All Forum Posts by: Patrick Echlin

Hey Montez, why 2-4 units? Are you planning on living in one unit? IMO you can find most of your criteria just about anywhere, but you're usually going to trade appreciation for cash flow. I focus on 5+ unit properties because you can force appreciation.

 Hey Victor, I'm an agent with a focus on investing, based in Ypsilanti. I'd be happy to help you find the best investment you can afford. Hit me up if you're still looking :-)

 Hey Chris, the floors and cabinets are going to be in addition to the $48k. The floors are going to be about $1500 and I think I can just repair the cabinets, so probably about $51k all in.

 Hey Tanner, the 6 that are rented are for 600, 650, 750, 750, 800, and 850. I expect the unfinished one to be 800-850 in about a month and a half :-)

Investment Info:

Large multi-family (5+ units) buy & hold investment.

Purchase price: $260,000
Cash invested: $48,000

I found this 7-unit on the MLS. It needed (still needs) a bit of work, but 6 of the 7 units are now rented, two weeks into owning it. I'll be replacing floors and cabinets on the 7th unit this summer, and will get that rented.

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

My broker/friend told me about 2 years ago that 5+ unit multifamily was the way to go, and I dug in.

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

This was on the MLS. I offered asking price, but ended up having to lower it from $280k to $260k once I saw the property and that the description was inaccurate.

How did you finance this deal?

I did a 20% down mortgage. Because the seller wanted a short closing timeline, I had to pay that 20%, plus some other costs, to close on the property. However, my lender intends to let me use the equity I have in my first property to get that cash back.

How did you add value to the deal?

When I closed on it, it only had one tenant (on Section 8) who was paying well below market rate. I raised that rent at no additional cost to them, performed minor repairs on 5 of the units and rented them out, and will be rehabbing the 7th unit this summer to get it rented.

What was the outcome?

Of the 7 units, 2 weeks in:
1 is not ready to be lived in
5 are rented out
1 is in the paperwork/inspection stage with the local housing authority to get it rented to a subsidized renter

Lessons learned? Challenges?

No big deal. The existing tenant is crotchety and has a foul mouth, but I told him we were going to talk in a professional tone or he would be looking for a new place. So far, so good.

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

I was the agent on this one. I feel like I did a pretty good job ;-)

 Hi Jeffrey, 

The lender I went with apparently has been doing 20% down as a standard of practice for a little while. Who knows if that will change.. I think they only work in Michigan though. Let me know if you need their info 🙂

5+ definitely counts as commercial, and that’s why I went that route - because future sales price will likely be based on net income, which I can definitely improve by fixing up this 6th unit and bringing the rent gradually to market rate.

 The brewery is 734 Brewing Company 🙂

Hi Sam, hopefully I can answer all your questions in a way that makes sense :-)

1. I was looking for just about anything with numbers that worked in terms of what I could afford, cap rate, and cash flowing from day 1. I wanted to be within 2 hours because I'm managing the property myself for now. Once I get a little more comfortable with what all goes in to property management, I'll probably let a professional company do it.

2. All of the repairs so far have been on units with tenants in place, so they usually report back whether things are fixed. It is a little bit of a headache wrangling contractors. When we start the full-gut redo of the 6th unit (which "should" take about a month) I'll probably visit once a week to make sure things are going well.

3. I co-own a microbrewery and the buildout involved removing everything (including concrete floors) and installing all new floors, plumbing, electrical, hvac, etc. We dealt with a dozen or so contractors and subcontractors, nevermind all of the interested regulators (feds, state, county, city) so I got a healthy dose of understanding code, zoning, and contractor... relations.

Investment Info:

Large multi-family (5+ units) buy & hold investment in Litchfield.

Purchase price: $210,000

5 units in two buildings on the same parcel, plus a 6th that needs about $25k worth of work to make it good, per contractor

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

I found this through my realtor (before I became licensed) and the MLS. List price was $235k, but I thought the numbers looked better (10% cap) at 210.

How did you finance this deal?

Traditional mortgage - 20% down, minus the 10k the bank allowed for repairs.

How did you add value to the deal?

I'm at the tail end of making sure basements aren't flooding, roofs aren't leaking, and everything actually works the way it's supposed to. Once that is done, I'll move on to renovating unit 6, which will be a full gut and redo.

What was the outcome?

TBD

Lessons learned? Challenges?

I haven't learned any hard lessons yet, but I learned a LOT of hard lessons starting a couple of non-real estate businesses.

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

My now-brokerage (Jones Chance & Co. in Ypsilanti, MI) specializes in helping people make wise investment decisions. I joined them to learn more of the nuts and bolts and to help others get on the multifamily path.