All Forum Posts by: Michael Masterson

@Chris Marte First Federal Lakewood. They operate on FNMA guidelines but have a common sense approach to appraisals in my opinion. If you want a contact DM me. Same goes for the Cleveland market if you’re looking to invest

There. Have a couple very good agents I’d recommend.

@Joe Kelly purchased $125k. Financed $93,750. Initial appraisal was $135k

Rehab ~$30k with an ARV of $210k. Took new loan amount up to 65% LTV instead of the max 75% just to protect a little in event of downturn. So put all rehab costs back in pocket plus a little cushion to set aside for any unforeseen costs on the other units along with ability to fund a website, local marketing campaign, letter campaign for future buys (estimating around $2000 to start there)

May regret the conservative LTV later but trying to be safe in the event we want to sell down the road.

@Chris Marte yes I used the same lender for the purchase and refi. It’s a local bank with a pretty solid understanding of the dated homes in the area.

With it being such a competitive market I made an offer without walking through. Previous owner said a lot of things that simply weren’t true. New windows, roof, furnaces, central air, and so on. I felt it was a very good deal at $165k given those Assumptions. Upon walk thru those items along with quite a few others needed attention relatively quick. The furnace was from 1966 so it certainly did not have AC. 

Overall the structure was solid and honestly could’ve stayed as-is and been profitable. But it just wasn’t the type of property I wanted to have long term. Our strategy is nice properties we would live in ourselves. We’ve found offering simple amenities like granite, stainless, etc really lets you decide the rent. At least where we are. Plus it doesn’t hurt the resale when the time comes

@Zack D'Aiello exactly. Albeit the property was in pretty poor shape it was fully occupied at purchase so I was able to use a local institution who knows the potential of multi family properties in the area so they didn’t give a lot of push back with items that showed up on the appraisal. I assume it didn’t hurt that I had the cash available as well at their bank.

@Jeff Kao initially I didn’t have one panned out. I was fortunate that the deal went smoothly, and had I needed out I could’ve dumped at any point for what I was into it for. Not ideal but I would’ve avoided losses I suppose

@Justin Clemmer should’ve read rehab costs of $35k. Conventional financing of standard 25% down of purchase

Price. Good catch!

Investment Info:

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

Purchase price: $122,500
Cash invested: $35,000

Second duplex purchase with intent of it being BRRRR #2. Purchased in May 2018. After non-renewal by tenants I was able to complete renovations in 3 months, and take total monthly rent from $1,275 to $1,950 and refi out all construction costs. Additionally increased value from $135k to $210k with ~$30k renovation budget. Have a 30 year fixed conventional note on this @ ~$900 in cashflow after all expenses.

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

Initially was interested in this deal because it was next door to my first investment, and I knew the condition of the property was below market comps. Since I'm an owner/manager of my properties it was attractive simply because of proximity to my first rental

I was familiar with the neighborhood and knew exactly what I would be able to increase rents too with a little bit of work. Additionally I knew my "fall back" could always be keeping it as is and still collecting fair cashflow on this.

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

Saw FSBO sign and contacted owner direct from previous interactions with him. Initial asking price was $165k which I offered over the phone with a walk through contingency. After first inspection of the property I was prepared to walk away, and told seller my best deal would be $122.5k. After a few days his attorney contacted me and asked how quickly we could close, and if we would assume the property as-is.

How did you finance this deal?

Conventional financing initially, with cash for rehab.

How did you add value to the deal?

Property improvements of ~$30k increased value from $135k to $210k appraisal in just under 1 year.

What was the outcome?

Increased rents from $1375 monthly to $1950 with full reimbursement of funds through conventional cash out refi.

Lessons learned? Challenges?

Double my timeline for renovation for sure. Always have an exit strategy, and concrete agreement in place with contractors. We saved a lot of money working with local "handymen" but as a result our lofty timelines were blown. In the end we are very happy with the results, and we got an awesome crash course in BRRRR in a short period of time.

@D'Andre Byers a lot of people have given some solid advice already on this. I just personally went through a very similar situation with my new wife. Prior to us getting married I already had investment properties and told her the goal moving forward would be to keep acquiring. 

I sat down, and spent a good amount of time discussing pros and really touching on the cons as well so there wasn't future fights in the event a project went south. 

Reluctantly I was able to convince her we tie our funds up in a renovation/value add shortly after we were married, and it was STRESSFUL. Until we were complete. 

Now that its over , we have refid to get all our money back AND renting it out at a much higher amount she is on board fully. 

I'm far from an expert in the marriage department. But when my wife truly realized I was doing this to create financial success for us and not putting us in harms way she became much more comfortable. 

She still questions my every move on investing, which I welcome. It keeps me grounded and honestly I've given up deals because of her perspective. 

Prior to being married I did two BRRRR deals, and a flip in almost 7 years. We've been married for 8 months and have completed 3 profitable deals, with 2 more likely to finish by year end.

Best of luck!

@Maria Marrero I agree with your compassion to an extent. If you treat people fair you usually can expect the same in return. You'll still get people who are the scum of the earth unexpectedly, but if you live your life as a landlord with that mentality you'll never rent to anyone. 

I've had mixed reviews on S8 tenants myself but it sounds like the income is there (3x whats required of her). Credit isn't in major disrepair, and shes disclosing everything to you....even things that may not be permitted with the program. So it sounds like they are likely going to work out for you. 

The additional tenant is concerning because typically S8 doesn't consider that unit in "compliance" for a voucher if anyone unnamed through the program lives in the house. They (the tenants) will likely know this as well, and could use this to their advantage down the road. 

Annual inspections take place with S8 and typically the residents are who let the inspector in. From there they can say whatever they want-including that you allow another party to live there, you don't repair X, you're collecting additional funds from them (often an issue), etc. 

In Cleveland where I've had these units its forbidden to accept payment from the tenant as "side payment". Tenants typically will issue their rent payment in advance through the housing authority, who then would give me the lump sum the following month. 

It's also a nice program though because once you're "in" you can post any of your units that you're having difficulty renting on their portal and they go almost immediately. 

Good luck!

I agree with @Theresa Harris on the cardboard approach. Even if you use some of the cardboard rolls for covering flooring during paint/demo you can't go wrong. Throw a fresh layer of dirt on top, and seed it. 

Thats what my beds turned into when my tenants claimed they were really into gardening, and wanted to have flowers. Wasn't worth the headache.