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

113 Replies

If this 4plex was listed on MLS, list price would be in low 300k's. Final price will be whatever the market bears. There is a pecking order as all cash buyers, 25% down, FHA/VA, in that order would be preferred by the seller. So with Spencer's limited budget of about 20k. He was able to something that a person with 75k was able to do. The financing part of the transaction is the hardest part, IMO, not finding the property.

So all in at 20k, then if sell now at 50-60k, seems like a good return. Heck, double money in 3 months is even good. If consider taxes, then better wait 1 year to sell, and get taxed at 15%, or 1031.

Terry 

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@Account Closed when you buy your first deal, you'll understand this business more.  Until then, let the adults talk.  I hope you continue learning and have success in this business.  You're obviously desperate for attention.  There are a lot of people in this community willing to help if you ask for it.  But your comments can and will negatively influence people looking to learn and gain value from this community.  All you're doing is adding useless noise to an otherwise great thread. 

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@Spencer Cornelia   the joys of the internet and BP.. your handling it well... 

and if this is what you want then fine.. and for that kind of leverage and owner finance not on your fico..

super low risk on your end. even if you have to feed it a tad.. which you may have to if you get a bad turn over or extended vacancy but so do every other landlord.

My only comments were based on my partners experience in those 4 plex's that he had and I looked at.. it was a roller coaster for sure.. and it just appeared your numbers were a tad low.. but hey your only putting less than 10% down so anything above break even is a home run in the rental game.

if your local you may want to consider managing it your self and save that 250 a month that could make a huge difference those I know that invest in this asset class do best as self managers.. 

I mean at one point I owned 350 C class SFR's happiest day of my life is when I got bought out of that partnership.. its a job and a tough on corralling all those folks.

so hopefully this comment is more like fox news  fair and balanced.. :)  

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@Account Closed

Not sure if you even done a deal in Las Vegas. The market is gotten tighter, as more inventory has come in and less sales (closed escrows). I was in talks to buy another 4plex for $205k, and comps at $280-300k easily. Maybe put in 20k of repairs, and sell in spring for $300-320k. I was going to partner with RE broker, who said 100% yes. So for $110k each, can return 30-40k in 6 months. However, got beat to the deal. 

If I'm going to risk 110k to return 30-40k, then Spencer's risk of 20k for 50-60k is a way better deal.

Just my two cents.

Terry

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@Jay Hinrichs

Nice hearing from the guru of all guru's. I concur that it is "super low risk ", as Spencer's skin in the game is 20k, not 260k. If goes bad, then his loss is 20k, not 260k. The seller who holds Spencer's note is on the hook. Then ultimately the seller's bank.

I'm looking at it from risk vs. reward standpoint.

Outlook, at Dec'18, Las Vegas will hit double digits appreciation, tops in the nation for 2018.

Forecast, 2019, Las Vegas at around 7.9%.

Terry

https://luxrealestateadvisors.com/las-vegas-home-p...

Winter Median prices from July 2017 to Dec 2017 was raised for only $7,900 from $260,000 to $267,900. 

Similar winter median prices in year 2018.  

So far, median price from July 2018 to Nov 2018 have been raised for $5,000 from $290k to $295k. 

Hopefully, Feb 2019 Spring median price will pick up like what had happened in Feb 2018 Spring median price.

@Ran L.

These are Las Vegas median SFR's, as multi's data are hard to find. Plus, it's a good indicator for other types like condo/townhome, and multi's.

The year 2018 was an exceptional year, and forecasts by zillow and realtor.com are lower for year 2019. The biggest reason being higher interest rates and increased inventory.

Terry

Awesome story Spencer. I can relate with the frustrations. Congrats and keep at it! 

Tough crowd. Congrats on getting the deal done.

@Spencer Cornelia

You asked earlier about the 4-plex address that my client bought and sold after realizing it was a disaster?..   Its  2519 Carroll  which is a few miles from yours to be precise..  

I probably still have the inspection report for that place..  lol..  One of the worst I've ever seen, and it was fully occupied at the time!  

One thing I wanted to mention that my inspector said who's been around the block in this city and knows his S*** (Picture Crocodile Dundee type knowledge and application) , is that these 4-plexes in this NE part of town were mostly built on expansive soil, or something with the soil, which makes them considerably more prone to movement and foundation issues over time..  

