31 units in 30 months at age 24, $70k Annual Cashflow

115 Replies

BP Community! 

I just closed on an 8 unit this month putting only 6% down on the deal. I expect my cash on cash return to be over 90%. Ill detail the information below. Please reach out to me with questions as I love to connect and try to help those who are just getting started or connect with those that are looking to team up and go after bigger deals.

Some may have read my post in the past about hitting 20 units at 22 years old. You could say it took a long time to get an additional 11 units given I closed 20 units in just 10 months of getting started with my investing. But since that time I left my corporate job, moved states, my daughter was born and is now 6 months old, and I began investing in a new city. Needless to say a lot has happened since I closed my 16 unit a year and a half ago. If you want to check out that article here it is.

https://www.biggerpockets.com/forums/223/topics/28...

It has been a rough past 18 months trying to find another sweetheart deal like my 16 unit. I closed that property with less then 1% down of my own cash. I knew not to expect that in the future but was hoping to replicate some of that deal structure. With a competitive landscape for all types of real estate I had a very difficult time finding opportunities where the price and numbers looked good, and the seller was motivated enough to carry a note. So I sat on the sidelines being very impatient.

While I looked for deals of 8 units or larger in Wisconsin, Michigan and Indiana I let my cash build up. With my automated alerts set up, a 3 unit came on the market in the town where I had already been investing. $69k for a 3 unit with gross rents of $2k a month and total expenses of $800 a month which included management and capX. Knowing the seller consisted of family members who inherited the property this year and had never actually seen it I offered $56k the same day it hit the market, cash, and close in 2 weeks. They accepted the offer and we closed the deal quickly so the family could move on from he property. Only $1k of work was needed right away to deal with deferred maintenance issues on the property.

Utilizing my relationship with a great local lender I started the process of getting a secured line of credit set up against the 3 unit so I could pull most of my money back out. I ended up closing the line at 5.25%, interest only payments for 80% of what I paid for the deal. Basically its a big credit card that I can now use for any business related purpose, in my case Ill use it to do more deals.

So here is where the 8 unit comes into play. Another one of my automatic alerts hit my inbox telling me the price on an 8 unit in South Bend IN dropped its price by $50k. I knew the numbers didn’t work at the old asking price, but now the property was priced at an 8.5% cap rate which I am happy with in my area.

I reached out to the listing broker and got a showing setup right away. After the showing we stood out on the street and talked through the deal. I was honest about my inability to do the deal with a normal 20% down(probably could have but didn’t want to) but if the seller could carry 10% I had enough cash ready and could close within 60 days. He asked me to put the offer in writing and get it over to him that evening so he could pass the info to the seller. The following day I got a small counter back and I accepted. We agreed on $345k with the seller carrying 10% on a 20 year note at 5% for 18 months.

Financing the deal went pretty smoothly, although a bit slower at first then I would have liked. I pushed the deal forward with multiple banks understanding that there was a good chance a banker would get pushback from underwriting later in the process. It happened to me on the 16 unit and it happened to me on this deal. But having multiple banks working the deal I had one pull through for me. We closed the bank financing at 80% LTV at 4.5% on a 20 year amortization and 5 year balloon. I thought it was interesting that I never even met with my banker until we got to the closing table. We had only worked together via phone and email for this deal.

After all prorations at closing, I was only responsible to bring 6% to the table. Not too bad in my opinion considering I pulled that money from my line of credit and didn’t have to tap into any of my current savings. I also still have 60% of my line available, along with current savings to do another deal.

With respect to paying off the seller note, I have been working with a number of people discussing private lending. My goal is to bump up rents and give the property a face lift over the next 18 months. I am confident that I will be able to refinance the remaining seller note principle with private money to allow me to hold off on putting more money in the deal. At my 5 year commercial balloon I will pay off the private money and have only one loan on the property at 70% LTV.

Here is how I expect the numbers to look for me.

