All Forum Posts by: Philip Hernandez

Hey folks!  So I’m considering a rehab on a condemned quad.  Does any here have experience with something like that?  What are the highs and lows $wise that folks have spent on rehabbing quads?  I know that you can’t know until you know, but this property will make sense if the rehab is 100k-140k, but won’t make sense if the rehab is 200k + or it will be challenging for me to control past the 120k $ amount. Thanks for any words of wisdom for how to proceed.  A little more background.  My go to GC says that they have undertaken work like this, but that they will have to research city records to see what it’s condemned for before a reasonable estimate is known.

@Sendhil Krishnan thanks so much for your generosity on sharing your insights experience on this topic.  What is the geographic range that you are planning on operating in, and how big do you plan to scale in the next 3 years?

@Jake Wiley looking forward to getting the full T12 with expenses from the owner, these are great things to focus on during my due diligence.

I invest in the Cleveland area, and second the comments about using it as a great opportunity to learn. I've done BRRRR deals, conventional financed deals, and seller financed deals all out there, and am working on my first multifamily deals in the same market. The dangerous neighborhood potential is real though, and the importance of having boots on the ground goes up exponentially. All in all I'm so grateful for the contacts I've made out there, and the opportunities to learn, although I do plan on moving into a higher end market in the future, as my skills at team building, underwriting and raising capital improve.

Hi all, I'm in the middle of negotiations/underwriting for a 12 unit multifamily property in Ohio.  Property is currently bringing in $8400 a month.  We are looking at value add that would bring the property up to $10,500 a month and higher over the next 5 years.  In our underwriting we've ended up calculating 58% for operating expenses, which hasn't left us much after the debt service for our potential purchase price of 650k.  My question is, if I am being too aggressively conservative in my underwriting, and potential making a good deal look untenable...for other multifamily investors in midwest markets, how high do your operating expenses and up being.  It's been easier for me to calculate on single family /duplexes that I've purchased, and I'm nearly in analysis paralysis land with this one.

Hello BP sages. I'm in negotiations to purchase a 12 unit apartment building in Ohio. We've tentatively agreed upon a price, but there's quite a bit of the financials that the owner has not yet provided. I'm hesitant to enter into a purchase agreement, until going over the financials/paperwork of the property in greater detail. I also don't want the broker to feel like I am wasting his time, as this is my first deal of this size. What advice do you guys have with using an LOI to start negotiations, vs purchase agreement?

@David M. Yeah, that was the appeal of providing them a note from the LLC, I can see myself moving into syndications in the future, and for larger deals, but because of the size of this deal, I wanted to keep it as simple as possible, which is where the idea of the Note from the LLC was appealing

The first question that I would ask, is where you came up with the 75k number for the rehab. The two ways where things can be most challenging for analyzing a BRRR (in my limited experience,) are in the rehab costs, and in the appraisal after the rehab. So much can happen based on the appraiser's judgement, that are out of your control, you should be prepared to leave money in the deal just in case, and the rehab may also go far over budget, I highly recommend if you haven't read it already David Green's BRRRR book at least on the negotiating with contractors side. I've completed 2 rehabs so far, and using his step by step for navigating that process saved my a lot of money.

Hmmm...definitely trying to do everything on the up and up. What suggestions do you have for structuring this kind of deal? My partner and I are bringing 80k of our own cash to the table, and plan on doing the majority of the active management of the project. We were originally thinking of bringing in other investors into the LLC, that we are going to purchase the property under, and including a buy out clause with a %annual return attached to the buyout clause to guarantee return for our investors. What are your thoughts on that kind of structure, and how complicated would something like that be to structure?

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $90,000
Cash invested: $5,000

Seller financed deal of an essentially turnkey property. Cashflow is very modest, but seller agreed to $5,000 down, had a great experience purchasing via seller financing. 30 year rate with a 2 year balloon. Current comps in the area are around 100-120 k plan on holding this and refinancing out the seller in 18 months

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

I've never done a seller financed deal, the amount the seller wanted as down payment was very low

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

Purchased it from my mentor

How did you finance this deal?

Cash, Seller financing

How did you add value to the deal?

Turnkey property

What was the outcome?

Rented at $950 a month. Cash flowing, no issues with property/maintenance

Lessons learned? Challenges?

I should have negotiated terms more. It's a 2 year term, and something more likely 4 years would have been much more conservative

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

Just escrow agents, and me and the seller @sammylyon