All Forum Posts by: Matthew Pritchett

I am looking at a 2 story apartment building in Indiana with shared walls - so some of the “bedrooms” don’t have windows and one unit is devoid of windows. First, is it legal to have bedrooms without windows to the outside and to have a unit without windows? Egress is to a hallway and not directly outside. Second, how can I market this to lease the units and then for the sale at exit - can I market these as bedrooms? Should I call them dens or multi purpose rooms? There is also a basement - recommended use is storage. Does anyone have experience using a basement as storage space rental for tenants and non-tenants? There is also a retail/office space on the first level - no issues with that. 

 I just ran into this in Indianapolis. No wonder the prior deal fell through!

Starting the New Year off right - analyzing deals! I look through Crexi, Loopnet, and Zillow for apartment buildings/complexes. Then go through some general underwriting before asking the brokers/agents for specific data and/or signing NDAs. My problem is I stop at the analysis sometimes not knowing where I'll get the money. Looking at a $2M+ properties, I don't have the funds currently for the down payment (I may not even have liquidity to get the contract), but I know it's a good deal. How do I move out of analysis paralysis into more offers?

Investment Info:

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

Purchase price: $280,000
Cash invested: $100,000

The property is a converted office / warehouse with 3x 2br and 6x 1br. Purchased with 2 good tenants, 1 unit ready to list, and 7 units to rehab and rent.

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

Since investing in a 4 plex, I've been looking for more MFRs and this hit on all points, with good location, reasonable price, low expenses and ready to go to market at market rates.

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

I know the seller and had told him how lucky he was to acquire it about 8 months prior. He did some updating but was worn out with his 9-5 plus updating his new campground. Since we are familiar, he let me begin the rehab and list units prior to closing. This helped make the property cash flow positive immediately (which is a big deal with high interest rates). It started as a handshake deal and we filled out .pdf files ourselves and went through Grant County Abstract title company to close.

How did you finance this deal?

Bank loan with an investor covering a good portion of the down payment, plus a refi on another rental we own in the county.

How did you add value to the deal?

I ran the entire operation of the deal from underwriting, to purchase agreement, through loan and title, marketing units online, and writing leases. My partner has done a lot of the day to day coordination with the contractor and initial property management with the new tenants (coordinating cleaning and keys on day 1 and follow up first renter issues).

What was the outcome?

Very positive, able to cash flow day 1 and have a good first impression with our first investor!

Lessons learned? Challenges?

There will always be more issues than expected with a rehab - so include that in the budget and return estimates. Keep open communication with the investors so they are confident and develop trust with one another.

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

Larry Howard is a local contractor. Grant County Abstract is a local title company. Both excellent.

Investment Info:

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

Purchase price: $78,000
Cash invested: $22,500

Seller said he was tired of the work to maintain the property and work with tenants, had the property over 20 years. Tenants were paying $200-300/month while market rent was $600/month. The property was good but needed better management and updates.

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

Four rents from one deal is great: rent still incoming when not fully occupied, can rotate tenants from unit to unit for updates, and more people to report if there are problems with the property.

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

Local real estate agent (Suzie Mack) was on the look out for me. She's a great person with a big heart happy to help me find a deal! Plus she grew up in the area and knows everyone that owns property in the area.

How did you finance this deal?

Bank Loan from Dave Wilson.

How did you add value to the deal?

Rents were sub market, upgraded units and raised rents as tenants rotated out.

What was the outcome?

Four good tenants paying market rent on time!

Lessons learned? Challenges?

We self manage and allowed a tenant to go delinquent without notice, ended up losing 3 months of rent. We now serve notice once the late fee period begins.

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

Suzie Mack Real Estate Agent for Tucker in Marion, Indiana. Dave Wilson, local loan agent/lender.

@Jared Hottle, @Colleen F. - thank you both! I can forget about the people side of landlording. I certainly don't want to raise rents going into fourth quarter/holidays and you're right on about targeting the moving season. Maybe a 6 month lease at $400 with month to month at $450 starting in April. What do you think about eliminating the HVAC? The units are small enough for window units and I'm not interested in a huge replacement cost for the old HVAC to cool and heat ducting rather than living space.

Thanks, @Dena Puliatti, those are in the contract. @Jared Hottle, very helpful. They are all on month to month. The seller said one is frequently late but current, another I smelled her weed when we toured, and the third is a long time tenant that does some things around the property and gets a reduced rate. I'd like to move them all up from $400/mo to market rate at $500/mo, but I'm thinking of doing that gradually at $50/mo every 6 months to keep them in place. Whoever rents the vacant unit will be at market rate.

Hopefully it's not too late, but I'm closing on a fourplex today. It's 3/4 occupied and I'm not sure if I need to have rental agreements for the tenants in place today or tomorrow. We have house rules that we give to all our tenants, but we've never purchased with an occupancy, we've always found the tenant and put them on a lease. What do I need to do...or what's the best idea in transitioning the tenants as a landlord?

Thanks! This is a distressed property. 3 building, 10 units w/ about 10k rehab per unit and 20k on the facility (including code violations). One unit on the tour had dog crap all over it and my buddy toured it 3 months ago and reported the same.

I offered a master lease agreement to cover costs and a little kicker for any fees and I'm waiting to hear back.