$474,725.00 Wealthier Today...

91 Replies

You make your money when you buy! I'm closing on a 22 unit portfolio that consists of 12 single family homes and 5 duplexes. The sellers first offer for the package deal was $1,140,000. Through a LOT of strategic communications and negotiations, I eventually got them to accept a price of $790,000. 

The appraisals came in at $1,264,725... $474,725 above the sales price! So just by closing on this deal my net worth goes up by nearly 1/2 a million bucks. 

.

But this gets even better... 

Since I bought so well my bank only required 10% down of everything including closing costs. I sold a 6-unit building which net just enough to 1031 for the down payment on this portfolio. So there will be no money out of my pocket to purchase the portfolio. 

There's a value add play too. The properties need approximately $200k in work and I wrote the contract for $890k with a $100k credit at closing. My bank will escrow that $100k for me to draw on as work is completed. 

I will only have to come up with the ~$100k to finish out the work. I'll do some of it cash and I'll pull some short term debt at the end. Then when the work is complete (6-8 months) I predict the value to be ~1.55 million. At that point I'll refinance at 70% LTV which will put ~$300k back in my pocket and cash flow ~$3k per month (my 6-unit was about $1k per month)

SO +1/2 Million net worth... with no money out of pocket to buy... AND half the rehab costs are covered... 

THEN at refinance +$200k cash in my pocket from before the deal... AND +$2k more in cash flow

Nice work! Thank you for sharing. Can you elaborate some on how you got the purchase price down so much?

Thanks!

@Austin Fruechting  I couldn't agree more and your post is perfect to show others that its true, you make your money when you buy.   Thanks for sharing! 

With regards to your bank only requiring you to put 10% down, do you think that's because you have a working relationship with them? I recently bought a property that appraised for $30k more than the purchase price (65% LTV) and so I was hoping to use some of that "instant equity" to lower my down payment but unfortunately, the bank still required me to put 20% down.

Originally posted by @Mindy Jensen :

Wow, your story just keeps getting better, @Austin Fruechting . Congratulations! 

 Thanks Mindy - this is an exciting one. It also moves our ownership to 101 units. That's fun to crack that benchmark. 156 total, but I have some equity partners on a couple packages. 

Originally posted by @Aaron Raymond :

Nice work! Thank you for sharing. Can you elaborate some on how you got the purchase price down so much?

Thanks!

 There was so much involved in making this happen, way to much to write out here. The amount of emails back and forth to get there is incredible. The best negotiating book I've read so far is Never Split the Difference

Originally posted by @Christopher Giannino :

@Austin Fruechting I couldn't agree more and your post is perfect to show others that its true, you make your money when you buy.   Thanks for sharing! 

With regards to your bank only requiring you to put 10% down, do you think that's because you have a working relationship with them? I recently bought a property that appraised for $30k more than the purchase price (65% LTV) and so I was hoping to use some of that "instant equity" to lower my down payment but unfortunately, the bank still required me to put 20% down.

 It's from having a long healthy relationship with a portfolio lender. 

@Austin Fruechting that's what I thought you were going to say..  I'm new to real estate but I have realized in a short amount of time, real estate investing is all about networking and building relationships.  Congrats on the new 22 unit as well as your continued success!!

Originally posted by @Christopher Giannino :

@Austin Fruechting that's what I thought you were going to say..  I'm new to real estate but I have realized in a short amount of time, real estate investing is all about networking and building relationships.  Congrats on the new 22 unit as well as your continued success!!

Thanks Chris. I don't knock people for going with the big boys for longer fixed rate terms at good rates, but the long term benefits of building a relationship with a portfolio lender shouldn't be ignored. The ease of loans and then special deals have put me much further ahead than just rate shopping. 

@Austin Fruechting Congrats!! That is probably one of the best deals I have heard in a longtime. Just awesome!!

Originally posted by @Vish Iyer :

@Austin Fruechting Congrats!! That is probably one of the best deals I have heard in a longtime. Just awesome!!

Thanks Vish!  I'm pretty amped about it. 

Great deal @Austin Fruechting !

My long term plan with the 6 plex I just bought is to 1031 into something bigger so it’s cool to see this as an example.

Originally posted by @Jordan Moorhead :

Great deal Austin Fruechting !

My long term plan with the 6 plex I just bought is to 1031 into something bigger so it’s cool to see this as an example.

Nice Jordan! I forced most of the appreciation on this one. It was down to the studs in the kitchens and baths and fully rehabbed. I bought a 32 unit package that I bought in June and used equity partners. This 6-unit had enough equity that had I sold it, I could have done the 32 unit without partners. So I decided to sell it to be ready for the next time a great deal came along. 

I wasn't actually planning on 1031-ing. The timing just happened to work out. I was just planning to sell it, pay the taxes, and sit on the cash until the next deal arrived. Say the sale net $100k and I would have $30k in taxes to pay. I would rather pay taxes, have $70k and wait for a great deal vs using a 1031 and forcing $100k into just an ok deal just to save those taxes. You make your money when you buy, and a lot of people end up not buying right because they're trying to save a few tax dollars today. 

Great deal.  Any words on how you found the property?  Was it formally listed?

Originally posted by @Greg Parker :

Great deal.  Any words on how you found the property?  Was it formally listed?

Hey Greg, some of them were listed MLS. I wasn't interested at first, but after they set idle for a while I decided to dig in further. I did a tax search on one of the addresses of them to find the owner (which was an LLC). Then did a tax search of the owner to find all they owned. So then I searched the state database to find who owned the LLC and reached out directly to them about putting together a package deal.

Thats pretty much how I found the deal I'm currently in underwriting. Congrats brother!

And that is how it’s done!!! Nice job. Congrats @Austin Fruechting That deal leveraged so many great real estate strategies. Got me all fired up. Thanks. 

Very awesome, congrats! Can you further detail what went down when you say there's "a LOT of strategic communications and negotiations, I eventually got them to accept a price of $790,000" ?

How were you able to negotiate the discount? Did you have to make concessions? If so - what were they?

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Excellent!!! Well done!! I'm soo glad to see things like your story become possible for us as newbies!! Keep up the great deals.. it's fun and exciting to hear all the creative deals on this forum!!!  

That's an awesome story. Congratulations! And nice job doing all the necessary footwork/research to get the deal put together. Going the extra mile pays...

@Austin Fruechting  Who is your lender?

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