22 Years Old with 20 Units in 10 Months!
10 months ago I was driving up and down every road in this new town of Iron Mountain MI trying to get a feel for the quality of the neighborhoods and characteristics of the market. I still had a few weeks of college left but was likely going to be starting a job in the town after graduation. Having already understood that multi family properties was where I wanted to focus my attention I wanted to take a look at every apartment complex or 4+ unit structure I could find. Knowing I could only afford 4 units as my first purchase I passed by a large complex on a small lake in the center of town and said to my mother who was in the car with me… “Wow, that would be amazing to own!” Given the size of the building, location, and fact that the numbers on the carports went up to 16 I shrugged it off knowing there was no way I could ever afford something like that in the near future.
The day before graduation I received my job offer, and 2 days after graduation I submitted an offer on a 4 unit building in the hopes of living in one unit while renting out the others. I wanted to renovate the units with the idea that within 6 months I could be living rent free with my tenants paying all my bills. After negotiations and inspections I closed on my first deal in June 2015, began my job, and began renovations. 5 months later I had the first major renovations completed and got the building full to achieve my goal of living rent free before the new year.
In October 2015, during the renovations of my last vacant unit my carpet installer gave me a tip on a 16 unit building. So being young and ambitious I figured, “what the hell, why not call and see what the deal looks like.” Well, it ended up being Crystal Lake, that 16 unit that caught my eye on my first property hunt through the town.
After analyzing the numbers, viewing a few units in the property, trying to find investors interested in a partnership and exhausting my network I had to make a phone call and acknowledge my inability to move forward on the deal(I was 100% honest the entire time about my situation). I explained that while I clearly like the deal, unless the owners could provide some sort of owner financing (in the very first conversation the owners were clear about not wanting to do any owner financing) then I couldn't likely make an offer as I didn't have the financing to back it up.
Long story short, the owners came back with an owner financing option, we negotiated and had a signed purchase agreement by the end of January 2016. After getting multiple banks to negotiate on the financing I was able to secure a commercial loan in 1st position with the owner financing in second position all under very favorable terms. I walked into closing today and was only required to put $11,950 down on the building.
If anyone is interested in learning more about my financing structure, negotiation, or cash flow analysis please PM me!
Needless to say, the past 10 months have been very exciting for me. I am 22 years old and now own 20 units. The goal is to hit 150 units by age 30! But why not try to hit that by age 26?
I have to give a big shout out to the BP community for the advice, encouragement, and cautions as I have sought out help through this process. I really cannot imagine I would be where I am today without the BP community to lean on when things have gotten challenging.
For all the newbies, I was one just 10 months ago. Don’t think because you don’t have lots of money or experience you cant make it happen. It took me just $17k in total investment of my own money to secure these 20 units which rent for an average of $600 each (most of the utilities are sub metered too!). Figure out what peoples problems are and try to find the most advantageous way to solve those problems for all parties. It’s a relationship and problem solving game. Do that better then anyone else who is competing for a particular deal and you can surely see substantial success in a short period of time!
Joel,
Awesome story man I like reading this kind of stuff.
Just a couple questions for you,
1)How did you obtain financing for that first four unit building? Were you working a full time job through college? Did your parents co-sign on the loan?
2) What was the purchase price of that four unit building?
Originally posted by @Joel Florek:
@Logan Allec happy to answer questions and be totally open. I went with a commercial loan rather than a traditional mortgage backed by the government. Not as favorable of terms but this got around a lot of the red tape people usually get stuck with and allowed us to close in under 30 days as was the same with the 16 unit. I was fortunate my parents could loan me $25k at 8%. for legal purposes we structured it has a gift. With that money I could provide the 20% down that the bank needed for the $125k purchase price. My parents also cosigned the loan to help the bank feel more cozy. On the 16 unit the bank wanted them to cosign as well but I pushed back and said "if you want to do business with me then it will be only with me for this deal and all moving forward". The bank didn't require cosigning on the 16 unit. On the 4 unit I also provided my letter of employment and had a starting salary at $65k which in our area will go a long way.
Regardless its a local bank that is a very strong and aggressive lender in the commercial space.
