All Forum Posts by: Tristan Toliver

Hello all!

Last Saturday marked the 1 year anniversary of the purchase of my first investment property. Definitely a lot of ups and downs but I'm glad I went through with it. With renovations and market appreciation, I'm now looking at $250K of equity in the property. I close on a HELOC next week and my plan was to use that money to invest in more rentals in the area. But I recently came across a listing that was sold at the end of 2019 and is now back on the market for nearly 3x the purchase price. It made me think if selling my property and using that money to invest elsewhere (in or out of state) would be a better idea? Or maybe trading up with a 1031 exchange? Would it be beneficial to sell for any reason?

The way I look at it, keeping a cash flowing rental and still being able to use the equity with a HELOC seems like the ideal situation. But I'm curious if others have a different perspective. And if you were in my shoes and my age (mid-20s) what would you do, knowing what you know now?

I'm sure there are a lot of different factors but any insight is appreciated. I'm still new to real estate and always looking to learn. Hoping this can strike up great dialogue. 

Thanks!

Investment Info:

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

Purchase price: $265,000
Cash invested: $50,000

A three-unit, value-add property that I house-hacked. Only one unit was rented below market when I purchased.
I was able to renovate the property, raise rents, and get it fully rented out. I am now living in the property and getting $2400 a month in rent and my mortgage payment is $1,700.

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

I liked the idea of buying a multi-unit property with owner occupied financing to limit the downpayment out of pocket and being able to rent out the other units to offset the mortgage payment.

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

I found it through the MLS. Negotiated with the seller after getting an inspection done. Bought it for $20K below asking price with a $9K credit at closing for repairs.

How did you finance this deal?

I had to put 5% down for a Conventional mortgage and received a $15,000 grant from the city that went towards the downpayment. My portion of the downpayment was from saving money over the course of a couple years.

How did you add value to the deal?

I rehabbed the two vacant units, added curb appeal and got the building fully leased.

What was the outcome?

I currently live in the building and it is cash flowing $700 a month. I am putting all the cash flow aside for expenses and treating it as breaking even and being able to live for free. I recently got an appraisal done and have $250K of equity in the property and close on a HELOC next week. I plan on using that money to buy more deals in the area.

Lessons learned? Challenges?

Rehab will take longer than you think and cost more than you think!
COVID was a challenge since I closed on the day that everything shut down. Pretty crazy.
Set expectations for contractors. Do three withdrawals for a project.
Plan on things going wrong. That way if they do, you already planned for it. And if they don't, it's a pleasant surprise.

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

None to recommend!

@Andre M. Nice. Sounds like you are on the right path. I have no experience with the Vacants to Value program but have heard good things. I would suggest searching it on the forums and visiting the Maryland Investors Network group on Facebook. There are a lot of Baltimore investors in that group and I'm sure someone could provide some insight for you there. 

An FHA loan combined with a city grant would be great. If you decide to go the 203(k) route, I would love to hear of your experience so don't forget to post about it! Good luck again with your purchase.

Hey @Alan C.

Great point to mention that the 203(k) are for primary residences only. I assumed that Andre was looking to live in the unit but that was a mistake to assume that. Thanks!

@Andre M.

To clarify, I was able to use a low downpayment loan because I am occupying the property as my primary residence. I am living in one unit and renting out the other two. You can use one of these loans for up to 4-units. Anything after 4, you're looking at a commercial loan. Can't think of a better way to get started in real estate than a house-hack! If you are looking to just flip a property, then unfortunately FHA will not be an option if you do not intend for it to be your primary residence. I hope this helps!

Hey @Andre M. 

I ended up going with a Conventional loan on another property and using my own capital to fund the rehab. I came to find that FHA 203(k) loans require you to jump through many hoops and is a very involved process on both parties. Although it is a great option to purchase and fund your rehab all while having a low down payment, I ultimately decided against it. However, I did use a program in Baltimore that granted me $15k to go towards down payment and closing cost assistance. The program is called NeighborhoodLIFT Program. I would also recommend taking a look at the Healthy Neighborhoods program. They offer similar grants and loans to purchase and rehab homes in certain parts of Baltimore. I'm not sure of the status of these two programs today, but worth taking a look. Feel free to shoot me a PM if you have further questions.

I hope this helps and good luck on purchasing that multi-family!

@Ozzy Sirimsi haha, you are probably right! Biggerpockets: Where dreams turn into reality, lol! I'm considering subbing out majority of the work since it is not extensive and maybe some subs are out of work due to this pandemic and are looking for work. What do you think?

But if you have any contractors in your network that you would recommend, feel free to send them my way. Thanks for the reply!

@Tim Jacob Good idea. Thanks, Tim. Any other work that you suggest I sub out? Also, do you have any contractors in your network that you would refer?

Hello,

I am in search of a contractor in the Baltimore area to renovate two units. Work includes: drywall repair/install, electric, plumbing, light bathroom remodel, gutter work, HVAC. Hoping to begin rehab ASAP. Since there is not extensive work being done, I think this project can take no more than 2-3 weeks tops. 

My ideal contractor will be:

• Licensed, bonded, and insured
• Fairly priced
• Very communicative and responsive
• Able to send references, pictures/videos of recent work
• Not very busy right now and can make this project a priority
• Interested in building a relationship for future projects

If you or someone you know would be interested, please feel free to message me. I am hoping to meet this Friday or Saturday at the property to discuss the scope of work.

Thank you!

@Marc Winter Thanks Marc. I read that letting tenants know you are the owner could allow them to take advantage of you. To avoid that, I was thinking of introducing myself as the PM. I could see how that could come back to bite me in case the tenants do some digging on their end so I will revisit that idea. Thanks for the input.

@Mike Wilkinson Thanks Mike. I am definitely leaning towards automatic payments to make things easier for everybody. Just out of curiosity, any suggestions for apps/sites for collecting rent that have worked well with your tenants?