All Forum Posts by: Kyle Stueven

I am looking for some advice from more experienced buy and hold investors on a deal I have in the pipeline. I have an opportunity to buy a 5 plex built in 1980, consisting of 5 3 bed room 2 bathroom townhomes, for $450,000. The bank would finance 75% of the purchase price, I would put $20k down, and the seller would finance the rest of the down payment for me.

Both loans would be amortized over 25 years making the monthly debt service around $2300. The gross income of the property is $5450 monthly and the operating expenses including taxes and insurance is roughly $1800 per month (not including management). Leaving me with net income of about $1350 per month.

My concerns with the deal are I would be almost 100% leveraged and I would be using all of my cash to put the $20k down so I would be left with no cash reserve. My only capital to fall back on is a 7k line of credit I have. What excites me about it is the potential to add more income streams to my portfolio with a low down payment. Is it worth it to take the risk and jump on this deal? Let me know your opinions! Thanks in advance!

Investment Info:

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

Purchase price: $445,000
Cash invested: $15,000

This deal is a 6 plex that I was able to buy for $445k with $15k down with owner financing. My wife and I are currently living in one of the units and renting out the other 5 units, cash flowing about $800 per month and living for free!

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

This deal was perfect for us because we had just moved back to Ames and were living with her parents trying to figure out what our next living situation was going to be. We were looking to find a house hack deal and this deal kind of just fell in our lap and we jumped on it.

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

I built a relationship with a guy from church that is a real estate investor as well, and we got to talking about real estate and he mentioned he had a six plex on the market right now and asked me if I would be interested in doing an owner finance deal so that he could refinance and pull out some money to invest in a syndication while spreading out his capital gain tax and I could accomplish my goal of house hacking a property, so I took him up on it and negotiated based on the income.

How did you finance this deal?

It was an owner finance deal, so I put down $15k and he is financing the other $430k for me at 6% interest, amortized over 30 years, with 2 years interest only and a balloon payment due in 8 years.

How did you add value to the deal?

There was one unit vacant when we bought the property so my wife and I have completely remodeled that apartment. We are currently living in that unit but as we have some vacancies we plan to move throughout the building and remodel every unit and increase the rent income.

What was the outcome?

It has only been two months of owning it, but we have essentially eliminated all our living costs and we are living in the nicest apartment we have ever lived in because we renovated it ourselves. It is a freeing feeling to not be reliant on a job to provide for living expenses and as time goes on will allow us to save a lot of money which will be used to grow our portfolio.

Lessons learned? Challenges?

The key lesson I learned from this deal is how important networking is and not only that but being mentally and financially ready to jump on an opportunity when it is presented to you. It is important to look for a scenario that is beneficial for both parties involved.

Investment Info:

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

Purchase price: $48,500
Cash invested: $28,000

This was a small multifamily deal, 4 unit conversion, that was in an extremely distressed condition.

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

At this point in my life all I wanted to do was get into the game of real estate. I didn't care what the opportunity was as soon as it was presented to me I was going to jump on it if the numbers made sense. I was definitely nervous because the property was extremely distressed but I saw the potential when I found out we could add another unit and use the banks money to renovate the property. Plus it helped that I whole heartedly trusted my friend who brought this deal to me.

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

A friend of mine brought this deal to me after he had negotiated to purchase price down to $48.5 with and additional $40k that the bank was going to require us to get in order to fix up the property. He asked me to go 50/50 with him because he was not able to put 20% down for the purchase price and line of credit at that time. So I took him up on the offer after I looked through the inspection report and walked through the property.

How did you finance this deal?

We got a commercial loan and had to put 20% down for the purchase price and the line of credit. We ended up having to bring $14k each to the table. So in order for me to come up with my part of the down payment I used every single dollar my wife and I had saved, which was about $7k, and then went to the bank and got an uncollateralized line of credit for $7k and used every penny of that to complete my $14k. I used our property line of credit to pay off my personal line of credit after we closed.

How did you add value to the deal?

We added value buy replacing the roof, adding a unit into the basement, getting better tenants in, and increasing the gross rents from $1600 per month to $3250 per month.

What was the outcome?

We are still holding this property, But after 6 months of holding it we were able to refinance at a value of $175K and were able to pull out about $44k with which we used to buy a 15 unit apartment building with another partner. We reinvest all of our cashflow back into the property and are thinking about selling in 1-2 years to pull out the rest of our equity.

Lessons learned? Challenges?

The main challenges we had was managing the property manager and contractors. The main lesson I learned was that investing in real estate is not an easy walk in the park but if you are able to increase the revenues coming in like we did it can have a powerful domino effect when building an investment portfolio.

Hello,

I am a new real estate investor in Iowa and am looking for advice on how to set up an efficient book keeping system for my properties. I bought a five unit property two months ago and am currently working on closing on an 8 unit property. My plan as of right now is to use quick books, but I want to make sure whatever system I use is able to track my properties individually, but I wanted to come to the forums and see if any more advanced investors could give me any input on my situation before I commit to a bookkeeping system. Any advice would be greatly appreciated.

Kyle Stueven