All Forum Posts by: Rayce Barnes

Investment Info:

Small multi-family (2-4 units) other investment in East Wenatchee.

Purchase price: $140,000
Cash invested: $450,000

Started with a raw piece of land
Built a town home style duplex
Refinanced out the money to build another

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

Available land in a neighborhood and I wanted to do a new build acting as GC

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

Found a raw piece of land and made a market value offer to the owners. They financed the land for me at $140k

How did you finance this deal?

Seller financing; $140k on a 5 year term

How did you add value to the deal?

I built 2 townhome style duplexes side by side.

What was the outcome?

Total invested/loaned was
$140k for the raw land 2017
$200k for the first duplex 2018
$250k for the second duplex 2019

ARV $950k which added approx. $360k in equity

Current value is $1,600,000 if a 6% cap is used. (But that number seems crazy)

Current rents average $9,600/month
Current expense average $1,600/month

Lessons learned? Challenges?

Lots of quotes and vetting subs. Not all subs are created equal. This is painful the first time, but once you have the relationships it’s cake.

Ex) best craftsman I’ve ever met charges $75 to hang a door and it’s perfect and takes him about 15 minutes. His efficiencies and skill has made his low price very lucrative and he’s always busy. (These contractors exist)

All the other contractors charge up to $200/door and may do a terrible job and take an hour or more.

What’s you’re process? My area has little to no investor minded realtors. I’ve tried to coach some of the realtors that I use what I’m looking for but they really aren’t interested. It’s just one more thing they have to learn/look for. I’ve offered a finders fee to realtors as well for off market deals. But no real luck. They seemed to be laser focused on the mls. Any advice would be appreciated. 

 That’s great advice. I would agree. I have done two other 1031 exchanges that were successful. The easiest one was when I found an off market deal and presented an offer to the owner prior to selling. He accepted and carried the contract for me. Very seamless transaction. 

 Yes true. The only reason  I sold was the issue with a non paying tenant. Which city of spokane in Washington was only allowing evictions during covid for non paying tenants if the house was being sold. I had to sign my rights away in order to get the tenant out of this house. 

This was actually my first failed 1031 exchange. I submitted multiple offers but because of the rush to real estate the last couple years my last offer also fell through. (offered $30k above asking price and was beat by a $100k over asking price on a $300k sfh)

I ended up paying the taxes. which, i believe, has actually been mostly offset by being designated as a real estate professional and getting a cost segregation on another property. I couldn't find anywhere to put the money so i ended up purchasing a deep water boat slip for $72K (nearly doubled in appreciation since purchased) and buying a piece of land in a development across the street from a golf course in my area. planning to get a house boat for the boat slip and rent it out as a str, and begin building the sfh on the land next fall.

This was actually my first failed 1031 exchange.  I submitted multiple offers but because of the rush to real estate the last couple years my last offer also fell through.  (offered $30k above asking price and was beat by a $100k over asking price on a $300k sfh)

I ended up paying the taxes. which, i believe, has actually been mostly offset by being designated as a real estate professional and getting a cost segregation on another property.  I couldn't find anywhere to put the money so i ended up purchasing a deep water boat slip for $72K (nearly doubled in appreciation since purchased) and buying a piece of land in a development across the street from a golf course in my area.  planning to get a house boat for the boat slip and rent it out as a str, and begin building the sfh on the land next fall. 

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $42,000
Cash invested: $35,000
Sale price: $185,000

Single level, about 900 sqft. Super cute little house with a carriage house garage in the back. This was my second deal and I lost all my employees on this house. But I finished it myself and it came out great.

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

Another cheap house that needed a full renovation. Better area than the first home. Nothing could have been as bad as my first deal. Now I knew “everything”. What could go wrong.

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

I hired a real estate agent. I don’t remember if we did much negotiation. Pretty much paid asking I believe.

How did you finance this deal?

Cash

How did you add value to the deal?

Full renovation. Added a bathroom where the laundry room was and a closet in the back room. This took it from a 1 bedroom 1 bathroom to a 2/2.

What was the outcome?

Rented for $950/month for a few years and ended up selling it for about $185,000 in the beginning of 2021.

I was actually forced to sell due to covid restrictions. Tenant hadn't paid rent for 10 months. Only legal way to evict was to move into it or sell(city and state covid laws). I felt like I had no choice but to sell to get him out. Probably could have quit claimed into a different LLC owned by my wife…..?

Lessons learned? Challenges?

Hire subs. At this point I was still trying to hire employees and show them how to do things by watching YouTube videos on renovations. I still had one employee that said he knew how to do things but he had a very hard time completing a task.

Vetting and hiring subs that specialize in one area is where I landed once I got into this deal.

This gave me the confidence to keep moving forward.

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

Yes, Tom Clark in spokane Washington. He did a great job pricing it in a wild market and helped me reason through several unique offers.

Investment Info:

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

Purchase price: $30,000
Cash invested: $90,000
Sale price: $180,000

3 plex completely remodeled into a duplex.

First deal. Had no idea what I was doing. Started a construction company. Hired a bunch of guys. Spent way to much money. Should have burned this one to the ground. Very great-full the market was in my favor.

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

I was told to get into real estate. I knew nothing. Cheapest house I could find.

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

Saw a for sale sign. Owner was an agent. Met him on site. Verbally negotiated him down $5k to the accepted price of $30k-ish.

How did you finance this deal?

Cash

How did you add value to the deal?

Total renovation. Insulation, Sheetrock, electrical, plumbing, heat, cabinets, bathrooms, kitchen, appliances, roof, windows, paint, landscape, etc

What was the outcome?

Break even at time the renovation was done. So held onto it and rented it out for a few years. Sold for a profit. I actually think I sold for closer to $160k.

Did a 1031 exchange as the down payment into an 11 door purchase between two adjacent properties.

Lessons learned? Challenges?

I think I learned everything in this deal. I started a new construction company. I Never had any previous construction experience or training. And it was a complete down to studs renovation. I hired 12 people immediately that also had no idea what they were doing. I did a lot of YouTubing that summer. Had one person that said he was a Forman…. I still don’t believe that. Once I finished this deal I knew I could do any worse. So I tried again.

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

Absolutely not.