All Forum Posts by: Samuel Garrett

Investment Info:

Single-family residence buy & hold investment in Decatur.

Purchase price: $48,000
Cash invested: $85,000

3/1 1580 sqft SF on large lot, with big backyard and detached garage and carport. The garage is 800 sqft, where a portion can be converted into a studio room with its own bath and massive closet space. The SF was converted into a 3/2 to appeal to a broader market and increase the value. Rehab took 75 days with a few stalls in schedule. Strategy is to BRRRR with obtaining a LoC with a bank that I have an existing relationship with.

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

This was the first deal that was presented to my from a wholesaler. The property is located near a hospital and a popular community area (Point Mallard Park). Also, we saw instantly the opportunity to add a bath that significantly increase the value. Which the appraisal came back at $120k, spot on from our comps and analysis.

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

Presented to me by a wholesaler. After inspection and running numbers, submitted offer (and accepted) $7k less than asking, based on key concerns identified in the inspection.

How did you finance this deal?

Cash deal. Partnered with a colleague who saw what I was doing with my first deal and was confident in our abilities. Partner provided capital for the acquisition, we covered the remaining costs.

How did you add value to the deal?

The renovation provided a remarkable finish. The significant value add was the conversion of bedroom adjacent to another (master) bedroom. End result was a master ensuite with 8 ft wide walk in closet. More value potentially could be made by running sewage to detached garage and converting that space into a studio apt. Waiting to obtain cost and may pursue this down the road.

What was the outcome?

A remarkable finish inside and out. Positive responses from surrounding neighbors as we maintained/increase the areas value. The property appraised at $120k. We are closing on our LoC for 80% LTV to use on the next project. Continuing to build rapport with the local bank with these kinds of turnarounds. The property is currently listed for rent at $1200 with 4 applications submitted after 5 days of being posted online.

Lessons learned? Challenges?

Contractors, contractors, contractors. Due to us converting a bed into a bath, definitely wanted to go through the permit process which was easy and the bldg dept are very gracious. However, the subs (electrical / plumbing) that were used didn't show up and caused delays. In the end, I had to write a letter to the dept that the subs abandoned the project, in order to get a new sub to pull a permit and finish the work.

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

Kristen Strickland at Iberia Bank in Madison. I have worked with her for a year now, building a strong relationship.
JD Crowson, my electrician who was busy at first so couldn't do the job, but came back in the end to cleanup and see us to the finish line!

@Kiley N., I was able to get an 80% LTV, interest only Business LoC for two years.

I talked to a handful of local banks throughout the area and all were in the 70-75% range, some even had a seasoning period. This bank along with another (Iberia Bank) offered the best terms and rates. I also believe it is dependent on your financial status and most importantly your relationship which I have developed over the course of a year with the two.

Investment Info:

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

Purchase price: $225,000
Cash invested: $80,000

Advertised as a portfolio sell, acquired two (C - Class) duplexes (1 bldg - 2 x 3 bed / 1.5 bath; 2 x 2 bed / 1 bath) in the five points area of Huntsville.

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

After spending a few months reading, listening to podcasts and webinars, i was anxious to get started with applying the strategies i had just learned. I was primarily looking for MF. There was a great amount of excitement with all this talk about growth within Huntsville and Madison. I wanted to take advantage of this opportunity by buying in the heart of Huntsville...5 Points. Also, the rent rolls suggested that the current rents were grossly under market and an ineffective property manager.

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

These sets of duplexes was on loopnet. The owner was unloading a good amount of his portfolio to invest in commercial retail buildings. He had these last two duplexes for sale at $240k. I worked with the transaction agent from SVN Realty and based off the analysis ran, I offered a price of $225k. This was accepted with the opportunity for retrade. In the end, I was able to get a few things fixed. But I should have focused on the electrical service...

How did you finance this deal?

I had already refinance two of my longterm held properties that gave me the capital for the down payment and renovations on the first unit which was vacant at the time of purchased. I went with a local community bank (First Community Bank Cullman) that offered a portfolio loan, 5.99% fixed for 5 years on a 20 year amortization.

How did you add value to the deal?

We did an overhaul on the first unit which was vacant. Expanded the upstairs bathroom and closet in the adjacent bedroom. LVP flooring all throughout the 1st floor. Upgraded the kitchen with new countertops and all SS appliances, too include W/D. I purchased the appliances through FB marketplace at a great discount.

What was the outcome?

After 10 months, i increased my rent to 26%, by November will be by 36% after we renovate our final unit. The properties were recently appraised for $313k based on the sales approach, which the bank went with. The income approach was $17k greater. I was able to get a business LoC for $74k which will fund our next deal later this month...

Lessons learned? Challenges?

