All Forum Posts by: Roger Brogan

Investment Info:

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

Purchase price: $320,000
Cash invested: $80,000

Contributors:
Tia Brogan

This deal is a fixer-upper duplex, purchased with my partner for $320,000. Used conventional financing at 25% down.
We plan to invest an additional $80,000 to get her rent ready. We believe the ARV will be north of $450,000 once renovations are complete.
Additionally, we plan to pull ~$1,500 in net cash flow each month. This being my first deal, and purchasing her the day we went under a national emergency due to the covid-19 pandemic has been a whirlwind, but things are looking up.

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

I like the cost effectiveness of investing in mulit family deals.

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

I found the deal on Zillow, and we paid full asking price. We wanted to negotiate the deal, but because we knew there were already 2 cash offers on the table we just went in at full ask.

How did you finance this deal?

25% conventional financing.

What was the outcome?

Currently a work in progress. We are almost done with all the demo, and because of Michigan's stay at home order we are unable to get a dumpster so our backyard if filling up quick.

Lessons learned? Challenges?

First lesson learned is to request a longer timeline to do our due diligence. We only had 5 days to get all of our inspections done. If we had more time we would have been able to negotiate the price lower.

Credit score is excellent, but not owner occupied. Only requiring 20% down. Just got off the phone with them and they said they could go 4.7% with 25% down. 

Our offer got accepted on a duplex this past weekend. The rate we were told was 5.5%, and that's with paying an additional 3,535 at closing to reduce it to that. This seems high. Are other people seeing similar numbers? Purchase price 320,000. Loan amount 256,000. 

@Erik W. @Thomas Loggins @Jonathan Greene @Todd Dexheimer @Rick Martin
I cannot thank you guys enough for all this great advise! 

1. Is it possible to find a 15-30 year fixed commercial loan or is that a unicorn? 

2. I looked up rents in the area and there wasn't much close by because it is 15 min from the small downtown that have comparable rents around the 650 range for a 1 bedroom. So I figured I could get maybe 550 for my 1 bedroom and 700-750 for the two bedrooms. Does that seem fair?

3. @Jonathan Greene Ive thought about it a lot, because I am with you. I would like to find an easy SF home in my city and start small, test the waters on being a landlord, learn property management on a smaller scale with less risk, but I feel somewhat at ease because it is my hometown. I am familiar with the people and the area. A huge bonus is that my wifes dad lives there and has some experience as a landlord and property management. 

4. @Todd Dexheimer Thank you! I did some research and found that my wifes local credit union does commercial loans so I will reach out to them soon.

5. @Rick Martin That is one of my main concerns. I am not sure how the population trends are since I left. When I lived there it was a nice small town, but the opioid epidemic hit it hard I feel like so I will ensure to research those trends and also write the property management into the deal to make sure it still cash flows.

Thanks Erik! That was very helpful and put me a little at ease. I will run the new numbers on a 5% 15 year loan to see if the numbers still look appealing. Is there a way to figure out what the tenants currently pay for rent? I have been estimating that with comparable properties in the area. Should I target a local credit union from my hometown for financing? I think I have an old account with them but I have yet to be there in years.. I have read a lot about the importance of building a relationship with a local bank.

After looking at several SFH, I have yet to find one to purchase for a rental that would be profitable in my area.

As a result, I expanded my search to my hometown which is about an hour away and have found a 7 unit multi family apartment that looks good on paper. I know this would need a commercial loan, which I am not familiar with what so ever, and it would be my first investment property located 1 hr away, I am very reluctant to make a move on it. How different is the commercial loan process than the residential one? How much higher will the rates be compared to a SFH? Will I need more than 20% down for a commercial prop?

I will take all the advice as I can get. Thank you!

Thanks Warren! Ill make sure to get it professionally inspected and I'll try and get some pics for you too. Right now I have 10,000 set aside for the fix but im not sure if that will be enough or not. I know we wont know until we get under there but fingers crossed!

@Kase Knochenhauer hahaha when I was in a frat in college we had to run our dryer non stop in the basement with the exhaust vent off to prevent our pipes from bursting. The utility company shut off our heat becuz our fraternity didn’t pay the bills. #fireupchips?

Going to submit an offer on my first rental tomorrow with a friend of mine. Ask is 95k but we are offering 85k due to the sloping floors and the bad Reno job the previous owner made. I know I should stay away from foundation issues, especially being my first one but it’s on a crawl space and thought it could be jacked up and leveled pretty easily. It’s a 1.5 story and comparative rents in the area for a house this size is around 1500. Let me know your thoughts.