First MF investment property bought by Hall of Fame!!!

14 Replies

Hey BP family, just wanted to tell you my story about my first RE deal. I spent nearly 2 years learning, reading, analyzing before I finally pulled the trigger last October on a Bank owned duplex. It sits directly across from the NFL Football Hall of Fame and is in a great location. I paid $50K for it with cash, spent $30K rehabbing it. Three weeks after I bought the house the NFL Hall of Fame announced a giant expansion that would require them buying my property. 

I have mixed emotions still about this because I'm getting $600/side rent plus pet and garage fees. I have great tenants who pay on time and don't need much ever. It cash flows really well. But as of this past week I've reached agreement with the HOF. I'm getting more than 3x what I paid for it but not quite double what i have into it. Either way, I feel I've done well in the sale. At this point I received the 2nd highest price of any of the properties they've bought thus far. 

I'm intending on 1031'ing the proceeds into a larger property, as I'm looking for a small to medium sized commercial rental property. Since this property was purchased I've also added 3 more duplexes to the portfolio. I went from 0 to 8 units in 6 months. I'm learning on the fly but am loving doing this. BP forums, blog posts, and podcasts have been huge for me. 

Biggest part for me is that I've clearly identified my goals regarding where I will buy properties and where I won't. What kind of properties I want to buy and which I won't, as well as meeting some really great people who've helped me out a  lot. BP has played huge part in that. Thank you and look forward to grabbing a few more buy and holds down the road. 

great post... One for the record books...buying in the path of future development and in strategic locations can add value... Sounds like the return was good and what a cool story you can tell about a "legendary investment"...touchdown!

Strong work Matt, very inspiring! I actually started with RE investment before doing all the research and such. I'm now doing as you mentioned above, researching, analyzing, so that I can grow my business. Buy and Hold is the strategy I'm thinking of too, as it is closest to what I'm doing with my vacation rental now. If only I could find a duplex in Denver for $50-80k. I'm thinking of considering long distance investing, due to the high prices here.

It would have been nice if they approached you before the 30K, but sounds like you didn't know until it was too late. At least you still did well and have the ability to get into higher unit counts now. Cool story! 

@John Turner 

The other units i acquired via auction. There were 7 duplexes being sold around the corner from me in a nice neighborhood where all the duplexes were near carbon copies of each other. I was so nervous buying properties at auctions especially since I couldn't inspect them until the day of the auction. I had about 2 hours before hand and asked a GC friend of mine to help tag team them with me. I bought the 3 nicest ones. I'm normally looking for properties that need some TLC to force appreciation, but I figured that buying Turn Key properties for about $15K less than on the MLS was about as good as finding something that needed work to appreciate. All the tenants have stayed and I increased the rents significantly on all of them as well. It's been pretty good so far. Now I'm looking for some larger commercial properties that need some TLC so that i can add value and rent increases to them by making them better places to live.

@Kyle Doney

I knew about their plans 3 weeks after I bought the place. However at that point no one really seemed to know how soon these plans were going to go into effect or where they were going to be starting their building plans. So I started the rehab process and right before i was done they called and offered me their first offer. In the end i probably lost out on some money, but going through the whole process was really good for me. rehabbing, then going thru the applications and showing the place, and finally renting the place was important. Who knows if i would have had the guts to pull the trigger on the next 3 places i bought without my first experience at this property. All in all, I'm glad i did what i did. 

Originally posted by @Matt Kauffman :

@John Turner 

The other units i acquired via auction. There were 7 duplexes being sold around the corner from me in a nice neighborhood where all the duplexes were near carbon copies of each other. I was so nervous buying properties at auctions especially since I couldn't inspect them until the day of the auction. I had about 2 hours before hand and asked a GC friend of mine to help tag team them with me. I bought the 3 nicest ones. I'm normally looking for properties that need some TLC to force appreciation, but I figured that buying Turn Key properties for about $15K less than on the MLS was about as good as finding something that needed work to appreciate. All the tenants have stayed and I increased the rents significantly on all of them as well. It's been pretty good so far. Now I'm looking for some larger commercial properties that need some TLC so that i can add value and rent increases to them by making them better places to live.

 @Matt Kaufman

Sounds like you seized your opportunity when it came along. That's great. You have a few under your belt now. Good luck with more!

@Matt Kauffman - Great work Matt!  You have hit the ground running and you have been able maintain solid momentum.  What kind of commercial properties are you looking for?

Are you going to hire a 1031 specialist? It would be interesting to follow this process to see what the hurdles are.

@Nick Hedberg , To successfully complete a 1031 exchange you must use the services of an unrelated party called a qualified intermediary.  As @Matt Kauffman moves closer to his sale he'll want to read up and ask a lot of questions so the specific reinvestment and timing requirements for the 1031 don't trip him up.  By the way - Congratulations Matt.  I'd call it a nice home run but maybe touchdown is a better metaphor ;)  Holler if I can be of assistance.

@Dave Foster

Dave, Thanks for the message reply. I have the 1031 language in my PSA with Hall of Fame. At this point I'm trying to analyze as many small to medium sized apartments i can find. I don't close till the end of March. So i have a few months, but I know that time will fly. any advice you can give me about what does and doesn't qualify as a legit purchases in Ohio would be great. I wish i could buy a new personal residence. I wonder if I could purchase agricultural ground with it even if it has a house on it that i'd want to live in.  

@Matt Kauffman , you're in luck.  sec 1031 is a federal statute and The rules of what constitutes "like kind" for the 1031 are quite broad.  You may sell that residential rental and use the 1031 to purchase any other kind of investment property as long as your intent is to use it for "productive use".  So another residential rental or commercial or agricultural land would all be appropriate.

The difficulty with buying a farm with house on it lies in the valuations.  In order to completely defer all tax the IRS expects you purchase at least as much investment property as you sold and to use all the proceeds from the sale in the next purchase.  When purchasing farm land with a house you would be expected to allocate the % that is investment and the % that is your primary residence.  Let's say you sell this property for $300K.  You will be expected to purchase at least $300K of investment real estate.  If you found a farm where the land and house were all worth $400K and $300K of the price could be allocated to the agricultural land then that would work fine.   You would be selling $300K of investment property and buying $300K of investment property and $100K of primary residence. 

Now regarding your primary residence.  In order to successfully complete the 1031 again you must sell property held for investment and buy property which you intend to also be held for investment purposes.  But it is perfectly fine to change  your mind and convert it to your primary residence after a period of time.  There is some guidance for 2 years being an acceptable period but there is no statutory holding period.  This could play very handily into your desire for a farm if you've got some flexibility.

There's a lot of moving parts and a lot of opportunities for you.  It can get overwhelming but a good team around you including an accountant and qualified intermediary can help you maximize your opportunities.

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