How I Bought a Seller Financed 4plex in Las Vegas [Part 3]

121 Replies

Janice, way to go! If you haven't already, I encourage you to talk to your CPA about

cost segregation so that you can depreciate items of your 4plex faster. I

@Spencer Cornelia My god! what a pain in the ***! I just posted about my first BRRRR strategy, but I left out all of the details about dealing with the title company. You are %100 correct about the title company not giving a **** about me. They closed on mine over 2 weeks after we were supposed to. It is very frustrating. But now we know. We learned to expect that now. I wish the people who worked at the tit;e company got paid commission, they would be busting there *** to try to close on time.

Anyway, congrats on your deal! 

Outstanding @Spencer Cornelia . I house hacked two small multifamily properties, a triplex, and duplex. This is a great way to build multifamily assets!

As someone who has not yet inked their first real estate deal, and also lives in Vegas, I found this post and the comments within to be hugely valueable and educational.  So I thank you @Spencer Cornelia for taking the time to write this up in the detail that you did. 

I was recently purusing Zillow out of curiosity and was "practicing" running the numbers, back of the napkin style, on <200k SFR . To be honest it seemed that all of the listings I analyzed were horrific deals. Initially I was doubted my math but the contributors to the post seem to have confirmed that profitable deals are few and far between in Vegas.

@Eric B. welcome to the community. The Vegas market is pretty brutal if you're only looking for properties that are listed on MLS. It's great experience to do what you're doing, but if you want to find deals to move on, you'll need to go off-market. The Outback has a Christmas mixer tonight if you're looking to network. I'll be there, along with other Vegas investors.

@Eric B.

@Spencer Cornelia

If I was in Vegas, I would attend the mix, sounds like fun. I've been privy to some details Spencer's transaction before he posted on address and details on BP. As he reached out to me, and I gave him my contact for inspections. Once, inspection passed, then I already knew that 4plex was sound. 

Eric - You can run all the numbers you want on any deal from Zillow, Redfin, or MLS for SFR's, and the numbers will not look good for cashflow. The best cashflow is 4plex due to scale, and financing, but still numbers are not what they used to be. The part that you are missing is the timing, meaning best time for these numbers were in 2012. Then still good 2012-2016. Now, prices practically doubled, thus cashflow goes down and higher expenses towards financing.

The deals are still out there, but harder to find.

Terry

@Spencer Cornelia and @Jon Lee ,  I am super bummed I didn't check this until today!  I would love to go to the next mixer in the new year!  I will be keep my eye out on the events tab moving forward.  How was the event last night?  I hope there was a good turn out.  

@Terry Lao - yeah I was looking just to practice to become familiar with the numbers and get quicker at it with hopes that it won't be the rate limiting step in me pursuing future deals.  Talking to locals in Vegas, I have heard similar reports about how now is a pretty terrible time finding good deals in real estate.  It seems that those who did buy in 2012, even if by luck, have at least 100% appreciation.  Because of this, I have an inkling that out of state may be the best way to get started... which of course seems way more intimidating.

@Spencer Cornelia FYI the Phoenix suns may be looking at Seattle or Vegas to move their team. I know some mention statistically sports teams don’t make a city better or property values increase, (which I don’t believe) this could be a very good move you’ve made. Hey if Inglewood California could make way for their new football stadium and get the increase in rents why not Vegas?

@Eric B.

Hindsight is always 20/20. Even when I bought my 4plexs in 2014-16, there was still a sense of apprehension. There will always be risk no matter the year, timing, situation, because nothing is guaranteed. 

If you want to be safe with no risk, then put your money in the bank and get around 2%. Back in 2012, it was like .01%. 

Brandon of Bigger Pockets says that 9 out of 10 people on BP will never do a real estate transaction. 

With risk.........comes the reward.

Terry 

It’s hilarious that people will just flat out discard years of economic research from multiple studies, because the data doesn’t fit what they want to believe. Lol 

@Spencer Cornelia

Spencer thank you for sharing your experience. I have yet to purchase my first rental property but I am hoping to this next year. Your story really shines the light on what can go wrong throughout the buying process and how to overcome all the roadblocks that come up. Your perseverance through the process was incredible. It's inspired me to stop talking about buying a rental property and start taking actionable steps to make it happen.  

Thank you for the detailed experience. 

Keep up the solid work and hustle!   

@Tye Foster thanks for the kind words. This game would be easy if it was just purchasing a property off the MLS and closing within a couple of weeks with no issues. But the reality is that many variables enter the mix when you're dealing with people, and sadly, most are out of your control.

