I've been lurking on BiggerPockets for over 6 years now... Listening to amazing podcasts, reading informative posts, and connecting with great people. Now finally, after leaving big life decision to strangers on the internet and asking "Should I get a college degree or sell real estate full time?" , writing hundreds of posts with feedback about if that property is really "a good deal", and "passionately" sharing my opinion at least once on some threads... I can finally say that I am a real estate investor!
I've been working as a real estate agent full-time for the last four years. I've sold dozens of investment properties and my business has grown exponentially year-over-year.... but boy is it hard to get a loan when you're self-employed! As of yesterday at 3:30 in the afternoon, two weeks after my 22nd birthday, I've officially closed on a two-family and a four-family in Concord, New Hampshire. Let me break down the deal. Let me break down the deal:
How I got the deal
I was texting back and forth one night with my former boss of the first real estate team I worked for. She had asked me for some advice about a really good deal with an owner who had two properties to sell and how to make it work... after some back and forth conversation, she let me know the addresses of the properties and the prices the seller was looking for. It was a no-brainer that I just had to find a way to buy them... in this market there was no way I'd get a deal this good. I set up a showing immediately and met with her and the 82 year old seller who had one property in his family for 45 years and the other for 77 years!! After listening to lots of stories and admiring the pristine 60's-style apartments, I wrote a full price, as-is offer with a promise to close in less than two weeks... after having to physically track down the seller multiple times (he had no phone, no email, and just went off places sometimes) the contract finally got signed.
The seller wanted to net one price for both properties that I could allocate however I chose. I had to cover all transfer tax and the broker's commission... Here's the quick overview of my numbers and projections with more detail in screenshots of my excel spreadsheets:
Purchase Price: $365,000
- Price Per Unit: $60,833
- Two-Family: $121,667
- Four-Family: $243,333
Rehab Estimates: $60,000 ($10K/unit)
Estimated After Repair Value: $575,000
Loan: 90% LTV (of purchase price) @ 12% interest for 6 months with 2 points paid on exit
Projected Cash-On-Cash Return: 29.35%
Projected Internal Rate of Return: 51.02%
Here's a picture of the current rent roll (two units were vacant) and my projection of the rent roll
(more details considering the numbers don't tell the whole story)
- Unit 1 (2BR+): VACANT - son-in-law lived here and moved out prior to closing
- Unit 2 (2BR): VACANT - empty when I walked it... he was "finishing" it
- Unit 1 (2BR): $200/week H&HW included - one bedroom is painted entirely black, multiple windows are broken, and other weird things...
- Unit 2 (1BR): $780/month H&HW included - only "normal" tenant in the building
- Unit 3 (Studio): $150/week H&HW&E included - complete hoarder... floor to ceiling with junk except for a small path from his bed to the bathroom and the fridge
- Unit 4 (Studio): $155/week H&HW&E included - smokes in her apartment without a care in the world... had a lit cigarette while I was walking through
- Unit 1 (2BR+): $1,400/month (OWNER-OCCUPIED) nothing included
- Unit 2 (2BR): $1,200/month nothing included
- Unit 1 (2BR): $1,200/month H&HW included
- Unit 2 (1BR): $1,100/month H&HW included
- Unit 3 (Studio): $1,000/mo H&HW&E included
- Unit 4 (Studio): $1,000/mo H&HW&E included
Here's how the numbers broke down for cash in and cash out:
Actual and projected expenses for the properties (I was given a single sheet of paper with hand-written numbers). The numbers are slightly high because they're inclusive of me as an owner occupant, contributing towards costs like management, vacancy, repairs, etc.:
Actual and Projected Income (no tenants have leases... everyone was verbal and I had to have them all sign letters of estoppel prior to closing. All other numbers based on my estimates of market rents). I'm assuming I'm paying myself market rent here for the unit I occupy:
The return profile of my investment with the cash-on-cash return modeled as if I bought these fully stabilized for "25% down":
And the return profile based off of having only $41K in (which is the overage that I've paid after all of my other costs have been wiped out by the refinance):
So that's my first deal in a nutshell! Or at least how I hope its going to go... still have to get through the renovation, evictions, and refinance process... all of which come with their own challenges. Always always always be conservative in underwriting your numbers when looking at deals like this. I've bought two properties in an extremely hot seller's market. I'm trying to buy "smart enough" that even if I screwed up my numbers royally I'll be safe and have ~25% equity in my investment to work with.
And yes... because I've managed to invest only ~$40K in once everything is said and done, I'm going to be seeing a 29% cash-on-cash return and, including principle repayment, a 51% IRR! Not bad for my first one!
I'll say it again @Matt Lefebvre ... CONGRATULATIONS!!! You've worked long and hard for this, and I know you're going to do great! Cheers to the beginning of a long, successful investment career :)
Once you kick out the tenants and put new, "normal" paying tenants in place, sell it. That's what I would do, then do it again. And again.
