All Forum Posts by: Rachel Chwaszczewski

In our experience we have learned to have it be a layered approach, for asset protection. We use a company that sets up all of our long and short term holds in LLC's and our parent company is filed in Wyoming due to all information being protected and not publicly available from the LLC. Our pass throughs that hold each individual entity/property flow up into that parent company which provides multiple layers of protection. Check with your Secretary of State to see how it is handled in your area to understand best steps forward.

I think the first one is always the hardest bc its a leap of faith at some level that it will all work it!  The leap should be underpinned by understanding the risk and gathering as much information as needed to fully understand the investment and the risks involved as well as understanding the exit strategy.  Look to understand your own risk tolerance as well before stepping into this arena.  It will help guide decisions and then as risk tolerance grows your growth and understanding expand as well.

Just some food for thought to help navigate the analysis paralysis; we have often found that looking what our long/short term goals are as a whole and for the particular investment itself is incredibly helpful in feeling better about the decision that is being made.  Alignment of these goals can help you clarify what exactly you want and need to get out of a particular investment.  Hope that helps!

Initially we shied away from Section 8 due to others comments/opinions in regards to it but ultimately a few opportunities presented themselves and we decided to move forward.  We have had very good luck with affordable housing and Section 8 specifically.  The obvious up side is it is guaranteed rent every month.  With that being said the best thing we did to help the tenants and ourselves was to develop a process to vet ALL of our tenants to try and make sure we are getting the highest quality tenant, regardless of the location.  We also ask for a 2 year lease when feasible as this cuts down on turnover/lost income.  This strategy has worked well for us.  Our signing process is lengthy and we review all of the responsibilities with our new tenants and ask that they initial each page confirming they have read and understand the rules etc.  I would not say we have no issues ever but the turnover rate is very low and we generally have amicable turnovers when they do occur.

Thanks!  It was a very interesting one for sure!

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $23,000
Cash invested: $30,000

SFR in D class area that had been partially remodeled (poorly) with a great yard that was fenced in. We allowed pets since the fence was a selling point.

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

The price point - in the beginning we did not have a ton of money to start investing and the total buy in for home and small minor upgrades was $30K!

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

We found the deal via a mutual person who knew the seller.

How did you finance this deal?

Private money from a business partner - this deal was so uncomfortable for him he asked if he could use our vehicle as collateral - just in case!

How did you add value to the deal?

The major issues had been addressed by the seller, who had to let go of the property. We used the remaining 7K after the purchase to make modest changes such as paint to the exterior and kitchen cabinets, new carpet, tile backsplash and new lighting.

What was the outcome?

We rented the property immediately and refinanced into a perm loan once it has seasoned. We continued to invest heavily in that specific neighborhood bc we saw so much potential. After renovating multiple duplexes and building affordable spec houses it began to increase the value of the properties and rents received. Other investors followed suit, the gov't invested in infrastructure and the area began a true change from barely habitable homes to a decent, safer C+ neighborhood.

Lessons learned? Challenges?

Take a chance on the ugly duckling and invest in doing the right thing by the tenants. We developed our rental strategy in this area as we were committed to providing safe and habitable homes to people. We also made sure the properties were on trend finish wise which brought in higher quality tenants and vastly improved the appraised values when we went to refinance. It also proved to us that when you invest and respect your property, your tenants, for the most part, will as well.

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

No these were all off market deals.

Investment Info:

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

Purchase price: $50,000
Cash invested: $150,000

Took existing dilapidated quad plex and stripped it down to the studs. We reworked the floorplan to become more efficient and to allow for more bedrooms in each unit. We ended up with (3) 2 bed/1 bath units and (1) 3 bed/1 bath unit that is in a area that is growing rapidly in a highly desirable location.

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

Investing in multi family properties are a good way to build a portfolio quickly as it lends itself to buffering income wise. If a tenant does not pay it is less impactful since the other units will cover the spread.

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

Property was offered to us from a person we had bought homes from previously and we have a working relationship with them.

How did you finance this deal?

Purchase property cash and took out hard money loan to fund the rehab portion.

How did you add value to the deal?

By gutting it down to the studs and reworking the floorplan of the units to be more efficient and cohesive we were able to add tremendous value along w/ the finishes that were chosen for mass appeal and longevity.

What was the outcome?

When the project was completed and rented out we refinanced into a perm loan and due to new appraisal value and equity position we were able to recoup the cash outlay we had into the deal and take a bit of extra cash to help continue to fund our investing.

Lessons learned? Challenges?

The most valuable lesson learned on this deal was having a good working relationship with local inspectors and zoning is immensely important when trying to renovate older properties. The city required us to bring the 1940's home up to code but since it was virtually impossible to retro fit to current standards we worked in conjunction w/ local inspectors to devise a plan that met code and their requirements w/o it breaking the bank!

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

This was an off market deal. We used our go to lender MoFin!

Investment Info:

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

Purchase price: $42,000
Cash invested: $60,000

Took existing dilipitated quad plex and stripped it down to the studs and reworked entire floor plan for better flow and efficiency. Created (4) 2 bed/1 bath units on a bustling downtown area that is on the upswing. Utilized 3 for long term rentals and made one into short term rental.

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

This is the type of properties we are most drawn too because they allow for a low buy in and the ability to do a tremendous amount of forced equity resulting in a almost brand new property which will immediately be worth significantly more which allows us to pull out any cash we may have in the deal while having a almost maintenance free property for at least 5-7 years, if not longer.

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

It was listed on the MLS but due to the condition it was not something everyone could take on so we were able to get it below asking price.

How did you finance this deal?

Cash and private money partner for rehab; Asset based lender for perm loan.

How did you add value to the deal?

The property was stripped and reworked. We also added value via the finishes which brought in better rents.

What was the outcome?

We were able to refinance into a long term perm loan and due to the new appraised value we were able to take out equity at the initial refinance after the full rehab and property was rented. A few years later, when rates fell and values skyrocketed, we tapped into the equity again and pulled out a significant amount of money we now lend to ourselves to continue our investing journey.

Lessons learned? Challenges?

Taking on challenges others may be intimidated by is a winning formula!

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

MoFin Lending is our go lender for rehab, new construction and 30 yr fixed asset based loans.