All Forum Posts by: Vince Mathis

Hi Sandy!

I'm from the Sioux Falls area, but now live in Phoenix. On my Bigger Pockets bio I have all the details of the deals I have done in Sioux Falls and the surrounding area as a long-distance investor. I also have a link to a podcast I was on where I go more in depth.

In general, like most markets - SFH in Sioux Falls will not cashflow outside of some kind of Sub-To or seller financed arrangement (which are possible! Just closed one :) ). Rents are plateauing, even dropping a little due to a combination of market conditions and being in the slow season (even less people want to move when it is 0 degrees outside), so be cautious in any underwriting.

I can definitely recommend some great local property management, legal representation, realtors, brokers, service providers and small banks.

Feel free to DM me with any questions or to set up a call!

Investment Info:

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

Purchase price: $2,300,000
Cash invested: $200,000

Single Owner 1970's build, Class B, 20 unit apartment complex with garages, acquired with 80% Seller Financing @ 4.19%, amortized for 30 years with a balloon at 5 years. Brought in $200k in private money @ 14% Fixed, interest only.

Strategy: Long Term Buy & Hold. There is some room for modest improvements to the units which will increase rent approximately 10%, and some expense reductions to be realized.

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

This was our (my wife and me) fourth and largest purchase. Each year we have at least DOUBLED the number of units we acquire. We have great-paying W2 jobs, but would not be able to acquire the 16+ units for this year with traditional financing and our own capital.

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

I follow multiple MLS aggregation sites and local brokers and had seen this deal originally come up in 2022. The seller's asking price was a bit steep, originally posted at 2.7MM. As rates continued to climb over the last year, the deal sat on the market. I initially contacted the broker and asked if the seller was/would consider seller financing for the right offer. He stated that the seller would, so I submitted an initial Letter of Intent through my RE Attorney.

How did you finance this deal?

After some back and forth, we settled at 80% Seller Financed at 4.19% Interest. This is amortized at 30 years, with a balloon to seller at five years. In second position I brought in two local private money lenders. They are debt-only, no equity, and will receive 14% fixed interest, paid quarterly, until we refinance.

How did you add value to the deal?

I met the seller where he wanted to be.

With the interest he will receive through the seller-financing, he will get nearly his original asking price by the time we close the primary note in five years. Over the next three years, we will invest approximately $4-5k to update the units to modern expectations, and be able to see a healthy rise in rent and reduction of time to fill. There will also be cost-cutting efforts through reduction of water usage and connecting to central fire alarms.

What was the outcome?

We just closed one week ago, so hard to say, but so far everything is looking good!

Lessons learned? Challenges?

The seller-financing aspect was interesting. Learned of the IRS AFR for interest rates, as well as being able to shape the note and mortgage for the first time, instead of a bank directing everything. Also working with local, personal lenders has been awesome. The two I am working with are small business owners with differing levels of experience in real estate, but wanted somewhere stable, yet profitable to put their earned income.

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

Tanner Anderson at Cutler Law Firm of Sioux Falls, SD represented me in this purchase. He had great communication and was open to my input while still guiding me within legal requirements and local market expectations.

Looking for a Hard/Private Lender who lends in second position. 

Under contract on great property with seller financing at 4.2%, looking for mid-term debt (2-3 years), expecting to pay around 12%. Looking for $250-400k.

See my BP Profile for my REI history.

Can send financials if interested.

Thanks!

-Vince

Great work Craig!

I love the Sioux Falls market. Glad to see the investment your group is doing downtown!

Any chance this will be streamed?

Thanks Adam!

Looking forward to it!

Hey Logan!

I invest in SF from out of the area, but have made a lot of great contacts locally.

I would strongly encourage you to connect with @Andrew Adam and attend his meetup next week!

https://www.biggerpockets.com/...

 Plans changed! I'm back in. See you this evening!

I have to back out for a church obligation,  but would love to link up early next year!

Investment Info:

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

Purchase price: $1,065,000
Cash invested: $266,250

Contributors:
Josh Utterback

Property is 15 Unit Apartment Building in a smaller, but stable city in South Dakota with an extremely low vacancy rate.

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

We have been growing our 'Goal Stack' since starting in 2020 with our Duplex. Due to living in a HCOL Area (PHX), we opted to invest in Sioux Falls, where our families are based.

In 2021 we set to add 4 doors and closed on a quadplex in October 2021.

For 2022, we set to add an additional 8 doors (get to 14 doors total). Due to the rising market, as well as having purchased the 4-plex off-market and under-valued, we desired to sell that property and roll it into something larger.

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

We sold our previous investments, a duplex and fourplex in Sioux Falls, SD, and utilized a 1031 Exchange to defer capital gains taxes through a local Qualified Intermediary in Sioux Falls.

Property had been listed online for $1.2 million. Initial inquiries to the listing broker revealed that they were going back and forth with a potential buyer, but were not under contract. Using a local Real Estate Attorney, we were able to get under contract for $135,000 below asking.

How did you finance this deal?

We were able to use the proceeds from the sale of the 4-plex via a 1031 Exchange. We were set to use the proceeds from the sale of our first investment property, a duplex- but fell out of contract due to the buyer being laid off. It is currently for sale.

Due to falling out of contract, we were able to withdraw funds from the HELOC on our personal home. This will be repaid by the sale of the duplex, hopefully, within the next few months. In the meantime, the cash-flow will pay the interest.

How did you add value to the deal?

Alone, we bring little value to this deal outside of the capital.

Our value is in the Team we have assembled over the last few years. Property management, lending, inspection services, and legal representation all worked together to make this work. With the relatively small REI community within Sioux Falls, most of these parties had already worked together and to eliminate running around, we kept most of these parties on a running email thread as we approached closing.

What was the outcome?

Successful Closing!

We are now working with our PM and getting estimates for mechanical updates to provide a better experience for our residents.

Lessons learned? Challenges?

Having the HELOC available was a lifesaver. It cost almost nothing to get, and we are only paying interest on it while we need it.

We also learned that in SD, having coin-operated machinery (laundry) requires annually registering each machine with the state. If they were app-run or took credit cards it would not be required. Due to this and the time burden of handling currency, we are looking at alternatives.

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

Property Management: Josh Utterbach of JL Properties (on BP)
Commercial Lending: Scott Ogdahl of Heritage Bank NA
Legal Representation: Alex Halbach of Cutler Law Firm
Inspection: Brad Horstman of Housemaster Sioux Falls
1031 Exchange: Amanda Schmunk of Homestead Escrow and Exchange Co