All Forum Posts by: Rylee Knox

Investment Info:

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

Purchase price: $133,000
Cash invested: $60,969

In March of 2020, we purchased a 3-unit property in Augusta for $133,000 with a 20% down commercial loan with a 20-year amortization fixed at 5.0% for 5 years. This property consisted of one 2-bedroom unit with a tenant in it, one vacant 3-bedroom unit, and one vacant 3-bedroom unit that we gutted to the studs and converted to a 4-bedroom unit. This project was a giant learning curve for me, as it was the first time that I had ever really done a full remodel.

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

I was interested in this deal because of the value add opportunity. This property had great bones, and large units, but needed some major cosmetic updates. We were able to make those cosmetic updates and immediately add value to the property.

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

This deal was listed on the MLS for $119,900. We used an escalation addendum and that resulted in a purchase price of $133,000.

How did you finance this deal?

We used a 20% down commercial loan through Kennebec Savings Bank. We invested $38,705 in down payments and closing costs. We financed $25,800 of the improvements with the bank we got the loan through, as well as contributed an additional $21,445 of our own money to complete the rehab project.

How did you add value to the deal?

This property consisted of one 2-bedroom unit with a tenant in it, one vacant 3-bedroom unit, and one vacant 3-bedroom unit that we gutted to the studs and converted to a 4-bedroom unit. This project was a giant learning curve for me, as it was the first time that I had ever really done a full remodel. We closed on this building a few days before the 15 day government shutdown, so none of our contractors showed up, and we spent the next six months doing just about everything ourselves. We change

What was the outcome?

Our total cash invested in this deal was just under $61,000. It currently cashflows $26,171 annually yielding a cash-on-cash return of 43%. Today, just 3 years later, this property is worth about $275,000. If we were to sell this property today, our net cash flow on this deal would be $117,191 in just 3 years and out Internal Rate of Return would be 62%.

Lessons learned? Challenges?

This project was a giant learning curve for me, as it was the first time that I had ever really done a full remodel. We closed on this building a few days before the 15 day government shutdown, so none of our contractors showed up, and we spent the next six months doing just about everything ourselves. We changed the floor plan, rewired the unit, and changed out old plumbing. We hung our own sheetrock, laid our own floors, and got a complete education in most things remodeling for free.

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

Katie Vickers at Kennebec Savings Bank

Investment Info:

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

Purchase price: $202,150
Cash invested: $26,936

In 2019, we purchased a 4-unit property in Farmingdale for $202,150. We invested $26,936.50 via down payments and closing costs to purchase the property, and it cash flowed $7,130 annually at the time of purchase, giving us a 26% Cash on Cash Return. Just one year later, in 2020, we did an 80% LTV cash out refinance for $224,000 and pulled out $48,745.66 of equity in cash that we used to continue to build our real estate portfolio.

Analysis updated 2/17/2023.

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

We loved that the heat and electricity were independently metered and could be billed back to the tenants. This is also a purpose built 4 unit which attracted us to the deal as many buildings in our market were converted from single family to multifamily and purpose built multifamily tends to perform better in my experience.

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

I found this deal by sending Facebook messages to every landlord who was advertising an apartment for rent in my target market and asking them if they would like to sell. The seller of this property responded that she was interested in selling, but that she was going to list the property, but she agreed to give me a 24 hour head start. The property was listed for $189,500, and we used escalation addendum, offering to pay $5,000 more than the next highest offer with a max price of $215,000.

How did you finance this deal?

We used an 11% down owner occupied loan from a local lender with a 30 year amortization and a fixed 4.5% interest rate. We later did a cash out refinance with an 80% LTV loan with a 20 year amortization and a 4.25% interest rate fixed for 5 years.

How did you add value to the deal?

We converted to natural gas, installing 3 new heating units. We painted the exterior of the building and brought rents up to market rates.

What was the outcome?

This asset is now completely de-risked for us and our cash-on-cash returns are infinite because we do not have any capitol left in this deal. Today, just 3.5 years later, this property is worth about $375,000 and it cashflows $26,836 annually. If we were to sell this property today, our net cash flow on this deal would be over $ $279,000 and our Internal Rate of Return on this deal would be 294%. Our initial investment of $26,936.50 has been returned to us over 12 times in the first 3.5 years.

