All Forum Posts by: Kat Hughes

Hi! 

Currently about to close on a multi unit at 228K.  Profits will be at around $100K.  Would like some feedback/opinions on what strategy to go with next and pros and cons of 1031 exchange.

PROS:

we won't be paying the capital gain taxes of about $20K

CONS:

Time line of 45 days to identify the next property(s) that needs to total 228K or more.  

Once 45 days have passed from the day of closing, identified properties cannot be changed.

We've never done the BRRRR method before and would like to start doing this strategy. The problem is, if we do 1031 exchange, we cannot use any of the profits towards rehab costs. It can only be used towards the purchase of properties that need to equal 228K or more. So, our idea is to use half of the funds to go towards a really well priced property so we can do the BRRRR method (con is we have to fork up the rehab costs), and then the remaining funds to go towards possibly a turn key property so we won't have a lot of up front repair costs and this property should bring us to the 228K mark. The reason why we would have to buy the 2nd property that is turn key is because we cannot have any all of a sudden cap ex emergencies or repair costs since we already have to use our funds to rehab the first property for Brrr strategy. We won't make as much money at the onset of the purchase (they always say you make your money when you buy) since it's turn key and usually sold at a fair market value but we also won't have the headaches of having to rehab it ourselves.

OR

We don't do the 1031 exchange, we pay the capital gain but we may have enough funds to do at least 2 BRRRRs with those funds and not have to fork up the rehab costs and also not have the stress of having to find properties that need to equal or pass the 228K mark. 

Any thoughts or suggestions?

Would appreciate the feedback! 

Thanks BP community! :)

Hi @Engelo Rumora

Yes, thank you for the advice.  Will keep doing my due diligence in learning.  My husband and I are going to look at this more in depth this weekend and we're hoping we have a clearer picture of where we want to go for our next deal.  I do love what you keep saying about find the people first, not the place.  Sometimes I think we get caught up on which market is good/not good but we forget that ultimately it doesn't matter how good the market is if you're doing business with people who are not good at what they do.  So thanks for that reminder as well!  

Investment Info:

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

Purchase price: $139,000
Cash invested: $34,000

Beautiful large multi family Farm house. This four unit home welcomes families and individuals to a 3bedroom 1 bath, two 1 bedroom 1 bath and a studio apartment with a full bathroom. Placed on a roughly two acre lot on the corner of Peachy and North Lake Rd, the home offers great views of the nature around. In just 10-15 minutes you can be in the heart of Brockport for a run/walk down the canal or to grab a bite at some of the restaraunts in town.

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

We started with one multi family in LA and just really like multi's. This place was very easy... already had tenants in place that were all happy. The property was well maintained...nothing much had to be done at all. There was one unit empty and all we had to do was clean it because everything else was already rent ready. We bought another multi, more towards Rochester and this at the same month.

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

Our realtor found it for us.

How did you finance this deal?

Conventional loan through MB financial bank. We put 25% down.

How did you add value to the deal?

Literally nothing much had to be done to this. It was a great find... the rental income was lower than what we would want but because there was no improvement that had to be made, we were ok with the rental income being low.

What was the outcome?

Great! Two units still has the same tenants since 2015. One of the units now has a tenant that has expressed their desire to stay long term. The larger unit (3 bed) has more of a quick turnover. We've almost have a new tenant every year for that unit.

Lessons learned? Challenges?

We were so new to investing back then (2015). Hadn't read anything, didn't really study much. Everything we did was lead by our gut instinct. Not a good way to make decisions and now we know better. This property uses oil to heat the home. This is our biggest expense that averaged $350/month (the highest we've had) all of last year because oil prices went up. Because of that, cash flow lowered significantly. We learned now to really carefully look at utilities before buying a property.