This sounds like a deal I would do if I were your age BUT I would have done the deal at a cheaper price and do it with more units. Like this project I've done a few years ago - my first building where I made over $1 million dollar (profit):
Congratulations and thank you for sharing those awesome metrics!!! I'm so glad you're able to get an investing example in the North East!! I have owned property in Concord and really enjoyed the rental class there. Good luck and keep going strong.
Wow! Congratulations Matt! Looks like your hard work has paid off. Great job!
Congrats, Matt! Way to take action and get a deal. Looks like your patience and perseverance is going to pay off!
Congrats!! Glad it all worked out and very happy for you!
From another New Hampshireite, congratulations.
All these NH responses, makes me think we should have a get together in Concord, maybe tour your deal and share some stories.
If you need any electrical work, I'd love to give you a quote and work with you.
@Matt Lefebvre Looks solid. Maybe I missed it but what was the final relationship of your old boss with this deal. Was she originally interested, asked your advice then passed? Partnered up?
@Michael Ealy that looks like a great deal that you got there! I would have loved to do this deal cheaper, with more units, or do something like what you outlined. Unfortunately I'm on the upside of the market right now (unlike when foreclosures and distressed sales were plentiful back in 2011) and in the entire state of New Hampshire I can count on one hand the number of auctions for larger multifamily buildings that have taken place this year. Behind the acquisition of these two properties has been a bunch of offers written and rejected. Every auction I've gone to I've gotten outbid by someone willing to pay more when its not worth it (or the bank took it back), or I get outbid when a good deal comes to the open market (all of my offers have been as-is, as-seen, no financing, close in two weeks), or even private sellers I've been in touch with want more than I'm willing to pay.
I'm curious, on that 48 unit, what did you refinance the property at in 2011/2012 after you stabilized it and how long did it take? I'm assuming you didn't pay 11% interest for 6 years. I'm trying to get in and out of my HML in 3 months.
@Jessica Stevenson thank you for your kind words and support! Cheers to the first of many :)
@Lien Vuong thank you! I'm always happy to share numbers... hopefully someone can learn from my plan and use the things that work and make sure not to do the things I've screwed up on (and I'm sure I did somewhere along the line!). Happy to hear another advocate for the Concord market :)
@Megan Frank thank you! Still lots of hard work to go on this one :)
@Nicholas Georgoulis thank you my friend!
@Kyle Lacasse thank you! Here's to a long and prosperous future for both of us!
@Pat Brennan thank you! Its worked out to buy it... now I've got to make sure all of my numbers aren't just made up!
@Emmett Harris thank you! Been a long time in the making!
@Stephen Gallagher that's not a bad idea! At least showing off the vacant building would be easy enough. I'll let the dust settle and then maybe pursue that... could be a great learning opportunity for all!
@Will C. she asked for advice about how to get paid on the deal when the seller refused to pay a commission! She was interested in it herself, but strapped for cash because she was under contract on another property. I gave her advice on how to market it to others and still guarantee herself a paycheck... fortunately she didn't have to market it very much :)
Great story and lots of material to learn from there. Thanks for sharing!
@Matt Lefebvre Awesome work! Congrats on the beginning of what I know will be a long and successful investing career.
@Matt Lefebvre Nicely done young man! Great first deal!! Hope you didn't set the bar too high for your future purchases :) Seriously though, those are great numbers for anywhere in southern 1/3 of NH right now and likely in any market. Hope all goes according to plan!!
@Matt Lefebvre congrats on getting such a smoking deal. I've yet to do a deal but plan to pull the trigger by the spring 2020. I'm looking outside NH though because of the hot market and the high cost of entry.
It's awesome you pulled this off. I'm more than double your age and wish I had started when you did. You're off to a great start.
Congratulations! Thank you for sharing this, it's very informative to know how you went about the process and calculations for acquiring this deal. Keep growing.
Best of luck on your future endeavors.
Congratulations. Thanks for sharing your deal. This is just the beginning. Well done.
@Mark Rocka you're welcome!
@Nathan Recchia thank you! I'm hoping it will be a long and successful one... but boy is this more work than I thought!
@Richard Lovering we're in a hot market right now in NH and its slightly concerning with some of the sale prices I see. In a market like this, to stay protected, I'm trying to target deals that I know even if we see a correction in the market, I'll still have positive equity and positive cash flow. My bar was very high going in and I got beat out on a lot of deals because I would only pay what they were worth to me. Gotta keep your bar high to invest smart :)
@Kevin Green best of luck with your search and thank you! Prices are pretty high across the board so its all about investing smart.
@Sthefany Lamoureux you're welcome and thank you! I've learned how to better analyze deals from people posting on BiggerPockets and its only right to do the same when I have a deal to share!
@Ricardo Gomez thank you!
@Boris Suarez you're welcome! Can't wait to see it completed and what the next one brings!
Amazing! Thanks for sharing, definitely inspiring!
Hey @Matt Lefebvre , great deal! Just wondering how you got to the estimated appraisal value of $575,000 ? And the refinancing is expected to take place after six months?
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