Greenock Financials 2018 2021
Revenue $‎60,030 $‎64,640
Gross Potential Rent $‎62,400 $‎67,200
Avg. Rent Per Unit $‎650 $‎700
Other Income $‎750 $‎800
Less Vacancy $‎(3,120) $‎(3,360)
Operating Expenses $‎18,790 $‎19,809
Repairs $‎4,000 $‎4,200
Capital Expenses $‎2,000 $‎2,100
Landscaping $‎1,500 $‎1,575
Utilities Vacant Units $‎288 $‎302
Property Taxes $‎6,000 $‎6,300
Insurance $‎1,500 $‎1,575
Management $‎3,002 $‎3,232
Other $‎500 $‎525
Net Operating Income $‎41,241 $‎44,831
Financing Expenses $‎22,224 $‎22,224
Cashflow $‎19,017 $‎22,607
Down Payment $‎21,000 $‎21,000
Cash on Cash Return 90.55% 107.65%

Keep in mind, this return doesn't even include the principle pay down on the loans.

My biggest advice for people would be as follows.

  1. Know why your in the real estate game, and why a specific niche. I have a goal of being able to spend time with my daughter and family. We want to be traveling and sailing throughout the year, not just when a job allows me to use my 10 days of vacation. Multi family has allowed this to become a reality. I started with no money 30 months ago with a 4 unit deal. I borrowed the $25k down payment from my parents at 8% and got the deal done. Since then I have focused on finding good deals and getting great financing to get stellar cash on cash returns.
  2. I have clearly written out levels of of my dream life I want to achieve. This property has gotten me to level 1. I have now replaced my old corporate job income and expect to make over $70k cashflow off of my 31 unit portfolio while also having the time I want to be able to enjoy sailing, camping, hiking, and hunting. Next goal is $250k in income through my real estate and stepping away from the day to day management of the properties. Level 3 is $20m in real estate so I can retire with a 5% return for $1m a year. Long way to go, but making solid progress. The multi family niche makes this goal possible.
  3. Keep pushing. In both my seller financed deals the primary bank I was betting on backed out. But I kept pushing to get more banks lined up and in each case needed them to close the deal. Now those backups are my primary banks and we have built great relationships. I also looked at hundreds of deals online and visited over a dozen properties before I landed on this 8 unit. It takes time, but patience and percipience will get you to the finish line.

I look forward to connecting more with the BP community. You all have been paramount to my success thus far. By no means am I a millionaire or did I get rich quick and quit my day job right away. But here I am, full time after 30 months and loving every minute of it!

Joel

Awesome story. Congrats on the success! It definitely helps motivate me to get creative and get moving on more properties.

Can you provide some more details on the secured LOC against the triplex? I suppose I have it in my mind that I'm only able to get a LOC after I've appreciated the property, let it season, and then pursue an appraisal/refi. What did the process look like for you to obtain that LOC?

Thanks for sharing.

Originally posted by @Dan Kelley :

Awesome story. Congrats on the success! It definitely helps motivate me to get creative and get moving on more properties.

Can you provide some more details on the secured LOC against the triplex? I suppose I have it in my mind that I'm only able to get a LOC after I've appreciated the property, let it season, and then pursue an appraisal/refi. What did the process look like for you to obtain that LOC?

Thanks for sharing.

 Happy to help Dan. Because I bought the property in cash I was able to pull a line of credit right away for 75% of the appraised value. I was pretty disappointed that the appraisal didn't come in higher, but each year the property will get reassessed and they will adjust the line accordingly. I need a 3 unit to sell at a higher price point so I can use that as a comp in the future. With that said my total closing costs for the line were only $1000 and it will cost $150 in fees each year. Much cheeper then if I went the route of getting a loan. What really hurt my appraisal is they decided to not account the income approach for valuation and only use square footage comps. Unfortunately with one of the units being in the basement they couldn't use any of that square footage for the comps calculation which killed where I thought I was going to get it appraised. 

Now many people aren't in markets where they can buy a property for cash that cheep. Typically this property would have gone for $80k to $100k in our area but given the sellers situation they priced it low to get it off the market and because I had cash I could close quickly. 

Let me know if you have any other questions! 

