All Forum Posts by: Pete Harper

@Bryan Noth

Time to snap up those tax auction properties in Tahitian Village.

Investment Info:

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

Purchase price: $85,000
Cash invested: $60,000

Crazy cat lady duplex. This is going to be our most ambitious real estate project yet. This is a 1960's all brick duplex. It was originally build as a mother in law property with two identical 1200sqrft 2 Bedroom/1 Bath units. It was most recently occupied by the original owner who had cats. The place reeks of cat urine. She has moved to an assisted living facility and we purchased it from the family.

All-in cost $145,000
ARV estimate $225,000
Rents $2200

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

I have a zillow search running with my buying criterial. This property was listed and we viewed it the next day. The duplex was in bad shape but had potential. We saw a way to convert it to from 2BR/1BA per side to 4BR/2BA. Huge upside potential.

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

Found the deal on MLS. We didn't win the initial offer. The first buyer's deal fell through and our agent alerted us. We were able to close the deal with a slightly higher offer.

How did you finance this deal?

All Cash

How did you add value to the deal?

With 1200sqrft to work with there is more potential in the property than just a 2BR/1BA. It has a half-assed carport conversion adding an unofficial 3rd bedroom. Since this is a bigger project than we have done before we plan on hiring a contractor to do the major work; demo, framing, electrical, plumbing, and sheet rock. My wife and I will do the finish work with new kitchen cabinets, new bath, flooring and paint. We have budgeted $60,000 and 6 months for the project.

What was the outcome?

After reno is complete and we have the property fully rented we plan on doing a cash-out refinance and go find another deal. BTW the cash for this property comes from a cash-out refinance of a 4-plex we purchased with 1031 exchange funds in September of 2019. The same capital has been cycled through two properties in a year. Gota love the BRRRR Strategy!

Lessons learned? Challenges?

The original contractor was a complete train wreck. We are headed to court. LL Never give a contractor too much money up front.

Investment Info:

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

Purchase price: $85,000
Cash invested: $60,000

Crazy cat lady duplex. This is going to be our most ambitious real estate project yet. This is a 1960's all brick duplex. It was originally build as a mother in law property with two identical 1200sqrft 2 Bedroom/1 Bath units. It was most recently occupied by the original owner who had cats. The place reeks of cat urine. She has moved to an assisted living facility and we purchased it from the family. With 1200sqrft to work with there is more potential in the property than just a 2BR/1BA. It has a half-assed carport conversion adding an unofficial 3rd bedroom. Our plan is to totally gut the house removing all the dated wood paneling, kitchen cabinets and bathrooms. We will rebuild as a 4 bedroom/ 2Bath with laundry. This will make the property family friendly in keeping with the residential neighborhood.

Since this is a bigger project than we have done before we plan on hiring a contractor to do the major work; demo, framing, electrical, plumbing, and sheet rock. My wife and I will do the finish work with new kitchen cabinets, new bath, flooring and paint. We have budgeted $60,000 and 6 months for the project.

All-in cost $145,000
ARV estimate $225,000
Rents $2200

After reno is complete and we have the property fully rented we plan on doing a cash-out refinance and go find another deal. BTW the cash for this property comes from a cash-out refinance of a 4-plex we purchased with 1031 exchange funds in September of 2019. The same capital has been cycled through two properties in a year. Gota love the BRRRR Strategy!

Investment Info:

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

Purchase price: $425,000

First off-market purchase. I found the seller on the county CAD site, sent him a yellow letter, and we made the deal without using an agent. I drew up the contract myself and had my attorney review. The building was build in the 1960's and had some differed maintenance. It has six two bedroom units and six one bedroom units. Location is ideal, in the center of town, close to shopping, right across the street from the elementary school.

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

I did a search of the county CAD website and identified all the multifamily properties in the county. I pulled a list of addresses and sent everyone a "yellow" letter expressing interest is the property. I received one reply.

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

Seller asked asked me to set the price. I gave what I thought was a low-ball offer. Seller wanted to close before the November elections. With all-cash we were able to close within 30 days. I was able to leverage the building inspection to get the seller to replace the roof on both buildings, bring electric up to code in Kitchens and baths, replace one dishwasher, and replace one stove. I was able to get just about everything I asked for.

How did you finance this deal?

Due to short closing we made an all cash offer. I plan to refinance once we get rents stabilized at market rate.

How did you add value to the deal?

We have been updating units as they come open. Fresh paint, updated lighting/ceiling fans, over range microwaves, and washer/dryer. We have been able to increase rents $50-75/month. One unit required a major rehab. We took the kitchen and bath down to bare studs and did new LVP flooring. We've gone through six units so far and plan on doing the rest as they come available. All renovations have been paid for out of cashflow. No additional capital has been required.

What was the outcome?

The property has stayed fully rented. We have seen very high demand in our small town for clean updated units. We plan to keep this property for long term cashflow.

Lessons learned? Challenges?

During the inspection I should have had the sewer inspected. Two weeks after purchase the main line from the second building stopped up. We have had additional plumbing problems in the first building. Major plumbing repair the first month was a surprise.

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

No agents or real estate professionals were used. I found a great inspector who helped me out with leverage with the seller. Inspector like the apartments so well he moved in to a vacant unit weeks after closing.

@Corie Carpentier

I think you are a little light on your expense estimate.

Vacancy 5-10%

Maintenance 5-10%

Property Manager 8-10%

Your $300/month is going to be eaten away pretty fast.

It’s a really tough market to cash flow in right now. Any opportunity to push rents higher? If it were me I’d like to see more than $2000/month on this deal.

@Conor Freeman

This makes a lot of sense. Last March I was having trouble finding lenders for a cash out refinance on a 4-plex in BCS. I ended up with a small regional bank willing to make a portfolio loan. Terms were 80%, 4.25%, 15yr.

Within the next year I plan to cash out refinance a 12 unit in a super small market. <17k people in the entire county. I put out feelers with the same small regional bank and they sounded interested. I’d like to find 30yr but if what you say is true it may be tough.

@Mitchell Brown

From your description I was able to find the listing on Zillow. Definitely looks like a flip. Property sold in 2/19 for $10,000; looked like a shack. It has been on the market for 89 days walking the price down from original $124,900. Listed for rent 8/19 for $1050 rented 11/19 for $800, vacant 4/19. Add the seller financing option and you have a very motivated seller.

I would not be afraid to low-ball offer at a price that works for you. Looking at finishes he likely spent around $70k on reno. That would put his break even cost around $90k. The worst thing is they will say no or counter offer. With it sitting on the market for over 90 days you don’t have a lot of competition.

Other things to consider with coastal properties; Hurricanes. What is the history of flooding in the area? Does it require FEMA flood insurance? That will double your insurance cost. FEMA saved me after a Hurricane hit our rental property in Surf Side. 5 ft of water in the downstairs was a mess.

@Eric James That only works if the property is appraised for more than you paid. In most cases the appraised value is much much lower than sales price. I never tell the county how much I paid for a property. You are under no legal obligation to report sales price in Texas.

In this case a more accurate assessment is to look at comparable properties. Are you assessed more per square foot than comparable properties in your neighborhood?

@Dan Maciejewski. That has been my experience too. Tenants are often the best source of information. I try to tag along on the property inspection. While waiting for the inspector to do his thing I chat with the tenant. “How do you like living here?” You will be amazed what people will share.

@Darald Berger I just hired O’Conner and associates to protest my taxes in Killeen. I tried to protest myself last year and lost. O’Conner charges 50% of the savings with no upfront fees. O’Conner came recommended from another BP thread.