Offer accepted on 3rd property! Woot!

10 Replies

Super excited to announce we will be closing in September on our 3rd property! We will be moving out of our current house into the new house and renting the house we are in now. Both our current houses (in the Northern Colorado directly in the middle between Denver and Fort Collins right off I-25) have a ridiculous amount of equity now. We are considering ( May 2021) selling (possibly both) and taking our equity and purchasing a multi-family. Probably have around $300K to put down if we sell both properties.

Why go to multi-family?  We want to invest in something that has more cash flow.  Issues?  I tend to be the person who has high level vision with extreme ADD, so sometimes drilling down into the details can be a challenge, but, not something I cannot overcome as I have my own company and am crushing that for the first two years in business - so I can focus.

I guess I have about 8 or 9 months to drill down and figure out location of where to invest (either CO or AZ is where I am thinking, possibly TX), what size multi-family and trying to educate myself on what that will look like for us....  

I do have a question - How long has it taken any of you who have purchased a multi-family - from identifying through closing, and fixing any repairs etc, to 80-90% rented?

Thank you!

Jennifer
  

I have not really thought about that. Is there a big difference in securing a loan on commercial?  I only have experience on the residential end. Not that I am afraid to go outside of residential. I guess it would just depend on the funding, what the opportunity is etc. 

Over 4 unit and it becomes commercial where you typically need 25-30% down. What areas are you looking in Northern Colorado? I think most multi-family tend to sell off-market between investors in our area. I don't see too many come up and if they do the price vs return isn't great. 

Consider taking a look in Greely, Longmont, Loveland. 

@Jennifer McPherson Hi Jennifer, I'm active buying/owning/managing small multifamily as well as helping investor clients in this market segment as an agent (recently licensed this year with about 11 deals under my belt total and one more under contract). Regarding your question on timeframe to rehab and rent: you'll find most multifamily in this area will come fully occupied (unless the property is highly distressed of course, but I don't see many of those personally, usually they are 100% occupied or one unit has been left vacant deliberately for ease of showing). I've been doing my value add rehabs during natural turnovers and even with existing tenants living there which is tricky but has worked well for me. It usually takes about three weeks for me to fully rehab a unit and I advertise and show the unit during that time so the total vacancy time is a month or two max. I haven't had trouble finding tenants in fact I usually have plenty of applicants to choose from except during winter months so I definitely try to avoid filling units in the winter (Oct-April is much harder to find quality applicants). Not sure if that completely answers your question but I'd be happy to chat and talk about what has worked for me as well as the challenges in the small multifamily market in our area. I'll send you a connection request. Steve

@Steve K. , it sounds like you have renovated some of your own units with existing tenants living in them. It seems like this would be very difficult and/or you’d have to have the right tenant.

What does this process typically look like for you in regards to preparing your tenant to live through renovations?

What type of work do you typically target for these types of rehabs?

Originally posted by @Calvin Stewart :

@Steve K., it sounds like you have renovated some of your own units with existing tenants living in them. It seems like this would be very difficult and/or you’d have to have the right tenant.

What does this process typically look like for you in regards to preparing your tenant to live through renovations?

What type of work do you typically target for these types of rehabs?

I've done full rehabs on several units with existing tenants. It's a bit tricky for sure but always worked fine for me. I've never offered hotel stays because I've never been asked, but would probably have agreed had I been asked. I build solid rapport with tenants whenever possible which is absolutely key. In each case the tenants were happy to have the improvements done as their units were in rough shape when I purchased. 

I do most of the work myself but work quickly and just hire out tile and sheetrock if there's a lot of it because I'm slow at those things. In one case my tenants took off on a climbing road trip for a week and I scheduled the work around their trip, another time I had a young but highly skilled carpenter tenant who helped with the project (which I normally wouldn't do but I knew he was a good carpenter and a reliable guy so it worked great). 

I don't know that I'd recommend it to everyone and I'm not planning to do it again any time soon (I have too many young children now, not enough time, and only self-manage a few units so I don't even know most of my tenants anymore), but it worked perfectly at the time. In each case, I just shared my business plan with the tenants, told them I was looking to make improvements in order to raise rents and add value to the property, then asked them what improvements they would be willing to pay more rent for, then made those improvements and raised rent (and raised it even more at the next turnover). The tenants were actually interested in my strategy and totally fine letting me upgrade their units. One tenant from that time is actually in real estate law now and another adopted my strategy and now owns a value add multifamily of his own down in Castle Rock.

 

Originally posted by @Steve K. :
Originally posted by @Calvin Stewart:

@Steve K., it sounds like you have renovated some of your own units with existing tenants living in them. It seems like this would be very difficult and/or you’d have to have the right tenant.

What does this process typically look like for you in regards to preparing your tenant to live through renovations?

What type of work do you typically target for these types of rehabs?