@Joel Florek , Thanks for the reply. I overlooked where you mentioned that you paid cash for the property. It makes much more sense now. Still a fantastic way to keep that money working. I hope to have my 6 flex appraised and pull a LOC out sometime next year, granted I have a mortgage on the property but I've raised NOI by quite a bit. Thanks for the inspiration.

Dan

Love the hustle. Keep grinding my man. Setting up multiple banks to do business with is key IMO. I have a great bank to do traditional loans, a great HML and a commercial bank that I know will do some seller carry. Also have a great bank that will provide HELOCs on multiple rentals. That is key to have so when a deal is brewing you can call these people up and figure out if you can make it work.

Hi Joel, I'm your neighbor in nearby South Bend. 

Just interested in who your local lender is because I'd like to do a line of credit on 2 SFRs that I recently bought with cash, but I know that only some lenders will do that... So any leads would be great. 

Also, where's this 8 unit... And what kind of alerts do you have set up? I'd love more details about your South Bend property!

congrats @Joel Florek your pretty aggressive and from our conversations you know what your doing. Keep it up! 

@Sarah Hill Thanks for reaching out! 

Down in Indiana I used Old National. Worked with Sandy Hagen on this one. She was fantastic! Keep in mind the financing is on the commercial side of their business. Best advice though is call call call. I usually talk to a dozen banks when preparing to make an offer or just get a property under contract. 

8 unit is just south of 20 by the fairgrounds. Very nice neighborhood in my opinion. Im excited to get more property in the area! 

Alert wise I like Realtor.com the best. 

@Elbert Dockery thanks! Looking forward to getting my next deal done. Got a few leads I am working on but nothing for sure yet. 

@Joel Florek Congrats on your success. A very motivational story. I work for a mortgage lender/broker in the Tri-State area (NY/NJ/CT) and I'm curious how you were able to obtain the commercial financing with the seller 2nd's. Pretty much all of my Commercial lender outlets will cap the CLTV (the % of combined financing between 1st and 2nd mortgages) as the same LTV limit. For example, if the commercial lender caps the % of financing they will lend at 80% of the purchase price, they will have a CLTV limit of 80% as well...meaning no secondary financing would be allowed above 80% even if it's from the seller. The lenders simply are not interested in financing a deal where the buyer has such a small amount of skin in the game.

If you don't mind, can you touch on how you were able to obtain the type of financing structure that allowed for a seller-held 2nd mortgage?  Is this something your commercial lender had no issues with whatsoever?  Is this something you had to seek out a lender for?

Any insight you can give is greatly appreciated.

All my best to your success in the future.

Cannot express how much I needed to read this. You are the freaking man! I'll be honest, I'm only a shadow of where you're at right now. I better step my game up!

Congrats again on all the success sir!

@Vincent Mazzuca Happy to help! 

I have heard your story from many banks. It is definitely the norm. However, I have been able to find in about 10% of the calls I have made to banks that they will look at a deal of this nature. This is why I have had my first choice bank fall through in underwriting in both deals where I had a seller 2nd but had a backup that could close the deal. 

My way to weed through banks is to ask the following. "I am calling to inquire on getting a commercial mortgage to buy a multi family property of xxx units. Currently I have xxx units in my portfolio and am excited about this new property I have under contract (or am considering making an offer on). Understanding your time is valuable I wanted to see if you might consider working with the deal structure we are hoping to use on this deal as I know for many banks it does not fall within the traditional box they are allowed to work within. I am looking for a bank to carry 75% to 80% of the purchase price in 1st position, and have the seller carry a small 5% to 15% 2nd position note on the property. Going through this process to close a similar deal I know this does not fall within most banks box but do you think might be a loan your bank would consider reviewing? If so I have a detailed information packet I put together on the deal that provides a background and financials on my current portfolio as well as a personal financial statement." 

Saying something along these lines allows me to get to the point and within 5min I can usually rule a bank in or out to get to the ones that want to talk more. So far it has helped me and I have done this on two deals in different states with different banks. My assumption is it can be done anywhere.

Joel, you mentioned automated alerts to notify you of a property that meets your criteria. Are you referring to automated alerts in Zillow, Trulia, etc. or some other site?

@Joel Florek - Congrats on all the success!  Looks like you're getting a killer deal on property management, do you mind sharing who you are using? 