Looks like I got my answers right here. Thanks! And great job, I hope to get similar financing!
@Amir M. I started my job after getting pre approved for the commercial loan. They were happy with my letter of employment. They also wanted my parents to co-sign my first property which my parents didnt have an issue with. Otherwise I would have probably had to wait at least 6 months to show I was in my job long enough.
@Theresa Amouzou its a great way to begin. Live in one and have all or most of your living expenses covered. Plus, when you move out you should have some great cashflow coming off of the property. Also acts as a great way to get you in the mindset of loving multiple doors per unit when you get to deposit your rent checks each month but yet you have your own space. Some of my friends go the route of buying a house and renting the other rooms out but I was done with having roommates after 4 years of college so I did not like that idea.
Hi Joel,
First of all congrats on all the success, I'm new and trying to figure out where I want to fit in and what would make the most financial sense, above you said "anyone is interested in learning more about my financing structure, negotiation, or cash flow analysis", well I am very interested any info is appreciated.
I love your story!
I recently came back to NY after a decade abroad in Japan. I own some property there, so I thought why not own some property in the US as well?
So I’m starting all over again in my native NYC. All I have is a bed, 2 suitcases and a fridge. No car yet.
Excited to do my first deal here in the US!
This is awesome & congrats, what would you think is the best platforms to set up alerts on, also what platform do you use??
Very impressive Joel. -- I know that you have even more "doors" now.. :-)
How did you craft a deal that included both owner financing and a commercial loan from a bank?
What were the favorable terms that you negotiated with the sellers?
Not too many sellers in the Chicago area (where I am) are usually open to owner financing but you never know!
Thanks,
John Meyers
@Joel Florek Love it! Congrats!!
I am curious to know more about seller financing. He didn't receive any other offers? What do you think it's the reason for him to give you seller financing?
@Hardy Vibert I like Realtor.com, Loopnet for larger properties, and now I have been seeing properties on CommercialSearch by Realtor.com that havent been on Loopnet.
@John Meyers The seller note is subordinated debt to the bank loan. Some commercial lenders will allow subordinated debt as long as you debt coverage ratio is still favorable. On page 2 and 3 of the comments I added some additional notes on the deal but the seller note was 2% interest rate which made a big difference to hitting the target financing package number. I just bought a deal in South Bend and got the seller to carry 10%... so they are out there!
@Jessie Niu See my comment for John above. He did receive other offers but those investors wanted to steal the property. Its a small market that frankly a lot of people in the nearby cities dont fully know the good things going on in the town. The seller also did not do a good job of advertising the property. It was only listed in the newspaper for sale so unless you bought the local newspaper you would have never known it was available.
Thank you Joel.
Your method to structuring these deals is impressively creative. -- I'm so used to seller's laughing at seller financing in the Chicago area but maybe there is hope for this if I look farther out.
Thanks again and talk with you later!
Joel, I would love to know how you did that negotiation! I don’t see how to PM you!!
Could you PM me?
Ryan
Wow this is amazing - congrats! I would love to know about the financing structure you used for buying the apartment building. I’m starting out investing in small multi families but some time soon I’d like to “level up” and invest in apartment buildings. I thought it would take me a few years (gaining experience and building the capital needed for banks to feel secure in lending) but if you’re saying it’s possible quicker than that, I’m all ears!
Joel: Congrats! For a long time I did not check out BP, but it was so inspirational reading your posts and others' comments today! Perhaps you have doubled or tripled your portfolio in the last 4 years, since the day you closed on your 16-uni property.
As for myself, I am getting my finances together for a 24-unit property that I am eyeing. The scary part is, I have never had any RE investment or property management experience. I even got ripped off when renovating my own primary home. I still believe in RE, and especially now when I am selling my land overseas I have extra cash that needs to park somewhere. I am thinking, maybe I should get a part-time PM job just to learn the rope. So any advice from you will be greatly appreciated.
Again: big congrats to you!
@Joel Florek what an Inspiring story. You had the ambition, courage and the belief that you can figure it out and that's what stands out in your story. You have taken action and made it happen. Congratulations brother, Best wishes to smash all your Goals!!!