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

116 Replies

Originally posted by @Spencer Cornelia :

@Jay Hinrichs there are a lot of 4plex in town that are less than ideal, I get that.  The address on this is 1550 Northwind Ct 89110.  There haven't been many sales in the area which doesn't make sense if the tenants are crap, not paying, and causing a lot of headaches.  Given the rapid appreciation of the multi family market in Vegas, it doesn't make sense for these owners to hold 4plex with >$100k of equity if it isn't cash flowing.  Which tells me the tenants in this area aren't as bad as some may postulate.

If your on top of it personally you could have better results than many.   

Cool, looks like zero landscaping cost there, thats a plus right. Good luck!

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@Frankie Lester I have messaged Terry Lao quite a bit. Please answer my questions. What property did you buy? What was the address? You said you owned a 4plex in Vegas and broke even, I'd like to know the numbers and your experience.
Originally posted by @Account Closed :
Originally posted by @Jay Hinrichs :
Originally posted by @Spencer Cornelia:

@Jay Hinrichs there are a lot of 4plex in town that are less than ideal, I get that.  The address on this is 1550 Northwind Ct 89110.  There haven't been many sales in the area which doesn't make sense if the tenants are crap, not paying, and causing a lot of headaches.  Given the rapid appreciation of the multi family market in Vegas, it doesn't make sense for these owners to hold 4plex with >$100k of equity if it isn't cash flowing.  Which tells me the tenants in this area aren't as bad as some may postulate.

If your on top of it personally you could have better results than many.   

ONly way it works is if he moves into a UNIT.

 Most of these look like they in 3X better physical shape than they did 10 years ago. A little family oriented affordable vegas hood cul de sac, self managed and buy the rest off the burnouts then add seller financed. These don't look like they ever got boarded up. I recall seeing a ton of these half boarded up. 

As a property manager who’s handled a bunch of these old small multis in town, I agree the chances of profiting on this deal don’t seem high. Especially not at the price paid. Most of these buildings are in such bad shape with years and years of deferred maintenance, the repairs become costly, fast. Plumbing is often a big problem, with old pipes that are rarely fixed properly. 

I’ve seen more owners lose money or just break even on these things, than profit. 

The only one I’ve personally seen so far that has really turned a profit, is a 6plex the owner got cheap as a distressed property and I’ve managed it from the beginning. From evicting the squatters to rehabbing to placing good tenants, I’ve managed it all. It’s had very little turnover and few repairs. I ACH good money to the owners every month, so i know it’s doing well. 

Things that made the difference on this one:

1) Cheap purchase price

2) Needed repairs were done up front

3) Tooting my own horn a little - I put in good tenants

4) When something breaks, we get it fixed asap - this helps keep good tenants, reducing turnover 

5) Owners invest in quarterly air filter and annual HVAC service, which helps prevent costly HVAC repairs. Very little HVAC expense at this property. In fact, only a couple small HVAC repair calls in almost 3 years, for all 6 units. 

@Casey Powers I profited ~$40k day one so I'm fairly confidant I'll profit. I'm not anticipating any cash flow. Will have ~$450/month surplus which will go towards repairs, vacancy, and cap ex. The $8k depreciation will shield me from roughly $2500 in tax from my flips which is 5% return if the property breaks even. Additionally, the rents should increase ~$200/month within 24 months which will be more cash for safety net. I appreciate your input as you actually have value to provide. This property will have headaches but I have the safety nets to handle.

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To add, the owner spent the past 6 months rehabbing the property so cap ex and repairs should be pretty low the first few years. Deferred maintenance shouldn't be a concern.

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I do wish you well. I’ve just seen too many of these things go south because of repair issues that were found after purchase, and simply paying too much for an old building. 

I’m also not convinced that $200/month rent increase will actually work out. If they’re renting at $650 now, that would be over 30% jump in 2 years. Rents on low income units don’t increase that much that fast, that I’ve seen. Wages don’t support that kind of price hike on low$ rentals. 