I wish you the best..  I could've purchased these like they were going out of style a few years ago but even at 160k, they weren't worth the likely disaster of condition, inevitable maintenance and the type of tenants that I'd have to deal with..  I personally couldn't bet my hard earned money on these kind of properties..  As a realtor, showing these over the years, quite honestly scares me to the point where Id want to carry..

@Spencer Cornelia Congratulations on being creative. The major key is that mindset change...being proactive. You will have a good run with tenants. Im putting the positive vibes out there for you. Goodluck!

@Brandon Carriere ~4.5 miles which is close but man that Carroll street looks rough.  There are a few streets on the North side with multi families on either side that look pretty brutal.  I may be looking through rose tinted glasses, but my 4plex isn't on the same level as the war zone looking areas that exist in Vegas.  The tenants should be lower working class or at least that's what I'll be aiming for.  My inspection came back as real solid thanks to the 6 months of rehab by the previous owner.  Sounds like I may be starting off in a slightly better situation than others.

@Spencer Cornelia

Yes, Carroll was rough..  Previous decades of ownership was literally the epitome of a slumlord..  Really sad actually but all together too common..  

It appears that you're definitely starting in a better spot with the actual physical building..  

I was looking back at that Northwind property during its previous listings on the MLS over the years, and in a couple pics the building was tagged, all the signs advertising were in Spanish, etc etc.. The big challenge will be that the $600-700 a month tenants, will be the same.. Even at double the cash flow a couple years ago, it wasn't worth it personally or thru a property manager dealing with (or even being part of) that..

On a bigger scale, despite your desire to change that into a family friendly 'safe zone', its probably not going to happen..  Your best bet is to let it be what it is, and just guide it along the way?  I dunno, @Casey Powers would be a good person to help with that..

I have a fellow realtor in my office whom as of a few months ago, owns at least 12 of those type of 4-plexes in that general area..  He's a 4-plex beast and somehow seems to be able to make it work with some very firm property management..  I'd be happy to introduce you to him to pick his brain and find out what you need to know, and what to do to NOT have to reinvent the wheel..  

You're a braver soul than me and I'd love to see you succeed..  At least your risk is lower than most..

@Spencer Cornelia There are positives and negatives to this. Beginning investors need a base to begin with equity to pump up the balance sheet and anything over net 10. You have this in this deal. With investing areas that differ. What would concern me is Reality: 1. cash flow is tight 2. Only came together because of 30 yr note and the down payment. I have tenants in this price range and I am going by some rules I have made for my self. 1. Everyone needs a place to live. 2. Net profit per door. If I were to buy any property I run the numbers like you did. You did diligently on your homework. I see your 13%. Good. Then if I can’t make 175-200 a door per month I walk. For that deal I would have to net 8400-9600 a year. It’s gonna be tight look for better deals. Use it for your base. I would either sell one of the others to solidify my return. When you get about 50 units you will need to sleep better. Gods speed and Good luck.

Thanks for sharing, Spencer.  Section 8, ugh!   Realizing proforma numbers can be difficult and a lot more of a challenge than installing cabinets on your own for the first time.  I am sure, one day in the not to distant future, we will be hearing about some guy in LV who rolled their 4plex into an 8plex. 

 Just a side note.  Get a good realtor/broker in your area - one that you really trust and will look after your best interests.  No need to have a lawyer write up a purchase & sale agreement.  These are simple and redundant deals and there s/b preprinted forms already out there that realtors in your area are using.   Once you have your agreement all filled out (by your broker who doesn’t get paid until the deal closes...) have a lawyer ‘review’ it (i.e., buy an hour or two of his time).    

@Brian Serina I wish I would have consulted with you sooner haha!  This was my first deal so I was 'clueless' in the sense that I didn't know exactly what to do for an off-market, seller-financed transaction.  Sadly, all comments on BP threads and common wisdom led me to just go ahead and pay for lawyers thinking this was the best route.  But this is how you gain from "lessons learned".  Cost me some money but I am better equipped to handle deals like this in the future.

Why the long faces.   Its party time . The Raiders are a coming to town.  Prices are expected to rise 8% in 2019.  

Math.  Worth $300,000 increase 8%($24,000)= equity of $64,000 in one year.   On $20,000 thats quite a return.

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