@Will Sellenraad exactly. Pick your favorite, I have found Realtor.com to be the most accurate and I get the alerts there first. I do have alerts on all the platforms though. While I love the idea of having a great agent or broker helping to be on my team finding deals I have yet to meet a broker that has brought me a deal that I havent already seen. Generally I always work with the listing agent. 

@Curtis Krumreich I self manage my units but you still need to account for the expense so I always do a minimum of 5%. As I grow I will hand over the virtual management duties(90% can be done via phone, internet, and mail) to an assistant and get a broker lined up to do showings based on a fixed rate price to show a unit when needed so I am confident I can put together this structure and meet or exceed the 5% target in the future. In total I maybe spend 3hrs a week for the portfolio on management related duties that a property management company would do. 

@Joel Florek - Nice, I like how you're thinking about it.  You'll probably get better service approaching it that way than hiring a professional manager anyway.  I am planning to self manage as well and since there aren't many managers in my area I will likely employ a similar strategy once I decide to outsource the management.

Incredible story. Great going @Joel Florek . you are a baller. would love to connect with you and learn from you. i am newbie to real estate and looking to learn from people like you and invest in multifamily.

Originally posted by @Joel Florek :

BP Community! 

I just closed on an 8 unit this month putting only 6% down on the deal. I expect my cash on cash return to be over 90%. Ill detail the information below. Please reach out to me with questions as I love to connect and try to help those who are just getting started or connect with those that are looking to team up and go after bigger deals.

Some may have read my post in the past about hitting 20 units at 22 years old. You could say it took a long time to get an additional 11 units given I closed 20 units in just 10 months of getting started with my investing. But since that time I left my corporate job, moved states, my daughter was born and is now 6 months old, and I began investing in a new city. Needless to say a lot has happened since I closed my 16 unit a year and a half ago. If you want to check out that article here it is.

https://www.biggerpockets.com/forums/223/topics/28...

It has been a rough past 18 months trying to find another sweetheart deal like my 16 unit. I closed that property with less then 1% down of my own cash. I knew not to expect that in the future but was hoping to replicate some of that deal structure. With a competitive landscape for all types of real estate I had a very difficult time finding opportunities where the price and numbers looked good, and the seller was motivated enough to carry a note. So I sat on the sidelines being very impatient.

While I looked for deals of 8 units or larger in Wisconsin, Michigan and Indiana I let my cash build up. With my automated alerts set up, a 3 unit came on the market in the town where I had already been investing. $69k for a 3 unit with gross rents of $2k a month and total expenses of $800 a month which included management and capX. Knowing the seller consisted of family members who inherited the property this year and had never actually seen it I offered $56k the same day it hit the market, cash, and close in 2 weeks. They accepted the offer and we closed the deal quickly so the family could move on from he property. Only $1k of work was needed right away to deal with deferred maintenance issues on the property.

Utilizing my relationship with a great local lender I started the process of getting a secured line of credit set up against the 3 unit so I could pull most of my money back out. I ended up closing the line at 5.25%, interest only payments for 80% of what I paid for the deal. Basically its a big credit card that I can now use for any business related purpose, in my case Ill use it to do more deals.

So here is where the 8 unit comes into play. Another one of my automatic alerts hit my inbox telling me the price on an 8 unit in South Bend IN dropped its price by $50k. I knew the numbers didn’t work at the old asking price, but now the property was priced at an 8.5% cap rate which I am happy with in my area.

I reached out to the listing broker and got a showing setup right away. After the showing we stood out on the street and talked through the deal. I was honest about my inability to do the deal with a normal 20% down(probably could have but didn’t want to) but if the seller could carry 10% I had enough cash ready and could close within 60 days. He asked me to put the offer in writing and get it over to him that evening so he could pass the info to the seller. The following day I got a small counter back and I accepted. We agreed on $345k with the seller carrying 10% on a 20 year note at 5% for 18 months.

