All Forum Posts by: Zach Hoereth

What's up @Tyler Wisner. Not a huge fan of Anderson IMO. Had a 10 unit property that I purchased up there a few years ago.. did well on it but the area is rough. Limited selection of property managers and a number of PMs that I've talked to who are in Indy won't manage in Anderson. If you get the opportunity to drive through Anderson at some point I would encourage you to do so... might see what I am talking about haha. Just like anything else... it's an opinion, so take it for what it's worth. Good luck! 

@Bryan Contreras  check out Intrigue Indy for PM on the A & B class stuff. Do a nice job there in Indy for that asset class. 

@Tyler D. very well thought out here. Have not posted on BP in quite some time but here is some food for thought from another 20 something yr old investing in the midwest with an interest in Texas:

About 2 weeks ago I purchased a one way flight from Indianapolis (my hometown) to San Antonio. I was in a similar headspace as you with the idea that Texas is experiencing exponential growth... so why would you not want to invest there? I decided to make the trip down and find out for myself what all the hype is about. In my short time here in Texas (currently in Leander.. just outside of Austin) I have toured properties in San Antonio along with some of the surrounding cities. I've found exactly what you are describing above.. 1% rule with slim cash flow if any at all. That being said, Texas is big talk right now and there is no question that it is the place to be. I can't lie as I would move to the state of Texas in a second. 

However, something keeps me wanting to have long lasting ties in the midwest. That something? Strong cash flow my friend! You are describing above that you are experiencing solid cash flow with your home in Cleveland but are worried about the long term play. While Cleveland may be experiencing a dip in population, I do not assume that you are buying on behalf of a REIT or PE firm that has the fire power to purchase thousands of homes. If the population in Cleveland were to drop to 300k and you have plans to purchase more than 3,000 homes perhaps there is a larger concern here.

Everyone has their own criteria for how they want to approach investing. Personally, I have found that focusing on cash flow for the long term has been tough to beat. Texas is more of a hybrid market and for some folks it works great because they can leverage more appreciation. It sounds like you ultimately know the answer here even though it is not the most exciting approach. Best of luck moving forward! 

Cheers,

Zach 
 

If I could solely rely on compensation for each time a new investor approached me about doing a BRRRR I could stop selling real estate. Hopefully this sheds some light on running a BRRRR full cycle. ;)

Overview: Initially I was planning to hold this duplex long term... but as many of you know it's nice to have multiple exit strategies.

Deal Facts 

• Type: Duplex
• Built: 1939
• Unit Mix: 2/1    900ish sqft per side
• 2 Car garage 

The nitty gritty

Purchase Price: $60,000

Rehab Costs: $40,000

All In: $100,000

New Appraised Value: $170,000

Market Rent: $1000/side

Cash out of my Pocket: $0 (I'll get to this later) 

Why this deal?

I had been looking for smaller multis in Indianapolis for quite some time. However, the majority of small multis in Indy are in rough areas and very dated. That said, I was attracted to this property and area for a few reasons. One being that this property is located about 12 minutes from downtown. I knew that if I remodeled nice enough I could potentially get students or young professionals that would command a premium in rent.  

The first time I drove the area I could see that the city was putting in new sidewalks and some other investors had already started renovating houses on the surrounding streets. I am not one to bank on appreciation, so I ran my numbers accordingly. If I could make this property work as a buy & hold rental I would move forward... well, it did! 

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

The deal came from another investor who was burnt out after holding the property for many years with section 8 tenants in place. I had worked with the investor on other properties serving as his broker assisting in the liquidation of his portfolio. This was the last property that he was wanting to get rid of and I asked him if he would sell to me. He happily agreed after I offered him 5k more than what he originally paid and elected to forgo commission.

How did you fund the deal?

At the time I was going into my last semester of college and definitely did NOT have 60k to purchase the property let alone another 40k to rehab. I raised 100% investor money from friends & family. Luckily this was not my first deal, so I had already built some confidence in others as well as myself that I could run a deal full cycle. I was able to get money from three different parties ranging from 9-12%, no points, and a 12 month agreement to pay back the initial investment +interest. I did it in 6 months... under promising and over delivering goes a long way. :) 

What value was added?

• Initially I thought that the rehab would be much lighter than what it turned out to be.
• Unit #1: Trim throughout, doors, luxury vinyl plank + tile in the bathroom, new vanity & toilet, paint, granite counter tops, new cabinets & sink, stainless steel appliances, and updated fixtures. 
• Unit #2: Trim throughout, repainted doors, paint, saved floors with deep clean, vinyl plank in kitchen, new cabinets, backsplash, new vanity + toilet, and updated fixtures. 
• *Entire exterior was repainted* 

So, did you make any money?