I’d never rely on a realtor’s opinion on rents - they don’t typically have enough experience with rentals to make a good estimate. 

And, we could all be wrong and you could have a little creampuff on your hands. I hope that is the case. 

@Spencer Cornelia I truly wish you good luck when finding/dealing the D class tenants. I’m an investor holding double digits properties in Las Vegas for 8 years. Personally, I would not touch nor buy any 4-plex in Las Vegas. If your 4-plex is worth $300k today, and if I were you, I would have sold it immediately, and be very happy if it can be broke even... I wish you the best of luck.
Originally posted by @Account Closed :

Does Casey handle buy /sell condos?  and does she manage them?  im thinking Sky, Allure, Turnberry.

My guy is getting long in the tooth...................lol.

Lol. I don’t do sales. I manage rentals as that’s what I do best. I’m happy to consult on rent estimates and possible repair issues before purchase, and leave the buy/sell transactions to the realtors who specialize in that. 

Originally posted by @Spencer Cornelia :

@Casey Powers $50/month for 4 units == $200/month increase. 

That makes MUCH more sense. I always think of it as per unit pricing. Ha

I am trying to see a half glass full here, with the virtually zero down, and an exception pocket as when you look at the street it looks stable lets say as compared to what other 4 plex pockets I have seen, those ones appeared physically and mentally obviously beyond hope. But let's not kid this might be gnarly still and basically buying a part time job. If it were me it would be unofficially for sale the day I bought it, but thats normal for me. 

@Matt R. and @Ran L. The seller is doing me a solid by offering seller financing on pretty fair terms and at a discount for a property that isn't really distressed.  He's doing it because he wants the monthly payment of $1,516 because he's retired and didn't want the huge tax number by selling today.  Additionally, if I were to sell for $300k, I would pay $24,000 in closing costs.  I had $15k in purchase closing costs.  And I owe $240k.  So it would be really short sighted to sell and walk with $1,000.

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Originally posted by @Spencer Cornelia :

@Matt R. and @Ran L. The seller is doing me a solid by offering seller financing on pretty fair terms and at a discount for a property that isn't really distressed.  He's doing it because he wants the monthly payment of $1,516 because he's retired and didn't want the huge tax number by selling today.  Additionally, if I were to sell for $300k, I would pay $24,000 in closing costs.  I had $15k in purchase closing costs.  And I owe $240k.  So it would be really short sighted to sell and walk with $1,000.

 I hear ya. Hey I have been looking for seller financing in LA for multiple years, not happening yet.  Then you hear about seller financing everywhere else, turns out sometimes a sign shtf. As far as the sellers taxes, he might understand all the risks involved on his end and when we are talking 6 figures you have to do what you gotta do regardless imo. 

Your expenses look really low.  Should be around 30-35% of ski

just looking at your numbers again on your first post. I cant see how those stack up long term.

you have next to nothing for vacancy one unit vacant one month in a year .

you have no money in there for turn over.  

you have no money in there for release fee.. I doubt you will have tenants that stay on for years .. and agents or PMs are going to charge you to do that.. with 2k or so a year in your blue sky proforma.. i suspect in reality this will be break even to a little bit of negative.. and you big bonus will be your tenant paying your place off for you ( which is just fine in my book to me cash flow is icing on the cake its all about getting that debt paid down with someone elses dollar. and of course the little bit of tax shelter.. also I can see how your prop tax's are only 1600.. thats 05%  that seems really low.

But I do wish U the best with these.. it looks like a solid place though.

@Spencer Cornelia , congrats on the deal.

Seems you get a lot of bashing from other Vegas investors. That's concerning but here's an idea for you that I used in one of my buildings in a "D" area that I eventually sold for over a $1M profit. Here's my post:

https://www.biggerpockets.com/forums/311/topics/64...

HINT: I don't like renting a building in a "D" area to market tenants, nor section 8 tenants. In situations like these, you got to be creative to turn a profit.

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