Financing the deal went pretty smoothly, although a bit slower at first then I would have liked. I pushed the deal forward with multiple banks understanding that there was a good chance a banker would get pushback from underwriting later in the process. It happened to me on the 16 unit and it happened to me on this deal. But having multiple banks working the deal I had one pull through for me. We closed the bank financing at 80% LTV at 4.5% on a 20 year amortization and 5 year balloon. I thought it was interesting that I never even met with my banker until we got to the closing table. We had only worked together via phone and email for this deal.

After all prorations at closing, I was only responsible to bring 6% to the table. Not too bad in my opinion considering I pulled that money from my line of credit and didn’t have to tap into any of my current savings. I also still have 60% of my line available, along with current savings to do another deal.

With respect to paying off the seller note, I have been working with a number of people discussing private lending. My goal is to bump up rents and give the property a face lift over the next 18 months. I am confident that I will be able to refinance the remaining seller note principle with private money to allow me to hold off on putting more money in the deal. At my 5 year commercial balloon I will pay off the private money and have only one loan on the property at 70% LTV.

Here is how I expect the numbers to look for me.

Greenock Financials 2018 2021
Revenue $‎60,030 $‎64,640
Gross Potential Rent $‎62,400 $‎67,200
Avg. Rent Per Unit $‎650 $‎700
Other Income $‎750 $‎800
Less Vacancy $‎(3,120) $‎(3,360)
Operating Expenses $‎18,790 $‎19,809
Repairs $‎4,000 $‎4,200
Capital Expenses $‎2,000 $‎2,100
Landscaping $‎1,500 $‎1,575
Utilities Vacant Units $‎288 $‎302
Property Taxes $‎6,000 $‎6,300
Insurance $‎1,500 $‎1,575
Management $‎3,002 $‎3,232
Other $‎500 $‎525
Net Operating Income $‎41,241 $‎44,831
Financing Expenses $‎22,224 $‎22,224
Cashflow $‎19,017 $‎22,607
Down Payment $‎21,000 $‎21,000
Cash on Cash Return 90.55% 107.65%

Keep in mind, this return doesn't even include the principle pay down on the loans.

My biggest advice for people would be as follows.

  1. Know why your in the real estate game, and why a specific niche. I have a goal of being able to spend time with my daughter and family. We want to be traveling and sailing throughout the year, not just when a job allows me to use my 10 days of vacation. Multi family has allowed this to become a reality. I started with no money 30 months ago with a 4 unit deal. I borrowed the $25k down payment from my parents at 8% and got the deal done. Since then I have focused on finding good deals and getting great financing to get stellar cash on cash returns.
  2. I have clearly written out levels of of my dream life I want to achieve. This property has gotten me to level 1. I have now replaced my old corporate job income and expect to make over $70k cashflow off of my 31 unit portfolio while also having the time I want to be able to enjoy sailing, camping, hiking, and hunting. Next goal is $250k in income through my real estate and stepping away from the day to day management of the properties. Level 3 is $20m in real estate so I can retire with a 5% return for $1m a year. Long way to go, but making solid progress. The multi family niche makes this goal possible.
  3. Keep pushing. In both my seller financed deals the primary bank I was betting on backed out. But I kept pushing to get more banks lined up and in each case needed them to close the deal. Now those backups are my primary banks and we have built great relationships. I also looked at hundreds of deals online and visited over a dozen properties before I landed on this 8 unit. It takes time, but patience and percipience will get you to the finish line.

I look forward to connecting more with the BP community. You all have been paramount to my success thus far. By no means am I a millionaire or did I get rich quick and quit my day job right away. But here I am, full time after 30 months and loving every minute of it!

Joel

Man this is great stuff Joel, thanks for sharing!  Another Michigander here just getting started out.  Trying to figure out how fast I want to move out of my comfy executive seat and actually start my own business and this just lit a fire under my ***!  This post also led me to your blog about vision from a couple years ago  which I also enjoyed.  I’m all about working backwards from the end goal and I like your approach at doing so.

Good luck brotha - keep it going.

@Matt Eckler thanks for the kind words! Its been an awesome journey and the freedom it has given me in my life is amazing. Would love to connect and learn more about what you are doing and where you want to go! 

That is awesome I would love I would love to know how you got started in Real Estate and know any tips.

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