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Jonah Richard
  • Developer
  • Upper Valley, VT
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My journey to where I am today: 14 units + 17 in pipeline

Jonah Richard
  • Developer
  • Upper Valley, VT
Posted Oct 24 2021, 14:21

Having lurked on BP for the better part of my 5-year REI stint, I figured I'd pay it forward and share my journey to get to where I am today (14 units owned with another 17 in the pipeline). Hands down, I attribute my confidence going into my first deal to everything I've learned on here. So for those of you just getting your first one done, keep your heads up and keep grinding!

2015: Graduated university & started working at a consulting firm in NYC

2016: Caught the REI itch, started researching markets and reading BP, etc religiously

2017: Landed on Newark, NJ as a target market. Decided to move there to for a year to get to know the city before committing to buying an investment property

2018: Bought my first duplex in the Ironbound (arguably best neighborhood in the city). It was a flip so one unit + basement was renovated (vacant at purchase), the other unit was outdated but rented. Day of purchase (after the walkthrough), tenants left unexpectedly and trashed the unit. But whatever, it was a good crash course on turning an apartment (spent several weekends hauling out trash, painting, installing LVP flooring, lots of YouTube university). Got both units rented quickly and started learning the ins and outs of being a landlord (mainly, dealing with tenant issues). I know this is a divisive topic on here, but I'd highly recommend doing your own PM if you can. It sucks but it'll fast track your understanding of how to operate a real estate portfolio (it's hard to hire a good PM if you don't understand the full extent of what their job entails)

Deal #'s: $411k purchase price, 20% down conventional loan, $4400 gross rents / mo, maybe $5k in rehab. Far from the 2% rule but this is a city that's 20 minutes from NYC so you're lucky if you can get above 1% (I'm not advocating for this type of deal necessarily but the numbers worked and I didn't care about hitting a home run on my first deal)

2019: Saved up enough money and felt comfortable enough to start looking for a second deal. This time, I wanted to do a value add. Found and closed on a triplex in Newark in October that needed work and brought my buddy on as a partner who had experience doing major renovations. We went 50/50 (both in terms of capital and sweat equity) and committed to taking sabbaticals from work to manage the construction ourselves. Probably a bit atypical, but I wanted to really learn how to do a renovation from start to finish. 

2020: In February, both of us actually moved to the triplex. For 8 months, we went nuts, living on mattresses on the floor while we renovated. Demo, framing, tiling, flooring, painting, cabinets, you name it. We ended up all of the work apart from electrical, plumbing, and window replacement. We even hired a couple day laborers for a few months to help out. Finally, in October, we had all three leased up and refinanced ($50k of initial $200k capital retained as equity).

Deal #'s: $398k purchase price, 20% down conventional loan, $120k renovation costs ($33/SF), gross rents $6000 / mo

2021: With my 12 month sabbatical coming to an end, I said f*** it, decided to pursue RE full time, and submitted my formal resignation. There's a bit more deliberation that went into it (no W2 = no loans so you need to have investors willing to sign on the dotted line. And I had built several key investor relationships by way of showing what I had accomplished with my first two deals) but at the end of the day, the worst that could happen was that I'd run out of money and have to find a job in 12 months (I gave myself a year of runway). I went from making $15k/mo with my W2 to $2.5k/mo (passive rental income). Some people say you need to replace your W2 income with your passive income before quitting but that was going to take way too long.

I also decided to pivot to an area that I know well, my hometown and surrounding area in Vermont. So early this year, I started cold calling owners in search of off market deals. I landed a 5-unit turnkey in March ($300k, $5k/mo rent). I brought on an equity partner who put up all the capital and signed on the bank loan (I also provided a personal guarantee but it wasn't worth as much since no W2) in exchange for an 8% pref return + 30% of the upside. 

⬆️Rendering of the 9-unit new construction project.

I then bought a small vacant commercial building in a great location on Main Street in April using seller financing. For the past 6 months, this has been my capstone project. The plan is to demo the existing structure and build a new 9-unit apartment + retail building. It'll be a $1M project and I have been able to secure $270k in private investment, $650k construction + perm debt, and $80k in state tax credits. We're gearing up to start construction in March 2022 (you can see project financials, construction breakdown, and pitch deck here if you're interested).

⬆️3-family to be converted into 7-unit apartment building.

A few days ago, I also closed on a vacant 3-family nearby for $150,000. It's a beautiful old building that's just been neglected for decades. The plan there is to convert it to a 7-unit apartment building (pending site plan review with planning commission in a few weeks). Feel free to check out more info on that one here. I funded the purchase on my own (with help from the bank) and will be pulling in private capital to help with the $400k in anticipated renovation costs. 

In parallel, I'm negotiating another off market 4-unit deal. We're so close to aligning on purchase price, the owner just drives a hard bargain (not the ideal motivated seller but a good acquisition nonetheless). Been working on this lead for over four months now. 

Deal #'s: $220k-$240k purchase price, 20% down conventional loan, $100k renovation costs, gross rents $5500 / mo after renovation. Equity partner to contribute 90% of investment capital (I put up 10%) in exchange for 80% ownership (moving away from pref returns since difficult for sponsor to get any cash flow before sale). I'd also get a 3% acquisition fee on purchase price, 2% asset mgmt fee on NOI, and 10% GC fee on any construction costs.

I'll note that all the deals I'm doing and looking at are long term holds. Underwriting for 7 years and make that clear to investors. Some people like the flipping business model, I just prefer buy & hold. 

Good luck to all the other investors out there and feel free to shoot me a note if you want to connect.

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