All Forum Posts by: Ryan Short

@Parker Eberhard if the seller wants to pay for all of it to be removed than that’s great but I highly doubt it. If he wants the property that bad that might be his only choice, which is not the end of the world. One insurance company even hinted to me as long as they can’t see it then they are happy and will insure the property. Doesn’t mean it’s right but just goes to show you how much they care. 

@Anthony Thompson yes that is true sometimes but as long as it is under 5% of the purchase price it is usually not a problem. Also in this case it is to prevent a lender from denying the loan on a property with knob and tube.

@Raymond Hill this is just a good learning experience if you buy the property or not. I think you are doing the right thing by trying to use the knob and tube as a bargaining chip. I would Only agree with a repair credit though, money off the purchase price will not help you. You want to atleast get $5k back for the K/T. You can also do something called a escrow holdback. The seller sets aside money at closing which will be paid to you once the repairs are finished. This prevents buyer from being stuck with a higher bill then expected.

@Raymond Hill I would ask for a repair credit at closing for the knob and tube wiring that mistakenly was reported to you as inactive. I had a similar situation with my first 4 unit property, I used a license electrician that is a friend to cut out all the knob and tube out of the basement and RE wire only the basement. This way if any inspector or insurance company checks it out it will be considered free of knob and tube. Knob and tube is perfectly safe as long as it is in good condition and insulated. You don’t want the seller fixing anything, they will use the cheapest person and cut corners. Also just an FYI if you try to ask the seller to cut out all active Knob and tube the seller will laugh and sell to the next buyer. That is a very large project with tenants involved and in a large older multi family property. Also if you have any questions about the water damage removal, I own a water damage/mold/fire damage company out of MA.

Investment Info:

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

Purchase price: $545,000
Cash invested: $130,000

Purchased this 7 unit property for $545,000 with $10,000 roof repair credit and a $7500 closing cost credit. I am renovating 2 of the units which will raise the rents by $800. Then I also raised all the other units rents after closing by $75. They were all under market value. I will be doing a cash out refinance in a couple months to pull out between $170k and $210k. Once I am finished the value will be close to $800k and the area is a 7.5- 8 cap.

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

I am a buy and hold investor. I feel like BRRRRing commercial properties is so much easier than residential. Everything is numbers based and nothing is left to chance with your refinance based specifically on your NOI value. Residential properties can be blown up if you have a appraiser that doesn't have enough knowledge about your small sub markets and under cuts your valuation.

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

This deal was on the MLS for over 8 months and was not a deal until the seller went down in price close to $100k by the time I looked at it. I negotiated a roof repair credit for $10k and a closing cost credit after the inspection for $7500.

How did you finance this deal?

Local bank, 25 year amortization, 5.2% interest, rate changes every 5 years.

How did you add value to the deal?

There is many value adds with this property. First I raised all the rents by $75 after closing. I then renovated 2 of the worst under market value units. This raised the monthly rents by $800 a month. I added coin op dryer and washer in the basement. The owner paid for the roof to be replaced.

What was the outcome?

Cash out refinance and long term hold cash flowing over $2,000 a month after refinance.

Lessons learned? Challenges?

I always try to have my closing on the 5th of the month or earlier so I can have the rents prorated and given to me after closing. If a tenant is moving out, have the seller move them out before closing incase of any prior issues of paying rent or problems in general.

@Andrew Smith south of Boston in the suburban areas of Massachusetts. I am buying at 8 caps. If there is run down properties in your area then there is always value to be added and cash flow to be eaten up. That is why it is safer to be a value add investor instead of just a regular real estate investor waiting for the golden goose or high appreciation. You just have to create the cash flow and value in properties. That’s also without saying it took me over a year to find my most recent 7 unit property with high cash flow and tremendous value add opportunities. The patient investor is the smart investor.

@Jackson Chang don’t worry to much about the concrete having mold. Concrete can’t not support mold growth at all. If anything it is surface mold coming off of the laminate flooring. Which means you can just spray and clean it with a anti microbial mold killer. I was suggest replacing the laminate and or carpet that has mold or water damage. If you send some pictures I can evaluate further if you would like. I own a water/fire/mold damage company.

@Michael Ealy

I own 11 units and am in the middle of a BRRR 7 unit in a B area that will appraise for 25% higher once I am down with the renovations to only a few of the units. I have huge goals for myself and my team. I know in the next year or 2 I will be purchasing 20-50 unit complex's at a time. Right now I am more so in the renovate, then refinance and wait phase on my 7 unit. I have a few smaller investors but am looking for larger 6 figure investors that love an amazing return from a very well known trusted person that would bend over backwards for his family friends and investors. I think I'm just trying to speed up the process because I know I can BRRR a 100 unit complex and have the team and mentality to take it down. Very similar to what you are doing but just in a different market, south of Boston for me. I appreciate you commenting back to everyone and giving tips and hints. You will be repaid 10 fold for your generosity.

@David M. Most private money deals are between 6 months and 5 years if your lucky, with a balloon payment at the end which you would have to pay them in full with interest. As an example, you borrow $100k for a down payment, most of the time you would pay interest only payments which would help your cash flow in buy and holds or holding fees with flipping homes. 10% interest only payment would equal out to $833 a month payment. 10% of $100k=$10,000/12 months= $833. You would pay that 10% each year you don’t pay back the private lender. At the end you would owe exactly what you borrowed, $100k. In your case a private lender would not make much sense unless you went through a friend or family for a very good interest rate.

Hi Mateusz, to put down 3.5% you would need to buy a property with a FHA loan. You can only have one property under an FHA loan which has to be owner occupied. You can buy a property with an FHA loan then refinance into a conventional loan then buy another property with another FHA loan as long as your planning on living in the property with the FHA loan for at least one year. That’s what I did with my last property.