All Forum Posts by: Michelle St. Claire

Investment Info:

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

Purchase price: $313,000
Cash invested: $9,000

Two Fourplexes, side-by-side in the same fenced enclosure ($156,500 each).
Each 1 bd/ 1 ba.
C- Neighborhood.
Seller-financed at 15% down, 6% interest, with balloon in 5 years.
I secured two personal loans (one through a bank, one through a friend) for the down payment and another personal loan (through a bank) for the initial rehab.
2 vacant units upon purchase.
Significant deferred maintenance.

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

My goal in 2019 was to purchase 8 units so what better way than do it in the one purchase. This purchase was a little risky given the deferred maintenance and the neighborhood, however, I am up for the challenge. The cash flow after full rehab and refinance will be approx $500/mo each.

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

It was on the MLS and my broker was the listing agent. I knew that absolute minimum the seller would take and that he would finance the deal (due to my relationship with the broker). The seller-financing was the major drawcard for this deal. Many backed out of this deal beforehand because of the deferred maintenance. The only negotiation was on the down payment, the seller wanted 20% and I countered with 15%.

How did you finance this deal?

Seller-financed at 15% down, 6% interest, with balloon in 5 years.
I secured two personal loans (one through a bank, one through a friend) for the down payment,
I used $9,000 of my own funds for the acquisition to make up some short fall between the two loans. I also used $10,000 of my own funds for the initial rehab work. Then I decided I should use other people's money and secured a personal bank loan for $30,000.
another personal loan (through a bank) for the initial rehab.

How did you add value to the deal?

Rehabbing the two vacant units.
Fixing the broken fences and gates so now the property is fully secured.
Landscaping for curb appeal.
Need to rehab the remaining 6 units and paint/update the exterior over the coming 24 months.

What was the outcome?

This is still a new purchase and the deferred maintenance will eat up any cash flow for some time. Once the value has been significantly improved through tenants vacating and rehabbing the units, then I will apply for a loan to pay out the seller. The ARV is expected to be between $190,000 and $200,000 each down the track.

Lessons learned? Challenges?

I paid market value for this purchase because the seller-financing made it attractive. This is not a property that I will gain equity on, however, the ability to use other people's money to purchase and rehab means that I have invested little of my own money to date. The intention is to keep it that way :)

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

Yes, Chuck Sheldon. He is my broker and property management company. He is a big time investor himself and knows Albuquerque inside and out.
And Jens Nielsen (who is a BP member) for the initial coaching and connection to Chuck.

Investment Info:

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

Purchase price: $205,000
Cash invested: $39,000

4-Plex in C neighborhood.
Purchased November 2018.
All 2 bd/ 2 ba units.
Rehabbed one vacant unit, the remainder are rented and will rehab once (if) they vacate. They are good tenants so I am in no hurry to motivate them to leave any time soon (I could charge an extra $100/mo per unit once remaining are rehabbed).
Total cash invested includes down payment and approx $9,000 on initial rehab work.
Average monthly cash flow is approx $300 while I make small improvements.

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

I knew I wanted my first investment property to be a fourplex as I could get a conventional loan and I would minimize the risk of full vacancy. Plus, it's kind of bad-*** to start with that.
I selected Albuquerque as I made a solid connection there with an experienced RE investor/Broker/Property Manager. That connection was invaluable to get started (and still is invaluable as I seek to expand).

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

My broker bought it to me as he was approached to sell it and knew it would meet my criteria. He was the agent for the seller and buyer. There was no negotiation as the seller was adamant on the price and I knew it was a decent deal as was.

How did you finance this deal?

I got an FHA loan and moved into the vacant unit so I could help with the rehab and take care of deferred maintenance. I was able to work remote with my job during my time there.

How did you add value to the deal?

I rehabbed the vacant unit so was able to increase rent for that one by $125/mo. I gated the entrance so tenants feel more secure and fixed some of the deferred maintenance. Waited 12 months before increasing the rent on the existing tenants once they could see the improvements made externally.

What was the outcome?

The intention was to stay in the unit for 1 year working remotely with intermittent travel back to California, however, I had a leadership change who no longer supported this arrangement. Now the property is fully rented with minimal headaches. It has been a great first investment.

Lessons learned? Challenges?

Take the plunge! I didn't spend too much time agonizing over the deal analysis deals once I knew what a decent price point was for the area and the rents. I just wanted to get my feet wet and knew that long term buy and hold is pretty forgiving.
I also learned (which I suspected going in) that purchasing a fourplex doesn't need that much extra diligence than a single family or duplex. But the returns and income are more stable.

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

Yes, Chuck Sheldon. He is my broker and property management company. He is a big time investor himself and knows Albuquerque inside and out.
And Jens Nielsen (who is a BP member) for the initial coaching and connection to Chuck.

Thanks @Shannon Richardson. I was actually hoping to get a list of stores that are set to open (not opened already) to get ahead of the game :)

@Lisa Brown Check out this blog for more info: https://www.biggerpockets.com/blog/brrrr-buyrehabrentrefinancerepeatprimer 

When you use this strategy for a property you will live in, then you can get a higher loan to value. Typically investors can only borrow 75-80% fo the appraised value but an FHA loan, for example, will let you borrow up to 96.5%.

@Kenny Dahill Thanks for the reply. Great job on Burbz! I took a look at your website; great to know your services exists for my future out of state investment ventures. 

Yes the app concept is primarily focused on investors who are trying to narrow down markets and/or diversify their portfolio across cities/states. Seasoned investors could also refer to it when pitching an investment opportunity to potential lenders (i.e. to provide reassurance of the chosen rental market) and/or to keep their finger on the pulse of their current investment market.

I like the idea of being able to choose your own thresholds for metrics. Great suggestion! There could be a default setting for those just getting started and still uncertain what good metrics look like. 

Your comment about how often it would be consulted is a valid one, and something for me to explore.

I appreciate the insights. Cheers!

@Jacob Sampson Yes, it would be pulling in data from varying sites - ones that are more trustworthy and update at least yearly. I wouldn't use Zillow, for example, mostly census, city-data, etc. The data exists at the city level for major metro cities at least. The idea is that it is aggregated into one place so you don't have to go to go poking around on different sites. AND that it provides analysis of the metrics too rather than just list the metrics (e.g. how does the population growth rate compare against what is considered a good market or the national average?). Thanks for the thoughts.

@Mike McCarthy good point. There's some neighborhood specific data on city-data.com but it's laborious to click through. Unfortunately most key metrics are at the city level. But some folk (particularly out of state) have a tough time narrowing down cities. Something to ponder though for increased utility. Thanks for the input.

Imagine if an app existed in which you could select a metro U.S. city and it populated a bunch of metrics relevant to real estate investing markets (e.g. population growth, unemployment, crime, job diversity, median house price, average rent, vacancy rate, etc). Also imagine that the metrics display thresholds so you can gauge whether they are "good" or "bad" (based on a pre-determined criteria of what is "good" or "bad").

1. Would you find it valuable?

2. Would you pay for it? 

3. How much would you pay for unlimited city searches? 

https://docs.google.com/spreadsheets/d/1oksilNkfLw...

I am continuing to update this sheet with some of the factors already mentioned (if I can find the data, that is).

@Hotaru Luebbe

Thanks for the input. My post was not about purchasing a Starbucks but knowing where a Starbucks is going to appear as it could be a sign of an emerging neighborhood. Thank you nonetheless 😊