S.

I agree. They aren’t motivated. They’ve had it empty for a year.

Trying to figure out some creative solutions for a potential opportunity.

A cash offer isn't an acceptable offer for them and they may or may not list it with me. They had a bad experience with a realtor in the past although they didn't completely shoot down my value proposition. They did seem interested in hearing more about a creative financing option and want a proposal. 

The property is a zero lot line. In other words its half a duplex. These make great rentals and are super affordable housing that sell quickly in our area. The floorplan is a 3/1.5/0 and is about 1,200 sq/ft. Most ZLL's in our area are 2/1/0 and about 1,000 sq/ft so this is a deluxe model. LOL. It is in an area that is desirable and has more sought after schools so that's a plus as well. 

The seller wants to net $205k. With a list price of $220k and a 7% cost of sale, it would net them about what they need. That would be maximum value if it were listed. I expect it might get that but I would be confident in them netting $200k. 

They are currently paying $500/month on the mortgage and about $300/month for utilities. Market rents would be $1,250 to $1,300. 

I'm wondering what would be the best way to structure a creative financing deal since it seems like this one might have some legs. I was thinking of offering the owners $800/month so they would be making $300 after paying the mortgage. They currently have the $800 expense but don't want to deal with tenants. I would fill the unit for a small premium over market rents with a tenant that would purchase it. They would pay $1,400. I would be able to keep $600 a month. The seller would be locked in at $205,000 and I would lock the buyer in at $220,000 maybe. After a few thousand dollars of closing costs I would be able to profit a little more than a regular commission but close. 

Any thought's on this? I'm trying to wrap my head around these types of deals. Thanks in advance!

@Jeff Dumps

Sounds like selling the duplex to buy the property you want in your area would be the best bet. The duplex cashflow is a little slim and a bad tenant or one mo the vacancy would take a lot of that cashflow away. It would also allow you to get rid of your bad debt, lower your monthly living expenses, eliminate paying a property manager and replace it with a self managed property you live in.

@Pavel Pavlov I would totally buy something like that for an investment. It would make a great VRBO/AirBnB rental. Sometimes you can find a little one or two bedroom house that would be ideal. If you are looking at a condo then you'll have to make sure you can use it as a short term rental. If you rent it out long term then it would be harder to accommodate your visits and wouldn't make as much money. 

The homeless issue is a real issue to consider. South addition, Westchester and Bootlegger's Cove are going to be higher valued areas that would probably be safer but you're still buying in a city that is pretty high ranking in categories that are not synonymous with safety. 

I live in Fairview. That's the "up and coming" downtown area. In other words, it's the hood. I even live on a street that has a lot of vagrant foot traffic, a sometimes occupied abandoned house behind me and my girlfriend works from home. There's all the reasons to not live in the exact place that I live... until you look further. There are at least 4 remodeled buildings within a block, another 5 that are under construction now and 2 more that will start renovation in the next year. I get a lot of foot traffic and some of it is drunk vagrants and some are grey haired old ladies that invite me to community council meetings. I could go on about my neighbors but suffice to say they are phenomenal. My point is is that even in this area which is the least desirable, there is opportunity. I wouldn't do a VRBO in Fairview though. Feel free to reach out if you'd like to chat about downtown some more. 

Yes. Investors will always be interested in more affordable building strategies with lower maintenance and holding costs. ICF is starting to take off here but I haven't seen any multi-family builds. I would like to though. 

It sounds like you have a bit of digging to do with your local city/muni/county requirements. We have a muni here. Not sure who you need to check with but start with your local authorities. Your lenders will be a great resource as well as a realtor. I'd make sure that both of them are investors as well. It sounds like since these regulations are new that an investor minded professional will be on the cutting edge of whats going on and will be able to think outside the box. For example, sometimes I'll have a client buy a 5-plex with residential financing but we will decommission a unit to make it a 4-plex. Maybe you could do something like that for an appraisal. Checking zoning and land use is probably a good idea too. Ultimately, you'll have to comply with local building codes, zoning and land use so starting with those authorities will ensure things go smoothly. Where I live anything above 4 units is commercial. Sometimes we can bend those rules if the additional unit can qualify as a Mother-In-Law but again you're getting into a grey area and have to know all the specific rules so you can abide by them in a very VERY specific situation. So many times the most profitable place to be is riding right on the line of what you can and can't do. One wrong step could cost you a lot but that's what makes you a ninja! Best of luck. 

Yep! It always comes back to your contract. If you are in your due diligence/inspection period then you can terminate and get your earnest money back. If not, then you'll likely lose your earnest money. If you have a janky contract, didn't provide bonafide proof of funds, or a legitimate amount of earnest money then they may take you to court and it could be trouble. The before mentioned items show an intent and ability to purchase a property. Wholesalers get caught up in investment seminars teaching them that these things are sufficient and that isn't always the case. Normally, if you sacrifice your earnest money then you can terminate without problem. That's what it is there for. Earnest money basically says that if you don't perform then this is their compensation. 

Search out your local REI meetings on Google and Meetup.com.

I'd recommend finding a good realtor to help you with the answers to that. You'll be looking at putting 20-25% down for a building like that. Make sure that the tenants are current on rent or you'll run into financing issues as well as cashflow/management problems in the future. 

Your budget and the kind of deal you find will vary between those areas. 

I'd also look at seeing if a residential lender can offer you a 30% down non owner occupied renovation loan. I'm a big fan of residential properties that are value add. You tend to get better neighborhoods and tenants and the renovation loan allows you to increase equity by doing the renovation and therefor increasing liquidity, cashflow, reducing vacancies, and increasing the caliber of tenant. Also, depending on what type of commercial building you're looking at, your acquisition costs will likely be lower. Even if they are the same, you'll have a higher equity position which is very attractive IMO in such volatile times. Feel free to dm me if you'd like to discuss this strategy more. :)