9 New Units In Last 6 Months! 25 years old 51 Units and counting
I posted an article on BP in March that was an article featured of me in Business Insider that headlined "A 24-year-old college dropout explains how he went from $10,000 in savings to $4 million in real estate". At that point I had 42 units. Well I had a busy summer, I ended up buying 9 units which made my overall total go to 51. I deal with primarly student housing near a University in Michigan. Here is an overview of the units I have purchased....
4 of the units were purchased from 4 different owners for various prices that were condo units in the same complex that I already own units. I contacted each of the 4 units directly because their units were vacant and in need of some major updates. I purchased all 4 at various prices and immeditaly went to work on rehab and marketing them to try to get them rented out. It was the summer so with college rentals if they are not leased by the time school starts it is near impossible to fill them and you will have to deal with a vacant unit for 5-10 months. So I have a crew (that includes myself) that go in and demo them. I rip up the carpet, take off all the light switches, door knobs, prep for painting, prime all the trim/doors/ and anything not already white, and paint the entire unit (about 1,600 square feet each!). I do have a professional paint gun which make things go quite fast. I have a contractor that demos the kitchens and bathrooms, (throw out all cabinets, counter tops, old vinyl, and the shower tile and base). Having the entire unit demoed makes it very east to paint with my spray gun (just tape up the windows and the paint can get almost ANYWHERE!). After I paint the unit my contractor puts tile in all the bathrooms, kitchens, and shower walls. He then installs the cabinets, countertops, vanities, and usually has a few broken doors to replace and appliances to replace. After my contractor is done I go in and replace the vents, door knobs, light switches/plugs, cover plates, and usually some minor things like new toilet seats, closet shelves, etc.
I can have this remodel completed in 7 days if needed
Day 1 I usually pull a 24 hour work day the first day getting the carpet ripped up and prepped for paint while my contractor demos, and then I prime (with a paint gun) take a quick 2 hour sleep. Then come back and paint. I try to do the quiet stuff at night like paint prep, carpet ripped up, take off light/plug switches and convers.
Day 2/3 My contractor comes in and preps the floor for tile and tiles the kitchens, bathrooms, and shower walls (he has help)
Day 4/5 Contractor gets the kitchen cabinets, plumbing, and countertops installed I try and finish the smaller things. Install the new door knobs, light switches, plugs, vents, usually replace all the blinds, toilet seats, mirrors, and minor things. Contractor also has someone get livingroom prepped for the wood grain tile I switched to.
Day 6 Is livingroom floor as long as it is prepped he can knock it out in a day
Day 7 Carpet is replaced (crew of 6 GIANT guys come in and put new padding and carpet down. If we are on a deadline myself and anyone that will work will clean it as soon as carpet is done. If we are not in a huge rush the cleaners will come in the next day and it will be ready!
The apartments showed AWESOME and within a month I had all 4 rented out. I rented per bedroom on one and put 5 people (they were 5 bedrooms) that didn't know each other in one unit. And found 2 groups of 4 students and a group of 5 students through: 1 group word of mouth (i think a past tenant), referral on 1 group (which I gave 400 to person that referred them) , craigslist on 1 group (the 5 people that I put together), and 1 called on my website. I had enough cash to put 20% down (which drained my accounts down lower than I'd like to admit) and do a conventional loan on all 4, 15 year loan 4% interest
The other 4 units I bought this summer I found out about through another landlord that I play noonball with and am close friends. He found out someone might be selling a 4 plex and he didn't want it so he told me about it.
Asking price 160,000
Within half a mile to the local university
3--2 bedroom units and a 1 bedrooms unit
Building was old (built in 1955) and had not been updated (besides a NEW ROOF!)
It had throw up looking carpet/walls/cabinets. In between the apartments was wood panel (you could have a conversation throught the walls with your neighbor!!
It had one unit filled and three of them vacant or set to be vacant in the next month
I was low on cash at the time because I purchase the 4 other units the same month so I offered him a 150,000 Land Contract at 10% down with a delayed closing for 60 days BUT I could go in and remodel one unit (at my expence which I put on a credit card). I wanted to remodel one so I could start showing it and fill the other 3 units ASAP. He agreed with purchase price of 155,000 and If the deal fell through because of me he would not have to repay me for the money I spent remodeling them. I agreed and started the remodel process within an hour (It was already July so I only hade one month to remodel the unit and fill 3 units before college classes would start).
Cost of remodeling was a little more than previous because we had to do new drywall (put 5/8 and sound barrior material inbetween the apartments) and blow out a wall (to make the kitchen and livingroom more open because kitchen was in a seperate room)
Well a week into the remodeling process (9-14 day process depending on the schedule) I had 2 friends looking for a place in the area that each had a roommate. So they signed on 2 apartments with a rent $40 higher than the previous landlord was charging and one person saw a bunch of work trucks and talked to my contractor about what was being done (who would be an AWESOME salesmen). The person got a buddy to look at the half remodeled apartment and signed a 12 month lease on the spot. So the apartments were all filled a month and a half before we even closed! I ended up maxing out credit cards to finish the remodel process on the other units. And by the time we closed I had a newly updated cashflowing 4 plex that was filled for an entire year with good tenants (so far anyway). The apartments turned out so good that they were filled for the NEXT year with preleases and down payments collected in October 2015 (for leases going from August 2016- July 2017).
Took me a few months but paid off all venders and credit cards!
Final deal a 5 bedroom condo near the university (just like the first 4 I purchased). I found out the unit was going in forclosure (literally from a forclousre notice stuck to the door). Turns out it was a land contract so the original owner of the unit was taking back possesion. This one was already rented out to 5 students and was cashflowing. I found out the owner facing forclosure was having other personal financial problems. Well I contacted the person that owned the land contract that was going to be getting the property back (found out his name and asked anyone I knew if they knew him and an old co-worker used to manage his units and still had his cell number). I called him and we had a signed purchase agreement within 15 minutes. I did not have a whole lot of cash and was taking advice from a from a few landlords and business owners that advise me to build up my accounts to $100,000. My cash goes up and down so rapidly because I usually buy at least one new unit every month or two. Well it had been 5 years since I purchased my first unit and it was up from refinancing. I only owed 45-50% LTV on the unit so my banker suggested we wrap this refinance and the new unit into one loan so I show about 25% equity in it and I did not have to put anything down! The prepaid rents equaled about the closing costs for me so I didn't have to put any money down!
This unit is cashflowing but does need about an $10,000 remodel which I will do next June when the current tenants move out.
Sorry for the long post sometimes I get on a writting rampage talking about this stuff!
Cheers and hope everyone has a Great Holiday season!