All Forum Posts by: Todd Olson

I am reading it now. I am interested in partnering up on larger deals so I am trying to learn how to structure them as a GP. I have not seen the breakdown on how to do this with the SEC yet. Hopefully it is in this book. That is the purpose of me reading it. I want to put the funding together correctly. What is the reason why you are reading it?

Lenders are broken down into residential loans of 1-4 family and then commercial lenders of 5+ doors. You could try asking your agent in the area to suggest a local community banker that does loans for one of the other. The broker should always have these connections. Best of luck in your journey. 

Investment Info:

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

Purchase price: $565,000
Cash invested: $141,250

My first multi-family purchase was an out of state 8 unit building. I put the traditional 25% down and financed the rest through a local commercial lender. I just recently refinanced the property and pulled out most of the original down payment. The building has gone up in value and I am now looking to do a 1031 exchange into something larger.

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

My interest in real estate started when I first heard Grant Cardone on the podcast many years ago. He inspired me to take action. I continued to learn from the guests on the podcast and sharpened my skills.

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

I found the deal on Loopnet. I called the listing agent and setup a time to meet at the building. He gave me some numbers and we determined the asking price was close to fair.

How did you finance this deal?

I put 25% down and then financed the rest through a local commercial lender.

How did you add value to the deal?

I hired a property manager to help navigate the tenants and local laws. We turned over most of the tenants in the building and stabilized it. Did some cosmetic work and upgrades to some of the apartments.

What was the outcome?

I refinanced the building after 3 years. It appreciated well so I pulled most of the original down payment out and ready to move to a bigger deal. I still have plenty of equity in the building so I would up doubling my investment so far. If you put your money in the bank it would take 833 years to double it.

Lessons learned? Challenges?

Some of the tenants are section 8. There are some good and bad to section 8 as far as the tenants and the inspectors. The local town inspector can be a handful also with keeping up on appearances and garbage that is dumped by drive-by upstanding citizens.

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

I worked with the local commercial broker. He has a good lay of the land and understands the market well. He represented the seller on this purchase and I still stay in contact if other deals come up.

I am in this boat. I am doing a cash out refi currently on one building. There is the costs associated with bank fees and appraisal. Some banks only do 65% of the value and some will do up to 75%. I am also considering doing a 1031 into something bigger and that will allow me to use all of the equity in the building. It’s a good question and comes down to your long term plan. Do you need the cash now or roll it into something bigger and defer the taxes on the sale. 

I like 1 larger building as opposed to 2 smaller ones for a couple reasons. 1 visit for property manager instead of 2 separate trips will cost you more in long run. 1 roof is better than 2. All utilities under same roof. 1 lawn or yard to maintain. Less expenses in long run will be to your advantage. Best of luck in your search. 

I have had a few issues with Section 8 withholding payment due to minor needs during inspection like batteries in smoke detectors and painting over chipped molding or trim. It has been a growing issue with section 8 in the past year and a half with them looking to avoid paying. Requesting a rent raise also can be denied and or take some time to get approved. 
just make sure you screen well in the beginning and be willing to play the game with the inspectors and be patient. 

I also have a water issue in my 8 unit. Some months I pay $350 for the building and sometimes it is $500 a month. Is that reasonable for units with a washing machine in them? I do not have any landscape to water. Just curious what everyone pays per unit for 1/1 and 2/1 bed to bath. 

I definitely would not take option 2 and wait. Five years from now there is a pretty good chance everything will be higher. I am sure every investor on BP will agree with me that they should have started earlier. Happy hunting. 

Seems like some sellers are basing their prices on future rents and not current market. Cap rates have come down all over the place due to lower interest rates. Cash is cheap now. I have seen this in a few markets I am exploring for multis of this size.