All Forum Posts by: Thomas Magill

I missed the part about what your goal actually is… I think that goal is very achievable. It would depend greatly on your market. I’m not familiar with the Minnesota market but that’s 5 deals a year that cash flow $200 a door. If you supplement some equity in the deals from money you’ve saved or your W2 income. That goal gets more and more achievable. 

William,

The best thing I did was drive around the area I was looking to invest and started talking with contractors. I exchanged information with them and would stop by their projects for the next month to see their progress. Speak to their references. Then, find 3-5 contractors to bid on your work, assuming you have a project to work on. This is exactly what I did and it worked out very well for me. 

Hey Jake,

I'll number my responses so its easier to follow...

1. I started when I was 37 and have achieved much more and less than I thought was possible. I'm 44 now.  What I mean by that is, your goals starting out are kind of meaningless because you have yet to live in the moment of achievement. My goal when I started was much more grand than what I've currently achieved but looking back it was a WAG goal. Then, life happened and I have two kids now and things change. But, I'm completely financially free and can live comfortably. In short, things change. 

2. My biggest fear was achieving my goals. I still have to work at this daily to get out of the blue collar mindset of trading time for money. But, the longer I've worked at it, the easier its been to accept the things that have come my way. I'm very Fortunate 

3. Contractors. I came from the Construction Management industry and my ego lied to me. It told me I could, of course, handle these contractors because I PM'd multimillion dollar developments. I learned very quickly that they are bad at every level, but you learn how to deal with them. And, they are not all bad. Once you find ones that are good, you have to be good too. Pay them as soon as they're finished with the work. Make sure you've inspected it, but pay them quickly. Treat good contractors like gold because they have the highest dollar impact on the investment. 

4. I would have started with new builds from the beginning. It's so much easier and quicker to scale. 

5. I am very conservative in underwriting deals. I plan for what's happening right now and not what might happen, unless what might happen is a downturn. If things aren't looking good I'll bake in an additional 10% to protect myself.

6. I would become great at acquisitions. Become an acquisitions manager for another investor. Find someone you can learn, not only acquisitions, but the rest of the process. Become great at systems and processes because that is really the only thing that makes investing work consistently.  

I realize some of these answers are generalities, so if you want more specific answers, please let me know. 
 

Thank you for all the reply's. I've been pulling tax delinquent lists and using deal machine. The leads are coming in but not at the pace I'd like. I'm sure it will take time like anything else. 

 Robert:

Build-to-rent is going well, but you have to bring some equity to the table because the cost to build gap to value is shrinking. But, with 10-20% equity they work fairly well. With the builder confidence coming down hopefully the cost will follow.

 I’m looking for infill lots because they typically have water and sewer. But, you are correct, they don’t have to be infill lots. But, I do need to have water and sewer tap connections 

Investment Info:

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

Purchase price: $10,000
Cash invested: $310,000

I bought this land as a part of a package of 4 lots that were turned into 7. I attempted to subdivide this land as well but it did not meet the requirements so in an effort to maximize returns, I decided to make it a duplex.

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

I love the build-to-rent model for the lack of maintenance issues. Your renting out a home you built, so you know, at least for the most part, that it was done correctly.

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

My business partner found this deal from a guy who got sick and wanted to sell off some land he owned. I bought the land (4 lots) and divided them into 7. This lot could not be subdivided so we decided to build a duplex.

How did you finance this deal?

I used my own money to purchase the land (10K) and institutional money to fund the construction.

How did you add value to the deal?

As mentioned above, the land was zoned for one single family home, but in order to maximize the lands value, because its on a corner, we decided to build a duplex. There are some economies of scale with having two properties on one site, and being able to charge roughly the same amount of rent as a single family home.

What was the outcome?

We will be putting long term financing on the property and renting it out. The idea is to refi the property once the mortgage rates come down, but even if they don't, the project still works in its current financing.

Lessons learned? Challenges?

Firewalls are more expensive than you might think. We significantly saved on the insulation of the home which basically paid for the firewall budget hit we took.

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

iFundCities is our lender.