All Forum Posts by: Timothy Connolly

@Account Closed My wife and I started with live in flips, so home ownership was part of the strategy. My short switch back to renting showed me that even, "high end lux property rentals" are still treated like a rental property for the owner. When things break they get replaced as cheaply as possible. Also, renters(unfortunately) can be looked down upon and treated like second class citizens. Especially in HOAs or gated communities. I found this frustrating. Anyways, I invest in long term holds and 40+ unit apartments. I now have a good team of property managers and account attorneys and such, that have made my life a bit more passive and allows me to focus on finding deals(if I want) or golf(more of that recently). 

@Michael Ealy about 6 months. The original owner was converting space at street level to open a night club. He had gotten into his head that his upstairs tenant could run a club so he could do it too. The problem he ran into was that the elevator had not been brought up to code since the early 60s(yikes) and needed to be completely replaced. Which was $200Kish. The ran out of money and could not refi the place without finishing the project. He also lied on his loan app and didn't mention it would be an owner occupied space. That changes the value of the building and how much can be lent on it conventionally. Anyways, After the foreclosure, I struck a deal with the upstairs club to take over the space and also negotiated with the 1.5M hard money first to keep the loan with us while we finished up the TIs and refied them out. There was a lot of moving parts with that deal but it all came together.

@David Zheng The Oakland market going crazy a few years later was just luck. Cant take credit for that. 

Investment Info:

commercial investment investment in Oakland.

Purchase price: $1,800,000
Cash invested: $585,000
Sale price: $8,200,000

Building in Uptown Oakland. I was originally a hard money 2nd lender. After foreclosing, I finished the renovations and rented it fully. The original plan was to hold this property for the long haul. But an upswing in the market after the purchase of the Sears building in Downtown Oakland had Real Estate developers snatching up high quality lots.

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

I had no choice. My wife and I made a bad loan(got into hard money and didn't understand the risks). And ended up having to pull the equity out of my house to defend my position in their bankruptcy. Luckly we were able to lift the stay on the property, take it over and with our experience as REO brokers, bring in the capital and finish the renovations and get it occupied and paying for itself.

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

A friend knew a guy(apparently not very well) who was a hard money broker and had an interesting deal that came across his desk. We had some money "under the mattress".

How did you add value to the deal?

As we were in second position we new that we could either force the sale of the property and get our money back, or take over the property and with our experience representing banks, stabilize the property ourselves and turn it into a passive income source.

What was the outcome?

We ended up turning our original 585K investment into a sale price 4 years later of 8.2 Million and also had a 15k a month passive cash flow during the hold time.

Lessons learned? Challenges?

If you are going to do hard money loans, make sure you are the first lien holder.

Being a landlord and real estate investor has its challenges. If that were not the case then this forum and bigger pockets would not exist. We have all had our fair share of trouble tenants and sticky situations. It is part of the learning curve; And in the end its all worth being financially free. Until a recent change in circumstance forced my family to rent for a short time, it never occurred to me that us landlords can be just as troubled if not more so.  I got caught up with the fact that, "Im in the business, I know what Im doing mentality,". And here I am now, caught up with a predatory landlord that is suing me. His game, as i have come to find out, is to file a lawsuit for baseless claims(which costs very little to do) on unsuspecting tenants and get them to release their deposits to make it stop. The problem with lawsuits, even baseless ones, is you have to spend money on defending them. The unfortunate truth in the country is most in this country can not afford a $200 emergency let alone, spend more money on what the deposit was in the first place to get it back. Yes, I could release my $5600 deposit and $600 pet deposit and go along with my life but this really hits a nerve with me. Its guys like this that give landlords and real estate investors a bad name. I refuse to let him get away with it and have the means to fight, so fight back I will. 

With any real estate deal there are things to be learned from this. 

1) Do a background check on your land lord, or anyone you plan on getting into a business relationship with. Most civil court records around the country can be accessed online now. If I would have plugged his name into the search bar before we signed a lease I would have been able to see that he/or his company are currently in/or have been in active litigation with tenants in the past.(red flag id say) I could have avoided this entire situation in the first place. 

2) This probably goes without saying, but document everything and know your rights as a landlord or tenant. Luckily, I have the experience to know this and this will very much make the difference in this current situation I find myself in. 

3)Tenants are our customers, we own the land and the building, but believe me we are in the people business. We provide a service and you are going to have more success in this business if you treat people with respect. 

My final message is this. People like this are a cancer to our community. If you see predatory behavior, call it out. Lets police ourselves a bit. 

Have any of you gone back to being a renter and regretted the decision? What are your stories?  

@Mindy Jensen maybe mine too? Definitely mine too! I can really get going when someone asksme what I do. I feel like everyone should do this and am more than happy to explain why.  The moment real estate investing comes up, many are interested until their eyes start rolling into the back of their heads when you get into the nitty gritty.... Anyways great share. 

@Anthony Gayden I completely agree.  Most people, when buying a home are paying premium dollars because they want everything perfect. Its an emotional transaction for them.  If you look at your home like an investment (ie value add) you can buy homes to live in that immediately have equity because you saw that a flaw in the house driving buyers away was easily fixed. My wife and I have made over $600K in tax free money in our last 2 purchases because of this. 

The first admittedly, was a bit of luck as we purchased in December 2011 at the very bottom(which we couldn't have known)  and sold in 2014 after the market corrected. Anyone can look like a genius when that happens. 

Our second home, a short sale that had taken 2 years to get approved by the lender. At this point the buyer had found something else. So this was at a price from 2 YEARS previous. Even though my wife is a broker, we let the listing agent double end and get both commissions. Immediately upon closing we had $150K of Equity. With a few minor updates and seasoning we were able to realize that and do a cash out VA refinance to 90% LTV and invest that money elsewhere in other projects.

The point is. If you are flexible on your needs, you can find deals for personal homes and still make money. 

@Jody Schnurrenberger thank you for the tip. I noticed that this past week and didnt jump on that fast enough. 

@Lane Kawaoka I will! I may be doing a 1031 Here in a bit and may need to place some money out that way, so if I do I will hit you up. 

@Matt Motil This will be the perfect place to share some of my horror stories and also take in some lessons from all of you. I just started diving in to all of the content and it has already given me a new energy and excitement to continue to grow my portfolio .

@Duc Ong As I said to Lane, I may be needing to place some money and If I cant do it all here on the Big Island then Ill be headed that way and let you know. 

Jennifer M Dell any questions that I think I know the answer too, definitely. Justin Dossey u, There is always a deal to be found. The market here follows behind CA about 2-3 years so while the REO properties are slim pickings there they are starting to flood our market out here. The reason for this is HI is a judicial foreclosure state and it takes much longer to foreclose than CA which is a non judicial foreclosure state. Thank you both for the welcome!

Aloha from the Big island. Back in 2012 when I was researching property management and looking for my first deal I somehow did NOT come across bigger pockets. It wasn’t until last week when I was looking for a new podcast that a found this one. What I heard was amazing. Here where 250 podcasts of people doing the same thing I was. I do wish that I had his resource 5 years ago and maybe I would not have made the same mistakes that I made in the early goings. Anyways, I’m here now and I’m ready to continue to learn and give the knowledge that I have accumulated. Thank you for the chance to be apart of this community.

One follow up: if you would like a basic CFK agreement that we use for our bank clients just PM me and I can send one to you.