After the rehab was completed I went to a portfolio lender to do my refinance. Since I did not have the income history this is the route I had to go. My appraisal came back at $170,000 and I was able to pull out 75% of that or $127,500. After the return of investor capital & interest I netted just over $8,500 after closing costs & fees.  

During the refinance period I could really see the neighborhood turning around. Multiple homes around me were going up for sale for insanely high prices and I felt that it was the right time to exit. I ended up listing the home for $183,500 later closing it for $175,000. After loan pay-off, credits, commissions, closing costs, etc. I netted right under $16,000. Combining my refinance and sale proceeds I had a total profit of about $24,500! 

Lessons learned... problems? C'mon share with the crowd!

I. Will. Never. Do. Another. Project. Like. This. Again. 

Yup, I said it... I spent the same amount of effort (if not more) on this duplex as what I did to purchase a 19 unit apartment complex. When you are working small deals like this it become tougher to hire out more help. In hindsight I probably would have been better off to wholesale the deal. Oh well... you live & learn. Keep in mind we all have different goals of where we want to be. 

Numbers wise I knew the deal made sense, but I tried to be as cheap as possible when it came to contractors. I won't dive too deep into this, but one of the contractors called me during the middle of the rehab to inform me he would be leaving the next day for Disney world.. :,) 

What does the future look like?

Repositioning myself to get into larger deals! My day job consists of helping people navigate the Indianapolis market for residential and small commercial opportunities. I plan to build up my team of brokers so that I am no longer the bottleneck. Work on the business... not in it. 

Cheers!

*Any realtor from Columbus beating a dead horse* 

"You should look into Columbus!" 

During the last week or so I have received an influx of private messages about whether or not one should be using their property manager to write up offers/essentially serve as their broker. I have spoken with a number of people about this and I continue to have mixed feelings. What I have witnessed is investors are sometimes nervous that if they do not use their PM to write up offers they will not take on the management. In other cases, I have found that some PM companies like to focus on just the property management itself. They have preferred or designated agents that are "investor friendly" and will happily work with them. ("Investor friendly agent" is a whole different animal that I have addressed in another discussion)

There was a recent ordeal in my market with a once popular property manager who has found himself in a difficult position after misplacing some security deposits and December rent. I do know that this pm was acting on behalf of investors as their broker. In the end, things did not turn out well. Perhaps too much on one's plate...?  I suppose juggling brokerage transactions and property management can be rigorous, but with the proper systems maybe it can work.  

Personally, I have only once used a pm to write an offer for me. Nothing came from it, but I did this to build the existing relationship. I understand why investors may want to do this to help further rapport with their pm for future growth and success. However, this poses the question... should your pm be writing offers for you or focusing on just property management? 

@Tyler Wisner a fellow hungry, young guy! Love to hear you are looking into Indy. I just turned 23 and have been investing in Indy for about 3 years now. Originally got started in the single fam space but have transitioned to multi fam. I run a small brokerage team in Indy and have been searching for larger opportunities on the multi fam side of things. Sounds like I could help you get the ball rolling. Hit me up and I can hook you up with a few PM companies and areas to watch out for. You have a long time in the game of real life monopoly so make it count. Hope this helps!

Cheers,

@Michael Fialkowski I have not done as many rehabs as I have rentals in the Indianapolis market. One major item to consider is the tenant/landlord laws in Illinois vs. Indiana. Indiana is incredibly landlord friendly, so if your strategy is long term buy and hold this is something you will want to be aware of. An additional element to consider are the property taxes in Indiana. Residential properties that are do not have the homestead exemption are capped at 2%.

There will be folks ranting and raving about areas of growth and future opportunity in both markets, but be sure to unpack the deeper details before pulling the trigger. I don't have any experience in Chicago for a reason... so take it for what it is. ;) Hope this helps! 

Cheers,

@Arian Doaks welcome to BP! Obviously investing 3,000 miles away can be scary, but there are plenty of folks doing it... and well at that. I would be surprised if there is anyone on this forum that has not made some sort of mistake in their investing career, so don't let that fear hold you back. 

Leveraging Sterling's map can be a great source to help get your foot in the Indy market. I would encourage you to check out some meet ups in and around your area that focus on OOSI (out of state investing). There are also a few Indianapolis investing Facebook groups. These kinds of groups can make a world of difference when sourcing vendors such as PMs, agents, contractors, etc. Boots on the ground that you can trust when vetting opportunities can make or break you.   

@Frank Lin faced similar obstacles that you are in regard to being so far away. I am sure he'd have some solid insight on how he got over the idea of investing a couple thousand of miles away. Hope this helps! 

Cheers,

Turnkey means that the value has already been added to the property. This is why you will see lower returns. For example if you buy a property for 50k and spend 50k on renovation your all in will be at 100k. You have the property reappraised and it is now worth 150k. This would be an example of a true value add deal. When you purchase a turnkey property there is not much upside outside of just the cash-flow. Hope this helps! 

Cheers,