All Forum Posts by: Charlie Corn

Hello, my name is Charlie Corn. I am a real estate broker in Eastern New Mexico (Clovis, Portales, Cannon AFB). I was unable to locate any professionals in this area doing a regular search so I would like to introduce myself to anyone who may be on the lookout for real estate services, or a good conversation! I am a licensed broker, as well as an investor and enthusiast. Please give me a holler if you are in the area and interested in talking about local real estate! Thank you. 

Investment Info:

Single-family residence buy & hold investment in Clovis.

Purchase price: $80,000
Cash invested: $29,000

Single family home, two bedrooms, one bathroom, built in the 1940s, located in a military community in New Mexico.

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

Looking for affordable investment options, either small multi-family or SFH that would work as a cash flowing investment. This is a broad criteria and at the time we didn't have more specific criteria other than cash flow.

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

I am a real estate broker and we had represented the owner as their property manager, and their listing broker at the time of sale. The property was listed on MLS.

How did you finance this deal?

Conventional loan with 25% down.

How did you add value to the deal?

The home had a floor furnace for heat, and window units for cooling. We installed a heat pump and ducting to modernize HVAC. Updated sewer line and gas line, as well as bring electricity up to code. We worked with the seller to upgrade utilities during escrow, and we upgraded the HVAC after close. The home was also painted throughout the interior and exterior. All in, the repairs and upgrades cost around $8000.

What was the outcome?

We were able to secure good tenants at a fair price. We have only two vacant months since the home has been rent ready during the past four years. At the time, the market was slower and more affordable which made this deal cash flow a minimum of $300 per month after expenses. At full market price today, the home could cash flow at $400 per month or more. We have not raised rent on the current occupants.

Lessons learned? Challenges?

Not really a lesson learned, but a good criteria we applied to this home, as well as others we look at, is the idea that we should only invest in property that we ourselves would feel good about living in. We want to make our renters happy and make a money at the same time. If a property is not up to our own standards, then we don't want to offer it on our behalf.

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

Yes! I represented the buyer and seller in this transaction. We had significant time on the marked for public offers. After two offer contracts didn't quite satisfy the seller, we stepped in and made a strong offer at a good price. We were able to leverage our relationship with the seller and take some stress off their shoulders by understanding their non-monetary needs. The deal worked out for both parties.

Sam, nice list so far. Here in New Mexico we use a special form to address this very problem. Our form focuses on any kinds of unknowns that a buyer may not know about during the purchasing process. You cover a lot of good topics already.

A few things to consider from your list: Copies of the rental agreements ought to be attached as a requirement via addendum in the original purchase agreement. The rental agreement should cover cost items that the tenant is responsible for paying - consequently any cost left over is covered by the owner. Some leases are written to NOT be transferable. We usually have the tenants execute a new agreement with the new owner that has the exact same terms and expiration date. Existing tenant quality is subjective, and unfortunately, obtaining existing credit reports from prior owners may be hard to obtain. The company we use for credit/background checks will not allow our company to share that information with anyone else, not even the property owner (when we are acting as the property manager). There's not a whole lot you can do, except rely on the owner about the current tenants. Conditions and compliance of the property code would be taken care of during the sale of the property. Most standard inspections will cover those items during a customary sale. Be sure to get information about the age of the capital expense items (roof, HVAC, water heaters, and sewer line as well).

Financial analysis should be undertaken as the first step. You are correct in your formula to make sure income covers expected costs. When purchasing income property there will be two sets of pro forma: one set using current (actual) data, and one set using new (projected) data. Compiling current data is simple in context, but you will need an honest and straight forward seller to get this done correctly. Your projected pro forma will use your updated costs (such as increases in property insurance and taxes, upcoming repairs) and income (increased rents or added income streams). I think it's best to project both sets of numbers and see how they align. A buyer will be stuck with tenants for a short while, mostly likely earning less than expected returns until rents can be stabilized at the projected numbers. The first few months of new ownership can cause a bit of sticker shock while the bumps flatten out.

Hope some of this helps!

Hi Trace. Whereabouts are you looking to get insight? Depending on your coursework you may need a local REALTOR vs anyone from anywhere. I might be of some assistance. I'm in NM, I'm a licensed broker, and I'm an investor.

@Ryan Rodgers Your ROI is looking good because of the 5% down. Getting $700 per unit at $25K purchase price is a good return. I don't have such luck in my market. As far as the contract goes, especially since it's an owner finance offer, you can wrap them up anyway you and her agree. Touch base with the title company, or whoever the custodian will be. They may have certain requirements.