All Forum Posts by: Brian Moore

All of my investments are out of state so far, but for my primary I have used Bedrosian's for tile and granite, and J&W Lumber for my deck. Both of these places have similar pricing to big box stores but much better quality (and were recommended by several contractors).

Thanks @Damaso Bautista!

Thanks @Andrew Syrios @Jacob Simpson @Jeffrey Holst @Kelly David Sansom!

Kelly, the deal was located in Hixson. I've found most areas to be good but you'll want to avoid the channel east of the tracks and west of the ridge cut as this is where the 'headache' properties are. Downtown is more pricey and most investment properties won't cashflow. Also be aware of City of Chattanooga taxes on top of the Hamilton County taxes. Most of the area has both, but Red Bank, East Ridge and Harrison avoid the City taxes which cuts the property tax bill in half. Good Luck!

Investment Info:

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

Purchase price: $160,000
Cash invested: $44,000

In the fall of 2019 I had a few business trips out to Chattanooga and really saw potential in the area. The home prices and rental rates also fit my numbers, so I attended a local REIA meeting to make some connections. Fast forward 15 months and one global pandemic later, and I now own a duplex in the 'Noog!

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

I found the numbers very attractive vs. my primary market of DFW. Home prices, property taxes, and insurance rates were all more favorable than DFW, and the 1% rule was very much in effect at the time (although things have been on fire as of late!).

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

The property had previously been under contract 3 months prior and had fallen out due to foundation issues which they repaired. I found it on the MLS when it relisted, and I contacted the seller's agent to have them double-end the deal. The numbers were great and I offered $5K over list with no financing contingency. It was my intent to get a loan, but had my loan fallen through I had enough cash on hand to purchase without financing. 'No financing contingency' clause helps offers stand out.

How did you finance this deal?

As mentioned above, I essentially made a cash offer but with a 35 day escrow so I was able to apply for traditional financing. Thankfully my rockstar Texas lender was licensed in Tennessee so I didn't need to search for a new lender. Terms were 25% down, 3.25% 30 year fixed with no points. Very good terms for a multi unit investment property. Before COVID these numbers were absolutely unheard of.

How did you add value to the deal?

Currently there are paying tenants in both sides of the duplex so I plan on upholding their leases and then doing major remodels once they move out. There's about $500-700 in additional gross rent once remodels are complete.

What was the outcome?

TBD. I'd like to introduce a new idea I call the SLO-BRRRR or Lazy Man's BRRRR. This involves finding a good deal on a value add property that is already rentable (or rented), and therefore qualifies for conv. financing. Purchase the property with financing and then remodel once tenants have left. In an appreciating market, refinancing your value added property might allow all original capital to be extracted. The added expense of 2 sets of CCs is likely equivalent to HML costs of a normal BRRRR

Lessons learned? Challenges?

Study BP forums, books and podcasts. I learned several techniques from this site that I put to use in this deal. Once you've studied up and know your stuff, take action! Don't try to time the market- if you see a deal that makes sense, make an aggressive offer and go after it! 3-3.5% interest rates won't be around forever, so acquire 'cheap money' while it is available.

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

@Jeffrey Holst and @Brian Levredge of The Old Fashioned Real Estate Show!

I've been in the same shoes recently and prefer the cash-out refi. I call it the Slow Brrrr (Slobrrr?) or the Lazy Man's Brrrr. In an appreciating market, if you're able to find a decent (but not incredible) deal on a property in average shape (still qualifies for traditional financing), do some cosmetic rehabs and wait a year or two, you may find that you're still able to refi all of your original investment back.

I also like that the cash-out refi holds my feet to the fire. I'm paying 3-3.5% interest for 30 years on that money, so as an investor it forces me to find a better return for it and not be on the sidelines for too long.

Actively searching for my next purchase of value add multifamily (small or large) <$1.5M in Reno/Sparks and looking to connect with wholesalers. Currently working on a cashout refi for a 2 unit I have in Sparks. Also invested in Dallas and Chattanooga and shopping for more. 

Hey @Brian Koons, good to see you making progress! Always happy to provide feedback if you have more to discuss.

My father has been involved in all aspects of RE (loans, residential agent, commercial agent). Around 1995 he partnered with a colleague who ran a capital fund ($100M+ AUM). The partner sliced off $2M of the portfolio for my dad's piggy bank to do flips; all SFR in Southern Cal ranging between $150-250K. He usually had about 5-6 properties going at a time and did about 30 in all. It was very low risk to the partner because my dad had 20 years experience and a good eye for evaluating properties and rehabs. The money partner financed 100% and my dad did everything else. He didn't usually act as the agent on purchases because he had other agents in his network with much better deal flow but I think he acted as the selling agent (not sure). The split of all proceeds was 60/40 in favor of the money partner. Given that the money partner professionally managed a lot of capital, I imagine he did a thorough evaluation to determine a proper financial arrangement for the partnership.

Obviously with buy and hold it is a different scenario because the long term equity, appreciation and cash flow of the holdings, but hopefully this helps!

I use a site called padmapper.com as my first stop for rental comps. It doesn't have the sophisticated algorithims that other sites have but it specializes in aggregating listings from a lot of sources (kinda like kayak.com for travel). Padmapper collects data from apartments.com, craigslist, and many other sources (possibly more than zillow and rentometer), and plots them on a map. I use the map view to research the nearest comps and formulate a rental estimate from there.

My other tactic is that I try to focus on a few small pockets (some of which I already own properties), and I can really zero in on the market rent through first hand experience plus intel from my PM.

Good explanation from Adam on stepped up basis. I would also add that 1031 exchanges receive stepped up basis at time of death; something I learned in the last year. Ex: Mom and Dad were RE investors all of their lives. Way back, they bought a condo as their first rental for 30K. 5 years went by and the condo skyrocketed to 120K so they sold and 1031 exchanged into a Single Family House rental for 400K (they had 90K in gains plus their initial down payment and mortgage paydown over the years, so they netted 100K and paid 25% down on the house). Another 10 years went by and their rental house appreciated to $1M so they sold and 1031 exchanged into an apartment complex for $3M (they had 600K in gains on the house, plus 150K of down payment and mortgage paydown over the years, so they netted 750K and paid 25% down on the building. The apartments had decent cashflow and provided a steady passive income stream for their last 30 years of life. Upon their deaths (which happened simultaneously; 'The Notebook' style), their lovely building was worth $10M and you inherited the property and sold for market value (you greedy SOB) with zero capital gains due because your basis in the property was 'stepped up' to $10M (I don't know the specifics of estate taxes but I think they kick in over $11.58M). This is an incredible long term strategy as long as 1031 and Step Up basis remain in place. Side note- if you are unfamiliar, 1031 is a way to defer your taxes. If at any point along the story above, Mom and Dad 'cashed out' of their investment, they would have had to pay all capital gains due from all previous investments. Instead, the winning strategy is to die and don't make $12M bucks.