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Multi-Family and Apartment Investing

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Mike Hoffman
  • Rental Property Investor
  • Barneveld, WI
31
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11
Posts

First deal in the books: From 0 to 48 doors

Mike Hoffman
  • Rental Property Investor
  • Barneveld, WI
Posted Oct 5 2021, 07:45

Hey everyone,

I apologize for the length of this post, but I thought I'd post about my first deal ever because it was a unique deal and might be able to help other people. For some background, I've spent the last 18 or so years working in IT and at the end of 2020 I decided that I really wanted to go a different direction. I have been interested in multifamily real estate for several years and had several passive investments, but nothing too huge. Anyways, since I decided to go all in on getting my first property, I joined BiggerPockets and started listening to podcasts. As we all know, this is a business all about networking, so I joined the Madison, WI REIA and started going to meetings as well.

The guy that runs that REIA, @Chris Hake, also has a coaching group that I joined, so I could learn the ins and outs and be part of a like minded group focused on building our real estate businesses. Soon after I joined that group, I was talking with my sister-in-law, who is a broker and I casually mentioned that if she has a duplex come up for sale to let me know since I was looking for a property. My plan was to follow @Brandon Turner's "Stack" method and acquire a property each year to build my portfolio. Anyways, she told me that she didn't have any duplexes, but she did know of a 28 unit apartment complex that could be bought since the husband/wife team running it had just went through a bad divorce. Needless to say, I was pretty excited, but at the same time pretty discouraged since I didn't think there was any way I would be able to get it.

I talked with Chris about it, and he said to go look at it and if it is worth pursuing, to put in an offer. So I went and looked at it and as it turns out, the whole deal included 28 apartments in 4 different buildings, 19 Storage Units and 1 single family residence. At this point I was like holy sh*t....how can I possibly pull this off? After discussing the financials with Chris we realized there was a great opportunity to add value to the property and increase our NOI pretty quickly. I submitted an offer on the property and after some back and forth, we had an accepted offer! Chris and I decided to partner up on the deal, which helped me immensely having someone with his experience onboard.

All good right? Not so fast....the first thing I wanted to do was to get all of the appropriate documentation (T-12, leases, contract services, rent roll, etc.) to make sure all of the initial financials that the seller gave us were correct. Unfortunately, the owners didn't have a lot of this information readily available, so this part took forever and was extremely frustrating, but I just kept hounding them until I got the information I needed. 

Meanwhile, Chris was working on the legal/banking side of things. We talked with 4 different local banks and both decided that the one bank was clearly the best. They were excited for the project, one of the board members knew all about the property, and it was the type of property they work with. Great!

So now that we had the bank chosen, Chris got the investor Offering Memorandum all done and sent to some people who had invested in his previous deals. This is where having a partner who has been there/done that made the deal possible for me. Being really new, I didn't have the network Chris did, so I would never have gotten the deal done if it wasn't for him.

So now that that was all done...off to closing right? WRONG. Our bank who was so excited presented the project to their board and it got flat out DENIED. No reason given, just plain denied. At this point we were close to losing the deal since we were running out of time. We quickly regrouped and reached out to another bank, which just so happened to be the lender that held the current mortgage. We submitted everything and had to wait almost 2 weeks for the board to meet to see if they would approve it. Meanwhile the sellers wouldn't sign an extension until we heard back from the bank. Thankfully our package got approved. The sellers signed the extension and we were back on. Whew!

Next up was to make sure the appraisal came back ok, which of course took several weeks. Unfortunately, the week before our appraisal was due, the appraiser's mom (and business partner) passed away. Appraisal wouldn't come in on time now, so we had to wait an additional week, which pushed our closing out again. Thankfully the appraisal came back good. Another hurdle crossed!

Our last hurdle to cross was getting our investor money wired to the title company. We brought on two investors who used self-directed IRA's to invest and due to the timing of the appraisal coming back and getting all of the legal paperwork done, we actually didn't get all of the money wired until the day AFTER closing. Lots of nervous people waiting for that money to get deposited :)

In closing (if you have read this far)...this whole deal had a little bit of everything...poor documentation, lots of back and forth with the sellers, bank issues, investor issues, and lots of personal issues including deaths in the family. What a roller coaster ride, but wow...what a great feeling to finally close on it.

So now, I'm focused on working with my property management company to get units upgraded/back online, and continuing to learn the ins and outs of owning a property. Then, of course, I want to find another one :)

Big thanks to everyone on BiggerPockets..I haven't posted much, but I've read a lot and it has been a huge help for me. I'll try to be more active now :D 

Mike Hoffman

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