All Forum Posts by: Mitch Brunette

Hey Jake Stuttgen agreed MN is tough. I swear I thought I’ve seen every duplex there is and couldn’t pull the trigger on any! Glad to hear you found one. Still hard on the hunt for my next property to keep building the portfolio.

Hi David I’ve been looking at Albert Lea for a couple months. I think I know the property you just bought and wish I would have considered a lower offer, congrats on being more experienced than me and pulling the trigger. For the area, population has been stable for 50 years, blue collar/white collar mix and my favorite (sarcasm) part is home values are all over the freaking place. I think I have paralysis by analysis on the area. What made you pull the trigger in the area? Do you intend to buy and hold for a long time? Who do you use as a PM? I met some people down there and a PM when I drove down 10 days ago to look at some homes and duplexes. Thanks!

I hear you, Ray, and completely get it.

Man, if I don’t quit after this then I am destined for upside! Bought my first rental which is one side of a twin home, hired a PM and set myself up for about $350/mo after all expenses including capex, vacancy, repairs, management and piti. Success! Property manager finds me a single woman with a trust, audits trust and its sound financially, she just wants a nice 4br house to store some things, have some space and live in peace. Few bumps here or there with rent slightly late, but she has a trust and it always gets paid. I mean come on, she has a trust... Until now. Rent doesn’t get paid, get a story about a trust issue, its paperwork mixup etc. Property Manager sends pre-eviction letter and before you know it the church is involved, find out theres another home that is still owned with boxes packed floor to ceiling with stuff and the tenant is a “clean horder”. Re-evaluate the trust and the attorney didn’t tell us initially it can only be used for utilities, cars, health care and other random things but NOT rent. I never thought I’d feel bad for the tenant that didn’t pay me rent, but this one I do because her trust attorney allowed it to happen. Plus, I’m a nice guy and grew up in crappy rentals, felt good to provide a nice one to someone or many someones over the years. First rental, first tenant, first eviction, all in 8 months time. I won’t quit. I’ll learn. Evaluate better, question everything that I legally can, and exercise lease eviction options as soon as necessary. Property Manager has done an excellent job in the middle of it all, but maybe could have been better during placement. Not sure how we could have saw it coming? Maybe you, the BP community could or would have seen it coming? Anyone experience anything similar? Glad to have this community to lean on and look up to. Want to get this wrapped up, new tenant placed and look for the next buy.

Hey all, Along a similar thought and maybe the decision is personal (arent they all?) Im looking at duplex and triplexes in MN where I live and after accounting all expenses similar to the original post mentions, I’m finding 9-12% coc returns, here or there finding 14% but those are already pending buyers. Anyway, the question is a 8-10% coc return acceptable if you are getting $120-200 a door? A triplex I’m reviewing could be as high as $220 per door after all standard expenses. Thoughts on the lower coc return to gain cash flow mentioned above? I own one unit that I bought in a desirable white collar neighborhood to get in, get feet wet, and know I could resell and break even if I got over my head. Getting into multi unit, it seems like a smaller buyer pool, thus so much more important to get right! Thanks!

Thanks for all the updated comments, and I’ve got Gordon covering me on another thread as well. I saw the place today, I do think it is over priced and talked to a couple realtors and they said its hard to price duplexs there because they have a number of them in town but they almost never sell. Anyway, after learning more about the property, it looks like the landlord was over providing, PM is far too expensive and it brings COC down to 11%. No thanks to 11% COC with all the other factors and risk in place. I’ll hold out for something in the city, drive for dollars and find something, or, maybe the realtor will call me back with a reasonable sale price. Thanks guys, the hunt continues!

@gordon Thanks again, I've tried to explain this concept to friends and they just don't get it!

"I wont sell because my property has gone up in value. So has everything around it thus I really gain nothing. "

Ok, so I hear you loud and clear, if my GRM is a 5 or below and the cash flow is good, make a decision.

Thanks again, and it's amazing how quick this community will jump in to help someone out. 

I never looked at the GRM approach, just took all the expenses, etc. and came up w/the COC numbers above. I looked up GRM/calcualted and the property I like out of the two is a GRM of 5. I know the rents because one unit is currently rented, and the main level unit is a 3br vs . the 2 br so I just looked around the area and found what apartments and a few others are renting for in addition to the local PM in town. There's one legit PM in town, and then a handful of people that operate out of their homes. The town is 19,000 people and I'm familiar with the town because my wifes family farm is just 10 miles west and I'm there farming 2x a year.

So Gordon, I'd ask this. Would you buy to hold? Would you buy to hold for less than 7 years knowing you may want to sell (probably not need to sell).

$20k down, no rehab costs, 1 renter in place for 4 years that has taken increases of $25/mo each year, a GRM of 5, COC of about 19% (about $165 per unit after all expenses), all capex work was done 6 years ago or less (there's nothing to do until something breaks) , and owner occupant is a busy body handyman type. Vacancy in the area according to a city study (performed by 3rd party) is 5.8% and that is down from just over 6% 5 years ago. Population 19,000 people and has been 19,000 give or take for 50 years. So it is rural in the sense that it is 115 miles from the down town metro, but it is a larger town, surrounded by very rural 5k and smaller population towns.

I'm going to see these places in about 5 hours, still excited to see them, feel out the neighborhoods they are in specifically and start potential negotiations. I know there IS a price worth it, and based on your GRM comment, maybe the purchase price is about right.

Thank you, good insight. Especially w/the 1 PM in town commentary. I’m definitely thinking more about 3-7 year exit strategy into bigger opportunities. May as well stack cash and buy bigger in 3-5 years. You may have given me my answer. Thanks!!

Thanks Gordon. I’m looking at 2 duplexs tomorrow. I’ve accounted for all expenses on the bigger pockets tools including capex etc. After all said and done, 18-29% cash on cash returns. Roughly $165 per unit. 1 duplex is completely redone. Everything done in 2011. (19% coc) owner paid $35k, completely redid everything and is now listed at $99,500. The other needs exterior paint and a roof soon (29% cash on cash). Not so excited here. Lack of comps is killing me. Knowing I can get that coc return is great, but if I ever want to sell and buy a building with 20+ I want to be able to sell. Thoughts?