All Forum Posts by: Ki Lee

@Jason Marcordes it’s 3/1, 3/1, 2/1.  Common coin laundry/dryer. A little outdated.  Detached 2 car garage, and a small back yard. What’s interesting about the property is that it has an unfinished attic that can be duplexed-up from the top unit.  It can’t be made into legal 4th unit due to not having an entrance access from the front.

@Trey Golston @Joel Owens Is it true that commercial lenders want to see net worth of same or greater amount than the loan? For example, If I were to take out $1M loan, they want to see $1M in net worth? What about investors that get loans for $5M? Do they all have $5M in net worth? And what counts as net worth for this purpose? Equity in primary residence? Cars and other personal assets? Funds in business checking accounts that are NOT in my name, but under the entity name?(I have an LLC checking account and C corp checking account with some funds in it. The accounts are in biz names). Do these funds have to be "seasoned?"

When reaching out to local banks, do I need to find one that does portfolio loans for this kind of loan? (commercial loan of $500k-$1M) or does it not necessarily have to be a commercial loan?

Also I hear conflicting statements about lenders that require a fee ahead of time whether I close or not.  Some say don't touch them with a ten-foot pole as they are after the application fee and don't have much interest in my success of closing on the deal.  Others say that it's somewhat of an industry standard.

Lastly - about balloon payments and prepayment penalties.  If I were to get 10 year balloon payment amortized over 25 years, and it has prepayment penalty - Does this mean that I can't sell or refinance before the 10 year maturity?  In order to avoid the prepayment penalty that I have to sell exactly after 10 years?  What's the best strategy in choosing different terms that are most forgiving and flexible?

@JB Cunningham it's because I bought it no money down back in 2017. Rent is $1015 and PITI is $831 with PMI(which is $59/month and is in the process of getting removed). PM me if you want more details, but I'm not looking to do a quick sale for under market price. I'll likely list it with a listing agent and go for the max price that I can get from the market.

@Jon Schwartz @Jason Marcordes it’s in Logan square, about 1/2 mile west of the blue line stop.  Units rent for $1750, $1475, $1350, and $100 for garage. $4675 gross rent. Less than 5% vacancy rate. 6% management fee. After maintenance, turnovers, and other expenses,I break even after debt services.  Principle pay down is about $600/month.  So between principle pay down and market appreciation, the property did well, but with the given rent, I should be cash flowing at least $400-$500.  I lucked out in having bought at a good time despite multiple rookie mistakes.  The next one will be done better.

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Chicago.

Purchase price: $400,000
Cash invested: $100,000

Started as as house hack when I lived in one unit and rented the other two. I also had 2 roommates. When I got married and moved to LA, I hired a PM management to run the place. It is not cash flowing, but has appreciated about $200K and I paid back about $50K in principle during the last 9 years. I am looking to 1031 exchange it to a higher cash flowing asset.

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

When I got based in Chicago(as an airline pilot) I saw that there were many triplexes that were within my price range. I wasn't part of BP back then, but the "house hack" idea intuitively made sense. I rented out the 2 units and lived in one with 2 roommates and lived rent free for 4 years until I moved back to LA in 2014.

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

I was not a savvy investor when I started and I basically looked at a dozen properties and picked me "favorite" that didn't include any sophisticated analysis. It was an MLS deal brought to me by a realtor, and we went back and forth on the price and also some minor terms(repair credit, cleaning out the attic that was full of junk, etc).

How did you finance this deal?

Traditional 30YF with 20% down. then refinanced 2 years later to a better rate. 3.75% 30YF

How did you add value to the deal?

I rehabbed my unit with new bath, new kitchen appliances, added back splash, new laminate flooring and carpet, and other minor rehab.

What was the outcome?

It's worth about $600K now and I paid back about $50 in principle, but it's not cash flowing. I was on autopilot and did not manage my PM until recently when I decided to get more serious about RE. The property is not run optimally and is under performing. The plan is to 1031 exchange it for a better cash flowing asset.

Lessons learned? Challenges?

I definitely learned that I need to screen the PM and manage the PM. The property had too many turnovers and the turnover costs were outrageous. The PM also keeps all the leasing fees(no security deposits in Chicago) rather than giving it to the owner. So if your PM suggest non-refundable leasing fees, find out who keeps it.

@Theo Hicks thank you.  I’m in the middle of reading the best ever apartment syndication book.

@Christopher Hunter thank you so much. I’ll check it out.

@Anthony Dooley thanks.  I will check it out.  Loopnet only showed a 32 unit for $2.5M and a 10 unit for 375K and a 4 unit for $190k.  I would love to learn a little more about Columbus GA.

@Jon Schwartz Along with some data from census.gov, I've also looked at Comprehensive Housing Market Analysis from HUD for different MSA's. Also datausa.io has good reports for different MSAs. To be honest I've had a little bit of trouble navigating the Census.gov website and some tables have too much other data that are not relevant. Also different charts seem to present conflicting data at times. I've been considering Columbus, Cincinatti, and Indianapolis. higher cap rates seem possible, but appreciation potential seems minimal (which I am okay with ESP during this hyper inflated market). The vacancy rates are slightly high compared to areas like SOCAL and Denver, but the trend is declining. I will definitely check out Lexington and Springdale. What do you like about these areas?

Hello BP,

What kind of cap rate can I expect for value-add class C property in class C+ neighborhood in the Indianapolis area?  20-30 unit buildings with price range between $1M-$1.5M.

I would especially love to hear from someone who actually invests there or works with local investors (broker, property manager, lender)

Thanks