All Forum Posts by: Nathan Zierer

@Morgan Wallace, do you still do meet ups in Greeley? We just moved here from the Midwest and are looking for some local input.

@Nicholas Nguyen I don't know if you have looked any further into this listing but I did probably about the same time you found this. After talking with my agent and she did a little digging, the owners on in 2 law suites just on this one property.  1 is with a injury case from a former tenant that has been going on awhile and the other is one of the partners is suing the other partners on.  Kind of a mess, if you have cash to close and don't need a bank right away, it could be cleaned up pretty easy if you have a good lawyer who can keep you from getting in the middle of it all. 

I do like this location because like some one said above, the area is seeing a lot of development though. 

I too own a single family almost next door to Perennial Brewing, great street except one problem house.  I keep trying to contact the owner to see if he would sell but I get no responses to any of my inquiries.  I keep looking down there, but the older homes need a lot of work, in that neighborhood I look for the 1950 and new homes. The usually have been kept in pretty good shape and if they do need repairs they seem to be small.  I bought our single family for 74K and rents for $1,000.  Great tenant that has been there for years.  

Investment Info:

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

Purchase price: $230,000
Cash invested: $56,000

Contributors:
Sarah Zierer

Solid duplex in South St. Louis City that came with one unit occupied by tenants that had been there 26 years. The other unit need some minor repairs updates roughly $1,500 worth. We did this with conventional financing and are looking at this with a decent cashflow but also build of equity base, maybe for a future 1031. This property sits in a B+/A- neighborhood, and this is probably a solid B property.

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

We are looking to get our cash flow up and this happened to be in great stable/growing neighborhood. Also was first stab at what it was like to have inherited tenants.

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

Found this deal on Redfin and called up our realtor to make an offer. We also said we made it contigent on inspections but would take it as is so long as no major issues came up.

How did you finance this deal?

We utilized our HELOC to make a cash offer to make sure we could get it under contract, but then we financed in tandem with a 75% LTV.

How did you add value to the deal?

We purchased it below market rate because we went in with cash offer, I think the property is really worth about another 5-8% more than we paid for it. Also there were some minor issues that needed to be address and we personal fixed them so we have some sweat equity in it.

What was the outcome?

We have the property up and operating, we used Dion's (BP Ep 448) "Binder Method" to up the rent on the current tenants - who actually ended up a little higher than we were planning. We are even considering selling our single family home and moving into this to lower our house expenses and capitalize on our equity position in our current home.

Lessons learned? Challenges?

One thing is we should have gone back and negotiated lower, I feel like there was still more meat on the bone and should have just gone for it. The worst they could have said was no, but we could have picked up another 5k-10k. Now that property #2 is in the bank I feel like we are picking up steam and hopefully we can get moving faster this year.

Investment Info:

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

Purchase price: $230,000
Cash invested: $56,000

Contributors:
Sarah Zierer

Solid duplex in South St. Louis City that came with one unit occupied by tenants that had been there 26 years. The other unit need some minor repairs updates roughly $1,500 worth. We did this with conventional financing and are looking at this with a decent cashflow but also build of equity base, maybe for a future 1031. This property sits in a B+/A- neighborhood, and this is probably a solid B property. Now that property #2 is in the bank I feel like we are picking up steam and hopefully we can get moving faster this year.

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

We are looking to get our cash flow up and this happened to be in great stable/growing neighborhood. Also was first stab at what it was like to have inherited tenants.

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

Found this deal on Redfin and called up our realtor to make an offer. We also said we made it contigent on inspections but would take it as is so long as no major issues came up.

How did you finance this deal?

We utilized our HELOC to make a cash offer to make sure we could get it under contract, but then we financed in tandem with a 75% LTV.

How did you add value to the deal?

We purchased it below market rate because we went in with cash offer, I think the property is really worth about another 5-8% more than we paid for it. Also there were some minor issues that needed to be address and we personal fixed them so we have some sweat equity in it.

What was the outcome?

We have the property up and operating, we used Dion's (BP Ep 448) "Binder Method" to up the rent on the current tenants - who actually ended up a little higher than we were planning. We are even considering selling our single family home and moving into this to lower our house expenses and capitalize on our equity position in our current home.

Lessons learned? Challenges?

One thing is we should have gone back and negotiated lower, I feel like there was still more meat on the bone and should have just gone for it. The worst they could have said was no, but we could have picked up another 5k-10k.

@S Moulton, I don't have much experience with septic but I know that you need to clean out the sediment tank every once in a while, 25 years seems like it might be time if it hasn't been done. I don't have a clue what that would cost. But at least your leach field should still be in in good shape at that age, depending on what they used for piping.  The electric baseboards seem to be one of those things that if they work and no one monkeys with them then they just keep working, so I guess I wouldn't worry too much about that - again I am not sure on what those cost to replace if they do go bad.  I would just call around to see what these might run to address it, just so you are aware.

The only hesitation I have with anything you said is one of the primary heating sources is a pellet stove - I just don't trust tenants with flames. My house, I would probably like that for myself but it seems like tenants really know how to find a way to get carried away. 

Good to see other Missourians in here.  

Well, if you are looking at 80k purchase and 20k repair with an after repair value (ARV) of 140k - that is flipping a house not renting. So cashflow doesn't matter there, but CoC does. If you have rent after the renovation then you are either looking a property that you have some good equity in or the potential of a BRRRR (Buy, Rehab, Rent, Refinance, Repeat). There are a lot of podcasts about BRRRR method. I would step into and listen to the Rookie Podcast, they have a lot of great tips on getting started and the early episodes of the BP Real-estate Podcast. They have them on this website or I like watching them on YouTube - seems like I pick up more when I see who is talking. Also I would look up Brandon's short video on the 4 Square Method for analyzing rental properties. This give a nice break down to what all the calculators out there do in a simple version.

4 Square Method

Unfortunately, since COVID hit, all of my contacts have said that they can do 20% on single family or 25% on 2-4 families. I have talked with one other lender that would go down to 15% but it was buying I think 4 or 6 pts.  

Not sure how the cash flow is looking but I just talked with the commercial side of another and he can do 20% down on a 5/1ARM - 20yr Amm.  

Just a few things jump off at me.

Vacancy - will this property lease up in 2-3 weeks?  8.3% is 1 month vacant equivalent. 

CapEx - You say no HVAC, there must be some sore of heat system and that will get old at some point. Also what about water heaters, is this on public sewer or a septic system,?

Appreciation - I don't count on appreciation.  I look at that as a bonus when I go to sell because its not guaranteed and has many factors that can play into it. 

Closing costs of $3,800 seems a little low with financing, if its under $200,000 purchase I just plan on $5,000.  

And do you have an inspection report on this, because something will probably need to be fixed, just kick in at least $1,500 just a safety. If you don't use it then great but at least you have something.

Sorry if this is kind of long and a downer, just thinking of any possible holes for you to consider and check off. 

Welcome, What kind of investing are you looking into or are you already in the game?