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

Katie Vickers at Kennebec Savings Bank

Investment Info:

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

Purchase price: $202,150
Cash invested: $26,936

In 2019, we purchased a 4-unit property in Farmingdale for $202,150 with an 11% down 30-year loan with a fixed rate of 4.5% from a local bank. This was our second owner-occupied House Hack. We lived in one of the second-floor units which we absolutely loved. This property sits right across from the river, and a walking trail, which was great for our lifestyle. The property consists of four 2-bedroom units that were all originally rented for $775 each, today they rent for $1350-$1500 each. We invested $26,936.50 via down payments and closing costs to purchase the property, and it cash flowed $7,130 annually at the time of purchase, giving us a 26% Cash on Cash Return. Just one year later, in 2020, we did an 80% LTV cash out refinance for $224,000 and pulled out $48,745.66 of equity in cash that we used to continue to build our real estate portfolio. This asset is now completely de-risked for us and our cash-on-cash returns are infinite because we do not have any capitol left in this deal. Today, just 3.5 years later, this property is worth about $375,000 and it cashflows $26,836 annually. If we were to sell this property today, our net cash flow on this deal would be over $ $279,000 and our Internal Rate of Return on this deal would be 294%. Our initial investment of $26,936.50 has been returned to us over 12 times in the first 3.5 years of ownership.

Analysis updated as of 2/17/2023.

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

We loved that the heat and electricity were independently metered and could be billed back to the tenants. This is also a purpose built 4 unit which attracted us to the deal as many buildings in our market were converted from single family to multifamily and purpose built multifamily tends to perform better in my experience.

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

I found this deal by sending Facebook messages to every landlord who was advertising an apartment for rent in my target market and asking them if they would like to sell. The seller of this property responded that she was interested in selling, but that she was going to list the property, but she agreed to give me a 24 hour head start. The property was listed for $189,500, and we used escalation addendum, offering to pay $5,000 more than the next highest offer with a max price of $215,000.

How did you finance this deal?

We used an 11% down owner occupied loan from a local lender with a 30 year amortization and a fixed 4.5% interest rate. We later did a cash out refinance with an 80% LTV loan with a 20 year amortization and a 4.25% interest rate fixed for 5 years.

How did you add value to the deal?

We converted to natural gas, installing 3 new heating units. We painted the exterior of the building and brought rents up to market rates.

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

Katie Vickers at Kennebec Savings Bank

Investment Info:

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

Purchase price: $135,000
Cash invested: $5,885

In 2017 my then fiancé, and now wife, Emily and I purchased a 3 unit home in Augusta for $135,000 with a 30 year fixed FHA loan at 4.375%. We did about $3,500 in renovations, and rented two of the efficiency units for $625, and $750 per month. We lived in the property for 366 days, and then moved out and rented the 2 bedroom unit for $1575 to increase cash flow and save money for our next investment. We put 5,885 down on the property and it cash flowed $4,949 annually yielding an 84% COC Return

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

We knew nothing about real estate investing at the time, we were simply seeking an affordable place to live while we focused on paying off debt, and having a tenant to help pay the mortgage seemed like a great way to keep our living expenses low.

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

We used a local real estate agent who really knew what he was doing. We were the first to offer on the property and we offered full asking price.

How did you finance this deal?

3.5% down FHA loan at 4.375% amortized over 30 years.

How did you add value to the deal?

We spent about $3500 on materials and contributed a ton of sweat equity to renovating both of the efficiency apartments. We separated the electrical panels and added 2 additional high efficiency natural gas boilers so that the tenants could be independently responsible for their heat and electricity bill, increasing the cash flow significantly by decreasing our expenses. We also replaced the sewer line. We learned how to manage efficiently to increase the NOI of the building, increasing it's val

What was the outcome?

Today, just 5 years later, this property is worth about $300,000 and cashflows $14,440 Annually. If we were to sell this property today, our net cash flow on this deal would be over $238,000 and our Internal Rate of Return on this deal would be 237%. Our initial $5,885 investment has been returned back to us over 39 times.