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

yes! tom hart from mb financial and Pete Zizzi from relax

Wow.  I just spent the entire day as soon as I woke up at 8am till now (12:45am) inhaling everything I could find about TK investing.  I know that in the bigger scheme of things, that's not a lot of studying/researching but I did learn a lot today and looking forward to learn even more.  I read through this entire thread, all 7 pages of it, along with any links that were attached.  The one thing that stood out to me the most was how all communication done by @Engelo Rumora was detailed, but straight to the point and how he always listened and tried to understand any concerns/issues that were brought up and was quick in doing his best to make things right.  And a lot of his replies were funny too which helped me stay awake as my eyes are now exhausted from reading all day.  Currently selling one of our investment properties and will have cash on hand to invest and very interested in TK properties.  Looks like OCF are turning more people down but would love to have an opportunity to connect and see if this can be a great long term relationship!  Will fill out the inquiry form on your website tomorrow.  :) 

Right now looking into Utah Area but we're open to purchasing more in Rochester and surrounding areas.  :)

Hi @John Boychuk !  This is in the southwedge area of Rochester. :) 

Thank you!  We've done two more purchases since then.  The first one was in 2012 and the next two in 2015.  Had no idea what we were doing then because this was before we listened or read anything about real estate.  It was more of an instinctual buy... Just thought it would be a good idea to invest in real estate so we just did it.  Fast forward years later to now, we've been studying and listening to everything BP is putting out and we're hoping to do at least one deal this year then keep growing at a steadier pace from here on.  

Investment Info:

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

Purchase price: $640,000
Cash invested: $25,000

Front house is a 3 bed 2 bath. Garage has been transformed into another bedroom so technically it's a 4 bedroom. Behind the house is a 2 story duplex each with 2 bed and 1.5 bath and comes with 2 covered parking spaces for each unit. Both duplexes are rented out and we're house hacking, renting out two of our bedrooms in the house. No extra cash after mortgage and utilities are paid off but we ARE living rent free in North Hollywood Ca while gaining equity on this property! We used to live in a 2 bed 1 bath small apartment in the same neighborhood, paying $1250 in rent. Now we live in a house and not paying for it!

Investment Info:

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

Purchase price: $156,000
Cash invested: $44,000

Our 2nd investment property! 3 Unit Multi Family: 1 3 bed/1bath, 1 1bed/1bath, 1 Studio Apartment.
Great property with long term tenants on the smaller units and the 3 bed/1bath unit was owner occupied. The larger unit needed a little bit of work done and we put in about $5000 in repairs. Rented out the top unit for $1100, bottom units are renting for $780 and $550. All in expenses are 2,130 giving us a profit of $300/month.

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

Our first property in Los Angeles is a multi family. We used to live in a small 2 bedroom 1 bath apartment in North Hollywood and paid 1250 in rent. Our multi family in LA is a 3 bed 2 bath front house with a 2 bed 1.5 bath duplex behind us. With the rents from behind us plus we're house hacking two of our bedrooms in our house, we're living RENT FREE!!! Knowing how successful multi units can be, we decided we needed to keep investing in these types of properties!

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

Through our realtor, Pete Zizzi from Remax. He's a friend we've known for over 20 years.

How did you finance this deal?

Conventional Loan, 20 percent down.

How did you add value to the deal?

Small minor fixes to the upstairs apartment. We also put in new furnaces and separated the meters so that tenants pay their own heat. A year later we put in washer/dryer in the basement.

What was the outcome?

Everything was great! Until... 2 years later we had some electrical issues that we had to fix. about 15k in expenses but we've been saving towards capital expenditures and repairs so we had money to put towards that.

Lessons learned? Challenges?

We're managing this property from LA. Definitely learning that a good property manager that is there on ground is very important. We bought two properties at the same time and decided to manage both from out of state. Right now they are small apartments which is manageable but because we do want to scale up, we have to put a better system in place so we can focus on scaling up instead of micromanaging what we currently have.

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

Pete Zizzi from Remax in Rochester NY is great!

Thank you @Casey Christensen  It's funny, I do have that book.  But I'm currently reading 4 other books so that was kind of put on the back burner but I probably should be reading that first!  Thanks for reminding me!