Vet your contractor. I was in a rush and didn't check to see if they were licensed. As soon as they began demo and exposed walls, city inspector popped by and shut the project down.This delay humbled me and after 3 months going through 4 more contractors, i finally found one that was "Licensed/Insured" but also that would work with me. The city required me to bring the electrical up to code for BOTH units. Costly venture that I didn't forecast and set me back.

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

Steven McRea - FCB Cullman, Paul McDonald - SVN Realty. These gentlemen made my vision a reality by finding, negotiating, educating and funding my first deal that is now in the process of funding my next deal. I also connected with my Realtor/Property Manager (Matt McDermott), thanks to me having to go through the eviction process of one of the tenants. I would definitely say that something great came from that experience!

Hey @Shawn Costley, great question and thanks for posting to generate a discussion. I too have those same questions. In addition to the comments above about resources to determine market rents, i also use Hotpads and GoSection8 (Housing Authority marketplace.

Hotpads lets you see what is advertised in the surrounding areas and allows us to look through the pictures to see what has been done to the properties. Plus it is one of the platforms used by many potential tenants.

GoSection8 is the marketplace for section 8. Once you create a landlord account, place a property on the active listing, you will be able to do rent estimates, based on what is listed on their database to see how yours compares.

Like Charles mentioned, when 'initially' doing my numbers, i am very conservative. Once i get halfway through the renovation, mindset changes in the fact we believe we can get higher than first thought. Once completed, we test the market by going a little higher. So far, we are very successful. Of course the biggest supporting factor is the screening of the tenant and income verification of at least 3 x the asking rent.

Proof of the significant different when updating, one of my 2 bedroom properties, that i recently updated, is renting for $850, while a similar 2 bed next door, that hasn't been updated, is still at $550. On Hotpads, you are able to see a significant difference inside and out.

Happy investing!

Hey good folks, it seems like we all are nearby on the Arsenal. I would definitely like to be apart of any meetup. if it is lunch, i am available wed/thurs of next week. 

Hi @Richard Locklair. Congratulations on your recent success. I am in the local area as well. I just closed on my first property that we are planning to BRRRR as well. It is also located in Decatur. I would love to sit down sometime to exchange experiences and ideas. I will send you a DM.

Again, congratulations!!!

Sam

I just went through the eviction process and Sarah Taggart's team represented me. I highly recommend them. Took roughly 3 weeks (which typically is 5 weeks), thankfully due to the tenant's failure to properly respond to the court (because she was incarcerated). A requirement by the sheriffs dept is that you have a team of 4 personnel on site to be at the ready to move when the sheriff gives you a date/time. The sheriff also mentioned to me that i was very fortunate that it only took 3ish weeks. In the past, it used to take 4-6 months. In large part the sheriffs dept being under staffed. but now they have dedicated staff to handle all civil suits.

You have to send out a notice to quit and after 7 days you can officially file an eviction. If you file this with Mrs. Taggarts team by 1 pm, they can have it filed in court and served the same day. then the tenant has 7 calendar days to respond. If they don't respond, then the lawyer will file a default judgement. The final step is the writ of possession which is filed 7 calendar days after the default judgement is signed. This document will be sent to the sheriff dept to schedule a day/time for the removal of the tenant. 

If you initiate this process, do not accept money from the tenant, as this will end your legal right to evict.

All this information is provided in their engagement letter.

Good luck!

@Dmitriy Fomichenko thank you for your great response. can you elaborate on your example given where you used leverage. How was purchase loan constructed? Was a non-recourse loan used with your SD? Or did you combine your SD money as a down payment and then a loan in either your name or your LLC name to purchase the property?

Also, can your SD LLC invest in a LLC owned by the same person to purchase a property? Would there be conflict if it is the same owner?

hopefully i made sense with my questions.  thanks for your time and valid input.

thank you @Kuba F. and @Maria McCreless. 

I appreciate the insight and things to consider.  My agent will run comps for  a 4/3 w & w/o garage vs 3/2 w/garage.

Just driving by the area, i see a mixture of both. the homes in the area are priced between $90 - 105 sqft. so the added potential of 400 sqft has an upside of $30 - 40k. But I understand that doesn't mean much if there aren't any interest.

Again, i appreciate your insights. Thank you.

BP Family, I'm currently evaluating a 3b/2ba fix/flip where we would be converting a 400 sqft 2 car attached garage into a master with bath / walk in closet. Will take the sqft of the house from 1200 to 1600. Will also add a mud room which would be connected to the new (relocated) laundry room next to the rear entrance. This will also allow me to maximize more space for the kitchen as we would be able to relocate the water heater and W/D. I see many upsides, but the biggest drawback would be the removal of a garage. Seeing if the obvious pros outweighs the cons. Happy to hear your experience and thoughts. Thanks.