All Forum Posts by: Logan Krutsch

@Dave Foster Thank you very much for the info!

Hello BP,

I am currently pursuing a 5 unit Multifamily purchase and upon discussing with the potential seller I discovered he feels he is unable to sell due to having a high basis in the property and not wanting to pay capital gains. In order to buy the property I need to solve this issue. I came across the idea of using a 1031 eligible fund known as Delaware Statutory Trust (DST) for the seller to park his money in upon sale. He is not interested in a traditional 1031 as he is 92 and dosent want the headache of buying and managing a new piece of real estate. I think a DST will solve his problem as his heirs will simply inherit the fund instead of the property which they can then liquidate or 1031 out if they so choose.

My question is does anyone have any experience with DST's and/or have any strong opinions on using a DST in this way. Can anyone think of other ways to address this problem without using a traditional 1031?

Best, 

Logan K

@Joe S.

Yes, I used to not supply them but I had tenants not use a curtain at all and ruin my bathrooms and downstairs ceilings. They are cheap and then I can guarantee that water is mostly contained. That being said I’ve been converting to shower doors to contain water even better and drive rents higher. Cheers!

Hello BP,

I am looking at a 6 acre lot to develop a self storage facility on. The problem is the land has been contaminated due to fuel tanks leaking from a gas station next door as shown on the phase II soil survey. The owners of the gas station are aware of the contamination and are not willing to cooperate in any way. The land is also next to a quarry and is likely gravel (which would make construction easier but could also mean the contamination is very deep). It is possible that over 1 acre of the land is contaminated but we will find out after the second soil survey is finished to determine the size of the contamination. I am wondering if anyone has any experience or stories dealing with contaminated soil and how I would estimate the costs to remediate. 

Any advice or help is appreciated,

~LK

@Dan Sundberg

Putting the conduit on the outside has worked great. No problems and Incase there ever is an issue it is easy to access and work on. Repairing lathe and plaster is not easy. Lathe and plaster walls are never straight and often vary in their depth across the wall. Patching with drywall can be done but over time you will have a noticeable section that is straight compared to the original wavy look of the plaster. You will need to find someone skilled enough to do the patches correctly which you will pay for. I saved myself the money and headache by just putting it on the outside. (I’m referring to the outside of the interior walls. Not outside of the building itself)

@Dan Sundberg

I purchased a 10 unit building 8000sf 1.5 years ago. It was an old home converted into multi family and was entirely knob and tube. It cost me $45k to have the home rewired to conduit and it took about 1.5 months. We put the conduit on the outside of the walls instead of inside to save on the cost of demo/repair of the lathe/plaster. Knob and tube is a great wiring system until someone puts a nail in the wall and shorts the circuit. Good luck!

@Joe S.

I found the property by driving around border towns. I called on a fsbo sign in front of a large Victorian home. Turns out it had been converted to an 11 unit building and the building next door ( a 19th century hotel converted to 10 units) was for sale aswell. They were asking 750k. After inspecting the property I negotiated them down to 550k. The buildings needed lots of work. One needed a full electrical upgrade from knob and tube. Foundations rebuilt, electrical, plumbing replaced in pex, 3 units needed to be rebuilt, interiors refreshed etc...

The sellers were running a 20% vacancy. I self manage and live in one of the units. My vacancy is close to zero as I get units turned within a couple weeks of them becoming open. I do this by requiring a 30 days notice prior to move out and marketing/showing the unit immediately upon the tenant notifying me. That way I have someone ready to move in almost right away.

Numbers:

PP - $550k

DP - $65k

Seller financing - $485k @5% interest, 20 yr Amtz, 5 year balloon

Purchase cap rate - 13.5%

Market cap rate - 8.5%

Repairs to date - $150k ($80k funded by rents)

Electrical, 1/2 plumbing, 3 units rebuilt, foundations, refresh of 4 other units, built laundry facilities in each building, long list of misc deferred maintenance

At time of purchase,

Gross - $116000

Expenses - $42000

NI - $74000

One year later,

Gross - $156000

Expenses - $42000

NOI - $114,000

Financing - $36912

NI - $77088

Present value - $1.2m?

Not bad

Today is my 23rd birthday. I spent the last year managing various contractors, planning repairs, managing the property, doing a lot of the work myself. I am also an amazon delivery driver full time. I work 70-80 hours per week. Discipline is key. I had to cut out video games and going out with friends to make this happen. I have a few more months of the intense work phase left until the properties are to my satisfaction. Then I will be ready to quit my job and move to the next deal. I started looking for my next deal 2 months ago. I have a strong lead already on a 42 unit portfolio of various small multi/sfh and a few commercial strip malls. Hopefully it works out! If you have any other questions don’t hesitate :)

~LK

@Joe S.

Seller financing if your friend in multi family acquisition. You can combine bank/seller financing to lower your barriers to entry. I set out to target tired landlords who are interested in selling but also want to keep an income stream. These people are usually retired or close to it and want to get out of managing their property’s. I look in border towns of major cities as there is less attention from other investors and prices are usually lower. I specifically target 10-30 unit properties because I find that they are usually too intimidating for smaller investors and are not as attractive to large multi family investors. It’s an interesting niche with good opportunity. The hard part is finding these deals. Again they are much more common in border towns ~50-100 miles outside of a major city. Usually these owners are well connected in their city and can be tracked down fairly easily. Ex: call on all the for rent signs, news paper ads, parcel lookup, talk to people on the street...etc. I started 2 years ago with this strategy in mind and purchased a 21 unit last year that fits my description exactly. it works. My barriers to entry were fairly low with 90% seller financing and getting a loan for the down payment from family (you could use a bridge loan for DP if need be).

@THU NGUYEN

I have used both midland IRA and Directed IRA. Their fees are nowhere near the fees you are currently suffering. I would check either of those out. Directed IRA was recently created by Matt Sorensen. He is the author of the self directed Ira handbook which I would recommend reading

@Kenneth Garrett

I agree with this.