Area: Solid B area (largely a solid residential middle class town, only 1 other 3-family has sold in this town in the last 2+ years)
Exit strategy: BRRRR project, the plan is to cash out refi
We are a little delayed in posting this diary so in the coming posts we will detail what went into purchasing the property and where we are in the rehab phase of the project. From there we will try and keep up with posting updates regularly.
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
10y
@Chris Anderson The place is in overall good shape. We bought the property from a tired landlord who was at the end of his rope dealing with the tenants he had in place which is why we were able to buy it at a good price. More to come on that tomorrow when we explain how we came to actually purchasing the property.
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
10y
@Jerry Padilla Thanks Jerry. We are fairly confident in the ARV even though there is a severe lack of comparables in the town where the home is. That is the trade off though when buying multi families in this area of Connecticut in the nicer towns. The tenant class is way better, but the comps are sometimes non-existent for refi purposes. Don't get me wrong though. I'll take that trade off any day of the week.
Real Estate Broker · Granby, CT · Member since 2015 · 694 posts · 317 votes
10y
Nice work @Michael Noto. Big fan of the multi's in higher class area's. Forget the comps, take the income all day. Like you said, tenant base is huge in Class A. Good stuff!!
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
10y
@Rick Santasiere Thanks. They don't come available like this to much so when they do you have to be ready to pounce, especially in the better areas of Hartford County like I know you are aware of.
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
10y
Plainville, Connecticut 3-family project update
How we purchased the property Part I: The Strategy
Late last year in one of our deep dives to try and find a property before the end of the year we decided to search expired listings in the B/B+ areas that we like to buy in which is something we do frequently to try and find diamonds in the rough. Most of the time these searches yield little to no tangible results.
Our goal is to identify a deal we want to pursue and reach out to the agent of the expired listing to see if their seller is still looking to sell and passing along that if we can revive the listing and make a deal we will give them our end of the commission.
Even though my business partner @Bill Labrecque and I are licensed realtors here in CT we will more than happily give up our end of the commission for a good deal. Let's face it, without the warm introduction from the realtor the odds of landing a deal on an expired listing like this are slim to none.
This particular property listing had expired over a year prior to us reaching out to the agent. The last listing price for the property was 188k with the original listing price being 198k and the listing expired after 188 days on market.
We were pumped when the listing agent of the expired listing returned our email and said that he was still in touch with the seller and asked when we were available to view the 3-family house. From there we made an appointment for the next day to view the property.
Tomorrow I'll detail how the showing went and what went into the negotiation that eventually led to us securing the deal.
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
10y
3-Family in Plainville, CT Update
The Showing & Negotiation
Like I mentioned earlier we identified this property during one of our expired listing searches. In reaching out to the agent of the expired listing we were able to set up an appointment for the next day.
Overall the property was not in bad shape. Here are some takeaways from the showing:
Two of the units were rented at below market rents and one of the units was vacant and required a complete cosmetic overhaul.
roof was good
Windows were updated expect for 2nd floor and since it was vacant we planned to replace them during the rehab.
siding was a dirty but good. we can clean vinyl.
We needed to replace two of the furnaces and in the process convert one of the units to natural gas heat (big plus around here). There was gas already going into the unit so that made this easier
The 2 units that were rented were not trashed by any means, but we knew would require basic cosmetic rehabs once the tenants moved out. Nothing crazy though and both tenants were on month-to-month leases.
Common areas, yard, one of the front porches needed a facelift and we felt the property would look completely different with some minor work in these areas
Our overall goal with the rehab is to get done all of the big ticket cap ex done. Basically if it is in condition where it needs to be replaced in the next 5-10 years we replace it during the rehab phase. As far as unit rehabs go we make our units and common areas as nice as clean as possible staying within budget to attract the best tenants we can. Before you can negotiate and make an offer you need to know what the property is worth: based on our research we felt with the upgrades it would be worth 210k and the repairs would come in at 22k. How people make offers without having a handle on those two numbers I will never know. they are crucial to any BRRRR project. In the next post I will detail the repairs and draw schedule and then how the negotiations went.
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
10y
Here is a breakdown of the $22,500 budget I mentioned in the previous post and how we laid out the draws with our HML. Again, most of the work for this project came from the furnaces and the remodeling of the 2nd floor unit. Next post will detail how the negotiation went down.
Investor · West Hartford, CT · Member since 2015 · 37 posts · 18 votes
10y
Michael Noto This an awesome project! Great to hear that it is in Hartford county. Just moved up to West Hartford last year from Fairfield County. Still investing down there but always looking around Hartford for potential cash flow. Do you like any other towns other than Plainville for good cash flowing rentals?
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
10y
@Phelim Lennon There are plenty of towns around Hartford where the cash flow is solid if you know what you are looking at and for. If you are actively looking I suggest working with a realtor that knows the multi family market and can guide you.
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
10y
@Alex Saleeby the 3rd floor unit is about 150 sq ft smaller than the 1st and 2nd floors and it has electric heat so that is why the rent is a bit lower on the 3rd floor.
Real Estate Broker · Granby, CT · Member since 2015 · 694 posts · 317 votes
10y
@Michael Noto, this is awesome. Thanks so much for sharing this. I am starting one on Wednesday (all the way out in Willington), I may mirror you. Always good to see others successes (and challenges) to learn from!! Thank you!
Our initial offer on the property was $117,500. We knew when we made the offer that low that it wouldn't be accepted. Remember, the last MLS listed price was 188k before the listing expired more than a year before. Our offer details a 3 week close, no inspection, and a 10k earnest money deposit.
After thinking for a couple days the seller came back at 157k. While we were still far apart this was the first inkling we got that he wanted to compromise. If he countered at let's say 185k we probably wouldn't have even wasted ours or his time any further.
The landlords biggest headaches over there had been the tenants. The second floor tenant had moved out 3 months prior and the unit was still destroyed and all of their trash was literally in the front yard. The other 2 tenants were renting at significantly below market rents, were at minimum 1 month behind on payments, and were on month to month leases. This is not an area where a landlord has to deal with nonsense from tenants, again this is a solid class B area.
Since we knew the tenants were his pressure point and thus we countered his 157k with one of two options
Option 1: We will pay 127k with the contingency that the house be vacant upon sale. So basically that would leave him to deal with the tenants and getting them out which we got the feeling he wanted no part of.
Option 2: We will pay 120k and take on the building as is with tenants and all. No inspection, 10k earnest money, 3 week close
Long story short the owner ended up taking the 120k. I guess we were right in reading that he did not want to deal with the tenants. So in the end we felt like we got a good deal on this one and we closed right before the end
Next post will document how we dealt with and are currently dealing with the tenants we inherited and how the project from a rehab project is progressing as well.