Lessons learned? Challenges?

Efficiency apartments can be tougher to rent and have higher turnover than 2 or 3 bedroom units in my market.

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

We worked with Debbie Bodwell at Guild Mortgage in Auburn Maine. She was phenomenal to work with.

Hey everyone, 

We are having a local meetup this Thursday (October 8th, 2020) at 219 Capitol St in Augusta at 6:00.

No sales, no pitches, just good honest networking. 

This is a monthly networking event for anyone and everyone currently investing in real estate, or interested in investing in real estate in the greater central Maine area. I created this event because I have been searching for a local organic networking event for real estate investors that does not revolve around sales pitches, and have identified a need for a fresh group where people can come together, build relationships, learn from one another, and enjoy the journey of real estate investing together.

You do not need to be an active real estate investor to attend this event! This is for anyone who would like to meet people who are involved in the industry and share similar interests.

Please do RSVP if you plan to attend, as there will be pizza and drinks. 

Also, Please note that appropriate social distancing measures will be adhered to, and we will move the meetup outside if weather permits.

@Joe Splitrock

My wife and I reached financial independence this year a couple of months after my 24th birthday. That is off 10 units that cash flow about 50k annually.

That being said, retirement is a sliding scale for us. We definitely don’t intend to lay with our feet up for the next 60 years, but we are no longer dependent on income outside of our investments which is really nice and extremely freeing. We intend to transition to work that we are truly passionate about with little regard for financial gain.

@Ryan Hazelwood

I am 24, got started when I was 21 with an owner occupied 3 unit on an FHA loan. Once we close on a 3 unit next week, we will own 4 buildings for a total of 13 units.

My advice: Don’t let analysis paralysis Lee you from taking action, but at the same time, risk can be mitigated by knowledge and a few minutes with an excel spreadsheet. Always run your worst case scenario analysis and make sure that you are comfortable with that.

@Erin Dorsey Robinson

I love this question. One thing that I might add is that it depends on your goal for the million dollars. For example if you have a $1M net worth held in private stock that you cannot sell, does it actually generate a better life style for you. Additionally, if you are named in a trust to receive $1M in 25 years, you also will have a hard time generating a better live in the near future.

For most people, I think the reason to generate a $1M net worth is because theoretically, you could live off this using the 4% rule and have $40k a year in net passive income.

The goal of 40k a year in net passive income is very manageable and there is a very straightforward path with less than a 3 year time frame. I just had my 24th Birthday. My wife and purchased our first owner occupied 3 unit in October 2017 on an FHA loan. We lived there exactly 12 months then moved out and used the extra cash flow to save for our next property. An owner occupied 4-unit in June 2018 with 11% down. We saved the cash flow, and bought a 3 unit in March 2020 with 20% down. These are all high cash flow properties.

We have invested a total of $65k cash and generate $41k net cash flow annually after putting 20% of our Gross revenue away for vacancy and CAPX.

Now we own roughly $500k in real estate (mostly financed), and our net worth is less than $200k, but we have accomplished the $41k in passive income goal in less than 2.5 years without coming anywhere close to the $1M in net worth goal.

I think this model is extremely simple, not too risky, and very very repeatable. I would be happy to share more concrete #s if anyone is interested.

I might add that we live well below our means and invest every spare dime from our middle class incomes. And I believe that this (living well below your means) is the most powerful practice for wealth building individuals.

@Kyle Black Welcome! My wife and I invest in Augusta and I would be happy to have lunch with you. Send me a pm and let’s set it up!

I use 5% for vacancy, and 10% for CAPEX. But it really depends on the property. For example, 1 bedroom units tend to have higher vacancy than 3 bedroom units and higher end units tend to have less vacancy. additionally, CAPEX is on a sliding scale from 5% to 15% depending on the age and condition of the building. But I also agree with @Joe Villeneuve. If you have enough reserves or access to funds (LOCs) you don't necessarily need to withhold that percentage every month, however, it is important when analyzing deals that you have a realistic expectation of the cash flow. So you're definitely on the right track. When in doubt, I estimate conservatively then hope to outperform my estimates. Best of luck to you!

@Douglas Curtiss