Example: I just bought a house in Cincinnati to flip. Everything was lined up to close on November 30th. But the seller's side involved lawyers and a court. And we didn't close until the 10th because of their side needing court approval to transfer title to me. Which sucks because those extra 10 days are included in my HML and I couldn't begin work.

This business is difficult.  Best of luck.

Congrats! Way to  be persistent!

@Casey Powers and @Brandon Carriere I sold this property yesterday for $310k cash.  $5k concessions to buyer for repairs.

I had a backup offer for $330k.

In the end, we all were right.  I didn't have the funds to put ~$3k into it to have it sell for $330k but the backup offer shows I would have gotten it.  That's $70k more than I paid for it just 8 months ago.  So in the end (as always) I was right.

But, I must admit, this property didn't cash flow at all.  It was a headache, had multiple evictions, and non-stop repairs.  We closed yesterday and my property manager just called and said there's another leak.  So you're both right that these 4plex are not nearly as attractive as they seem on paper.

It was a negative cash flowing property.  The property insurance was $1000/year for previous owner, but was $3180/year for me.  That wiped out the tight margins.  Additionally, there were more repair expenses than anticipated.

It turned into a good deal because of the appreciation of Vegas.  I got lucky I'll admit.

I definitely will not be buying in an area like this again unless I get a HUGE discount.

@Kent Caldwell you mentioned that you were looking into small multi's in Vegas.  Tread carefully.  Casey was right - these buildings have years of expenses waiting to pile on the new owner when they least expect it.  BTW, why haven't you showed up to our monthly meetup? 

@Spencer Cornelia

Glad to see you got out unharmed..  You weren't right, like at all.. Zero..  But you got lucky that the market trickled up a little more for this property before its predictable death..  

People like @Casey Powers and myself deal with this stuff daily..  We KNOW what we are talking about..   Its unfortunate that most people don't listen..  I feel bad for the sucker that bought that place from you..  Thats going to get ugly..  

Congrats, and good luck on the next one..  

@Brandon Carriere Yea I will be taking the side of 'stay-away' from the Vegas multi families moving forward.  I'm glad I got the experience when I did, because had I entered the game a year later and acted so desperately to get my first multi family, things would have turned out much worse.

To be fair, by the time I purchased this, I knew it was worth around $300k-$310k so I didn't really profit too much from the mania.  Had I ran it better, I would have.  First deal learning lessons.

I feel really bad for new investors looking for Vegas multi families. The only good ones I've seen are starting to reach $400k which is way out of price range for a lot of FHA Bigger Pockets house hackers.

Ya, getting lucky and getting a bail out on a bad investment because the market went crazy doesn’t make it a good investment. You weren’t right to buy it. You got lucky. Whoever bought it - well I hope they are able to take advantage of Opportunity Zone or such. These properties aren’t currently worth what people are paying for them as they cannot possibly cash flow - they will cash SUCK.

Also an offer of $330k doesn’t mean that’s what it’s worth either. You obviously took the lower cash offer for a reason. At $330k it still would’ve needed to appraise and I’m betting there would’ve been repair credits requested. And that buyer may have walked. So ultimately, it was worth $310k. The $330k was a “coulda shoulda woulda” fantasy. Lol 

These properties need to be bought cheap or part of a neighborhood improvement to make them worthwhile. As I warned you, the maintenance on these things is almost always a nightmare because they are old and haven’t been repaired in no-telling-how-long, and you just can’t get enough rent on them yet. 

@Spencer Cornelia I work evening shifts and you guys always meet up so early, hah! I see the updates on facebook though and am gonna try to make it out one day. Clearly, I need to check BP a bit more often, too. Crazy to hear how much more your insurance was than the previous owner and glad you got out clean.

I've got my condo and rental house here in Vegas going pretty well. I'm pretty conservative with my risk-taking, so that will definitely be all for Vegas for now. I'm keeping an eye on the market here and especially in other parts of the country and hope to pick up one more property that's cash-flow positive from day 1 by the end of the year....

@Kent Caldwell we generally stick around until ~12:30pm so even if you can't make it until 10am, that's fine with us.

A cash flow positive property in Vegas?  Lmao, do they exist?

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@Spencer Cornelia good to know, hopefully I'll pop in one day.

Cash flow positive from day one in Vegas with financing? No, I don't believe those really exist here at the moment. That's why I'm trying to keep my eye on out of state markets....

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