I've done full rehabs on several units with existing tenants. It's a bit tricky for sure but always worked fine for me. I've never offered hotel stays because I've never been asked, but would probably have agreed had I been asked. I build solid rapport with tenants whenever possible which is absolutely key. In each case the tenants were happy to have the improvements done as their units were in rough shape when I purchased. 

I do most of the work myself but work quickly and just hire out tile and sheetrock if there's a lot of it because I'm slow at those things. In one case my tenants took off on a climbing road trip for a week and I scheduled the work around their trip, another time I had a young but highly skilled carpenter tenant who helped with the project (which I normally wouldn't do but I knew he was a good carpenter and a reliable guy so it worked great). 

I don't know that I'd recommend it to everyone and I'm not planning to do it again any time soon (I have too many young children now, not enough time, and only self-manage a few units so I don't even know most of my tenants anymore), but it worked perfectly at the time. In each case, I just shared my business plan with the tenants, told them I was looking to make improvements in order to raise rents and add value to the property, then asked them what improvements they would be willing to pay more rent for, then made those improvements and raised rent (and raised it even more at the next turnover). The tenants were actually interested in my strategy and totally fine letting me upgrade their units. One tenant from that time is actually in real estate law now and another adopted my strategy and now owns a value add multifamily of his own down in Castle Rock.  

 

It seems like having great rapport with the tenants would be a key aspect for sure.

Sharing your plan and asking the tenant which improvements they would be willing to pay for in the form of increased rent sounds like a really simple but smart strategy to ultimately get their buy in before executing the work.

Thanks for sharing your experience and I'll be sure to tread lightly if I do decide proceed in that manner.

When you self-managed most of your portfolio, what were some easy but key steps that helped you build this type of working relationships with your tenants?

 

When you self-managed most of your portfolio, what were some easy but key steps that helped you build this type of working relationships with your tenants?

That's easy: showing up. The best way to build rapport is by being on the property fixing things and treating residents in a friendly and polite way in all interactions. Due to my value add strategy, I'm at the property a lot when I first purchase, making improvements that residents notice. Residents definitely respect an owner who's out there with their sleeves rolled up fixing things, landscaping, making their living space nicer and not just collecting rent while letting the property fall into disrepair while piles of trash collect along the fence line (like many absentee landlords do). It's kind of like being a real estate agent in that way; distinguishing oneself from the pack isn't that hard. Another thing I do is hand deliver a "welcome letter" when I take over a property and take that opportunity to meet the tenants and get to know them a bit (if possible, some people make it clear they prefer to be left alone and I respect that too). I always ask if there is anything that needs fixing during that intro meeting, and if there is, I fix it on the spot (if possible, or ASAP) to start off in a good faith relationship where I do what I say and expect the same. It's a bit of a fine line because you definitely don't want to encourage tenants to call you more than needed, but that comes from training them later after you've built that critical initial rapport. From when I first started managing I always followed the motto "Always friendly, never friends", so I avoid renting to friends or becoming personally involved with residents for the most part. However I'm a friendly person by nature and have definitely found honey to work better than vinegar personally, while keeping very strict policies around the terms of the lease, rent collection, late fees, proper channels for maintenance requests etc. I'm super polite but also firm about sticking to my policies.

 

Originally posted by @Steve K. :
When you self-managed most of your portfolio, what were some easy but key steps that helped you build this type of working relationships with your tenants?

That's easy: showing up. The best way to build rapport is by being on the property fixing things and treating residents in a friendly and polite way in all interactions. Due to my value add strategy, I'm at the property a lot when I first purchase, making improvements that residents notice. Residents definitely respect an owner who's out there with their sleeves rolled up fixing things, landscaping, making their living space nicer and not just collecting rent while letting the property fall into disrepair while piles of trash collect along the fence line (like many absentee landlords do). It's kind of like being a real estate agent in that way; distinguishing oneself from the pack isn't that hard. Another thing I do is hand deliver a "welcome letter" when I take over a property and take that opportunity to meet the tenants and get to know them a bit (if possible, some people make it clear they prefer to be left alone and I respect that too). I always ask if there is anything that needs fixing during that intro meeting, and if there is, I fix it on the spot (if possible, or ASAP) to start off in a good faith relationship where I do what I say and expect the same. It's a bit of a fine line because you definitely don't want to encourage tenants to call you more than needed, but that comes from training them later after you've built that critical initial rapport. From when I first started managing I always followed the motto "Always friendly, never friends", so I avoid renting to friends or becoming personally involved with residents for the most part. However I'm a friendly person by nature and have definitely found honey to work better than vinegar personally, while keeping very strict policies around the terms of the lease, rent collection, late fees, proper channels for maintenance requests etc. I'm super polite but also firm about sticking to my policies. 

 

All these points are great and I will be sure that I implement these next time I inherit a new tenant especially the hand delivered welcome letter.

That's also a great motto to go by. 

I appreciate the thorough responses.

 

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