All Forum Posts by: Luke Harrison

@Guifre Mora that would work for future projects perhaps. But any suggestions on borrowing against a duplex that we have owned for 2 years with 100% equity.

We now own a total of 7 rental units comprised of 3 duplexes and one single family. Our last two purchaces were bought using funds from a private investor. Although both parties are happy with the agreement (payments and interest) we would like to pull our equity in these two properties to keep building our portfolio.

Everyone makes it seem so easy to pull this equity out. The question is, how do you refinance without paying a boat load in closing cost? We cant seem to find a bank that will do a HELOC on an icome property, or one that will refi without going through the entire closing process all over again.

Any ideas, tips or tricks? I have my eye on multiple deals and cant seem to access my equity.

Investment Info:

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

Purchase price: $54,000
Cash invested: $1,000

This is our 3rd deal we have closed on, and puts us at 7 units total now. 3 duplexes, and a single family used as a vacation rental.

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

We are growing our portfolio of small multi family's. Always looking for new opportunities.

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

Listed on the MLS. They were asking $65k, we offered $55k cash and they accepted. After we did the home inspection we asked for $5k in concessions to fix what needed to be fixed, they declined, and said they would fix the issues, that they had already dropped enough off the price. After they fixed all issues we closed. When the real estate agent did the final walk through she told us they had spent nearly $10k on all repairs.

How did you finance this deal?

Private investor.

How did you add value to the deal?

The "almost $10k" the sellers had put into the house updated the electrical to to new breaker boxes instead of old fuse boxes, new meters, and new main lines from meter to box. Re shingled the roof, and some plumbing work. We also charged more for the upper unit than they did, and have plans to raise the rents to market value for the tenants we inherited from the seller.

What was the outcome?

We currently have both units rented for $625, and $550 (inherited tenants, rent will go up for this unit in the future), $1,175 total. Our loan amout with the private investor is $866, at 5% interest, taxes and insurance around $200 a month, current cashflow $100+. Loan will be paid in full in 6 years.

Lessons learned? Challenges?

If soneone asks for seller concessions to give it to them if its reasonable, that way it is on the buyer to fix the issues, that may cost even more than what they asked for. Also if you fix it as the seller odds are the buyer wont be happy with it anyway.

Investment Info:

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

Purchase price: $54,000
Cash invested: $1,000

Bought this duplex with cash obtained through a private investor. They were asking $65k, we offered $55k cash and they accepted. After we did the home inspection we asked for $5k in concessions to fix what needed to be fixed, they declined, and said they would fix the issues, that they had already dropped enough off the price. After they fixed all issues we closed. When the real estate agent did the final walk through she told us they had spent nearly $10k on all repairs including updating the old fuse boxes into brand new breaker systems, with new meters, and main lines from meter to breaker, also new roof, and some plumbing.

We currently have both units rented for $625, and $550 (inherited tenants, rent will go up for this unit in the future), $1,175 total. Our loan amout with the private investor is $866, at 5% interest, taxes and insurance around $200 a month, current cashflow $100+. Loan will be paid in full in 6 years.

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

We are growing our portfolio of small multi family's.

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

Listed on the MLS offered cash they accepted.

How did you finance this deal?

Private investor.

How did you add value to the deal?

Raised rents.

What was the outcome?

Own the property, and have both units rented.

Lessons learned? Challenges?

If soneone asks for seller concessions to give it to them if its reasonable, that way it is on the buyer to fix the issues, that may cost even more than what they asked for. Also if you fix it as the seller odds are the buyer wont be happy with it anyway.

I live 16 miles from Jamestown, what made you decide to invest here all the way from Phoenix? I am a local investor and manage  all my own property here. If you would like to connect privately, i could maybe help you out with your property, or at least help point you in the right direction. 

I know the city of Jamestown intimately, and can give you a broad outlook of the neighborhood that your propery is in, it is a small city, with low income, and many undesirable people, there are drug problems, and lack of good paying jobs. There are good areas, and bad, and they go by a street to street basis.

I currently own 2 duplexes near the hospital, and am currently looking for more, for either long term buy and hold, or potental flip opportunities.

@Shawn Westbrook buy some bucket jockeys and some 5 gal. buckets, fill each bucket with tools that you would need for spacific jobs. I found a bin of left overs from a fathersday sale for about $8 each, and bought a bunch, because i had a bunch of drywall joint compound buckets lying around from a renovation i did. I now have a bucket with jockey (tool pouch insert) for carpeting, one for plumbing, one for drywall finishing, one for electrical, and one for miscellaneous. I can just grab the bucket i need for the job i am going to do.

As far as tools go, buy what you need as you need it, and your tool inventory will grow faster than you can imagine. And here is the advice i was given, "dont ever cheap out on tools, always buy the more expensive, and better name brands, that way you only have to buy them once." They usually come with better warranties as well, and buying as you need will spread out the cost. You can also write off a portion of the cost of the tools as well, but make sure you get that advice from a tax professional.

@Ashish Acharya thank you.

I live in New York state, and own a rental property in California. Do i need to file a tax return for the state of California for that property, or so i file it under my New York state tax return, or do i need to do both?

@Marcus Auerbach thanks for the reply, I feel I will be safe with this particular property because of the way we are financing through our private investor. It is a shorter term loan, so when the house is paid in full we will be increasing our cash flow exponentially, right around the time any large repairs need to be made. Both the private investor and ourselves are happy with the interest rate he is charging, and we will sacrifice the larger cashflow now for better future returns, around 8 years down the road.

Our area most duplexes/triplexes are older homes within this price range. This particular property is a stones throw from a hospital that is getting millions in additions invested into it each year, this should be a good one in years to come.

My fiancee and I are long term buy and hold investors in a small market, and were looking to add another property to our portfolio. We have a private money investor backing us so we were able to make an all cash offer. We were on the hunt for a duplex nearby one of our other rentals. 

So the mistake you ask? We found a property we liked, and made our all cash offer. This offer was accepted without any negotiation. This as any investor knows is a tell tail sign that we offered too much. 

What's the good in this mistake? It is still a good deal. The sellers were asking $65k, we offered $55k cash subject to inspection. After inspection we requested that work be done before closing, the sellers did $8,000 in electrical work, and some roof, and venting work. One unit is already rented for $550 a mo. Which should be raised to $600 within the year, and the other unit is vacant, and we will be asking $600. Which surpasses the 2% rule.

So in closing I feel that even though we had our offer accepted without rebuttal, I feel that it is still a great wealth building deal for our portfolio, which will cashflow immediately after closing in about 2 weeks.