All Forum Posts by: Patrick Haug

I have been seeking to replace a carpentry contractor to use on multiple renovation projects on and off for a long time.  These projects are major projects that involve changing the floor plan of the apartments, completely rebuilding the bathrooms, and updating the kitchens.  Over the duration of my search, I have tried a number of techniques but all have not been fruitful.  Please share what techniques you have discovered and/or sources of quality contractors.  Thank you in advance!

Investment Info:

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

Purchase price: $108,333
Cash invested: $50,000

This is a four family investment. I utilized a 1031 Investment Property exchange to acquire this building. Additionally this building is located within the "Opportunity Zone". Which is another discussion completely, but worthy of the note.

David, My recommendation to you - Do not look at the financial numbers as the HELOC market is national, so all the banks will compete against themselves to win your business.

My suggestion is to research what banks in Saint Louis are involved in financing/re-financing renovations or refinancing active rental properties.  If you are not a subscriber to the Saint Louis Business Journal, go to the local library and review the various categories and/or the 'Book of lists' published by the Journal.  It is a good place to start.  The Journal publishes various lists for different types of banks, sizes, and activity in the area.  Post review, identify what bank leads in the lending style in which your investment activity will lead.  

Use this opportunity to begin a relationship with that mortgage broker or mortgage banker associated with that bank.  If you become successful in your investing activity, a healthy relationship with a lending institution which operates within your sphere of activity is crucial for future growth.  Plant those seeds now so that they will be ready to harvest when you will need them.

Thanks @Anson Young! Listing the journey in such a succinct description does remove all lessons learned from the dread & worry brought about by delays, overruns, and various bickering.  
This experience now serves as a foundation on which I built my present & future investment deals. 

@Bob Hines, it was the Shaw neighborhood. 

Investment Info:

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

Purchase price: $174,900
Cash invested: $50,000
Sale price: $375,000

This was my original investment purchase, a two family building. Originally, I purchased the building and rented the other unit to my long time friend. Fast forward to toward the last year of my ownership, I changed the floor plan of the apartments. They were large 1 bedroom units with dining rooms, I converted certain rooms within the structure to other functions, updating the bath and kitchens converting the units into 2 bedroom units.

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

This was my first purchase, it was a building where I was going to live. It was close to an entertainment district and within a short commute radius of two major universities.

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

I found this deal through a friend that was utilizing a local real estate agent that was very involved in investment property real estate. I walked through the property before it was placed on the MLS and was got the property into contract.

How did you finance this deal?

I used VA financing. Since this was my first real estate deal, I was very able but limited by my financial reserves. The VA loan helped me tremendously.

How did you add value to the deal?

The value I was able to bring to this bit of real estate was identifying the highest and best use of the floor plan and making changes to the existing floor plan to bring about those highest and best features. The apartments were spacious (1200 sq ft) 1 bedrooms, I converted the floor plan to 2 bedroom units and significantly increasing the investment income of these apartments.

What was the outcome?

This was a wonderful investment for me. I was able to see my dreams for the building come to fruition and acquire a handsome sale price/profit from my efforts.

Lessons learned? Challenges?

Having a strong pool of competent contractors was vital. I am so appreciative to those individuals that helped me during my stewardship of this property. Since this was my first investment, I used this property to quell my fears of not being able to rent a vacancy, interacting with tenants, and being the one to take action when a problem is reported.

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

I utilized local real estate agents.

Investment Info:

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

Purchase price: $70,000
Cash invested: $160,000
Sale price: $297,000

This was a two family building (built in 1898) where in the original floor plan was functionally obsolete. Our plan when we purchased the building was a complete update. The original floor plan was completely removed from both units and a new floor plan was installed which allowed for 2 bedroom units on the 2nd floor and 3 bedrooms on the first floor (utilizing a portion of the basement). This was a long term hold where at sale the apartments where rented for $1,100 for the second floor unit and $1,500 for the first floor.

We decided to sell after realizing what sale price the market would support and moving our investment to another learning challenge.

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

This was an early deal in my investment career. The potential earnings of the location and development activity in the area made this location and property attractive.

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

This deal was located by 'driving the area'. We located a 'For Sale by Owner' sign in the window. The sale price was reasonable for the condition, location, and current market.

How did you finance this deal?

Original purchase was achieved through a conventional loan. The improvements were financed through silent/private investors. The original investors where paid back through a refinance a few months after the completed renovation and tenant placement.

How did you add value to the deal?

This building was completely functionally obsolete, four rooms with a narrow bathroom (obviously installed post original construction) which was in a state of disrepair. The building was being used by the previous owner as a storage structure & had been for some time.
The new floor plan design was implemented for each unit (2 total units) which in turn captured the highest rents in the area for at lease the first 10 years post renovation completion.

What was the outcome?

After purchase it was debated which avenue to pursue for a renovation, either a conversion to a single family home or maintaining the duplex floor plan. Hind sight reveals that our decision to keep it a duplex paid dividends, especially during the financial downturn of 2007 through 2010.
We sold the investment (the highest sales amount at the time in the market) and pursued other Real Estate investments.

Lessons learned? Challenges?

Wow. This property was my doctorate in real estate. I learned everything from coordinating volunteers for a demolition party, placating investor fears, project management, mitigating contractor disputes, market analysis for apartments, advertising, property management, etc...

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

This duplex was purchased using a local agent.

Investment Info:

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

Purchase price: $174,900
Cash invested: $50,000

This was my original investment purchase, a two family building.

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

I was particularly interested in this location of this two family building. It was very near a popular entertainment district and the building had been recently update.

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

Actually, I was shopping for real estate deals and was speaking to a friend who had the same interests. He directed me to a real estate agent who had a relationship with a local investor. This investor was about to complete the building and place it on the MLS. I got in before it went live and got it in contract.

How did you finance this deal?

This being my first deal, I used a VA loan - no money down. Since I had limited funds but limitless interest, this was a good fit.

How did you add value to the deal?

Time. I held this investment for a long time. This investment weathered the downturn and I eventually was able to harvest my labor investment in 2018.

What was the outcome?

I believe I timed the real estate market well. I sold this investment and placed the proceeds into a 1031 Investment Property Exchange.

Lessons learned? Challenges?

This was my first investment. The lessons wrapped up during this ownership define the type of investor I am today. I learned the value of finding good contractors and paying them well. In essence, value quality work over cost savings.

Investment Info:

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

Purchase price: $108,333
Cash invested: $40,000

This is a four family building which I purchased where investment was required. Investment has been made and is on-going.

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

I was shopping for a replacement investment. I had an accepted contract on an investment property. I was utilizing the 1031 investment property exchange, so I had to locate a replacement. This location fit all of my criteria.

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

I found this deal through a letter campaign. As I advised, since I was utilizing a 1031 exchange I had 45 days post closing to identify which properties I was going to use as a replacement. The added pressure of finding a replacement pushed me to do and try things I had yet to attempt. Letter writing was one of those attempts. My offer price was accepted. But once inspections were complete I was able to renegotiate because of the deferred maintenance conditions that were discovered.

How did you finance this deal?

This deal was financed through a conventional bank. I brought 25% down and received a 30 year fixed rate mortgage.

How did you add value to the deal?

The value add for me was meeting the dead lines stipulated in the 1031. Additionally, knowing the condition allowed me to renegotiate the value of the building.

What was the outcome?

The outcome was a closed deal!

Lessons learned? Challenges?

The challenges were all new. I left a different investment stratosphere and entered a new one. I had to learn all about eviction, & finding related professionals.

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

I am a Real Estate Broker and have an active real estate investment portfolio. I acted as my own real estate agent.