All Forum Posts by: Andrew Chapman

We have three tenants that were inherited.  One agreed to a $400 per month increase which brings them within $200 of market or so.  The others do not want to increase, so we will be giving them notice, likely in January.  

Investment Info:

Large multi-family (5+ units) buy & hold investment.

Purchase price: $517,500
Cash invested: $192,500

6 unit mixed use building that was listed on the MLS - 4 resi, 2 commercial. The rents were ridiculously low and there is a good bit of deferred maintenance and updating needed. The strategy is to get the commercial spaces leased out ASAP after a light cosmetic rehab. Upstairs we are changing the 4 residential spaces to ductless mini split heat/ac, and have sub-metered the water for the entire building. One of the residential units is vacant and we are renovating that and plan to rent it out.

What made you interested in investing in this type of deal?

Cash flow investment.

How did you find this deal and how did you negotiate it?

It was the first deal I have bought off the MLS in years.

How did you finance this deal?

We took an interest only loan from a local credit union that includes a construction component.

How did you add value to the deal?

Sub metered water. 4 new ductless mini splits in the residential units. Paint/flooring in the common hallways. Painted the front commercial exterior. Renovated the one vacant residential unit. Renovated and modernized both commercial units.

What was the outcome?

In the middle of the renovations now. We should be all in for about $620k and the building will be worth roughly $750k so we will have $130k in equity at the end of the project. We are conservatively projecting to have the property rented for $7,000 per month once stabilized.

Lessons learned? Challenges?

The challenges are with the inherited tenants who were paying $650, $700 and $800 per month for two bedroom apartments. Market for these units once they are updated is roughly $1,250-$1,300. There is also some water damage/rot on the back wall of the building that will require a good bit of time/money to repair, but we new about it prior to the purchae.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I am a broker, and I represented us as the buyers agent. We used Align Credit Union for our financing and Attorney Anthony Takis out of North Andover for our legal work.

Investment Info:

Large multi-family (5+ units) buy & hold investment.

Purchase price: $517,500
Cash invested: $192,500

6 unit building that was listed on the MLS. 4 residential and 2 commercial units. The rents were ridiculously low and there is a good bit of deferred maintenance and updating needed. The strategy is to get the commercial spaces leased out ASAP after a light cosmetic rehab. They both have newer gas furnaces. Upstairs we are changing the 4 residential spaces to ductless mini split heat/ac, and have sub-metered the water for the entire building. One of the residential units is vacant and we are renovating that and plan to rent it out for $1,250-1300. There are three other residential units that have tenants. We did an increase for one unit to $1,000 and are planning to give notice to the other two tenants. Once those units are emptied, we will renovated and rent them for $1,300. With the purchase and rehab we will be into the building for roughly $620,000 and it will be bringing in $7,000 plus per month once stabilized. The other big plus is that it is a quarter mile from our office head quarters.

What made you interested in investing in this type of deal?

Cash flow investment.

How did you find this deal and how did you negotiate it?

It was the first deal I have bought off the MLS in years.

How did you finance this deal?

We took an interest only loan from a local credit union that includes a construction component.

How did you add value to the deal?

Sub metered water. 4 new ductless mini splits in the residential units. Paint/flooring in the common hallways. Painted the front commercial exterior. Renovated the one vacant residential unit. Renovated and modernized both commercial units.

What was the outcome?

In the middle of the renovations now. We should be all in for about $620k and the building will be worth roughly $750k so we will have $130k in equity at the end of the project. We are conservatively projecting to have the property rented for $7,000 per month once stabilized.

Lessons learned? Challenges?

The challenges are with the inherited tenants who were paying $650, $700 and $800 per month for two bedroom apartments. Market for these units once they are updated is roughly $1,250-$1,300. There is also some water damage/rot on the back wall of the building that will require a good bit of time/money to repair, but we new about it prior to the purchae.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I am a broker, and I represented us as the buyers agent. We used Align Credit Union for our financing and Attorney Anthony Takis out of North Andover for our legal work.

As a real estate broker I had some success having my taxes for a condo I used own in New Hampshire abated. The assessor told me that the property was "water front" which is why he accounted for a large increase.  I sent some solid comps and a spreadsheet of area values as well as some photos of the alleged water front area.  It's true, that there is a very small bit of frontage on a small swampy river, but there was a very steep hill down to it an it was borderline unusable.  It wasn't nearly as glamourous as they were making it sound.  After he came out and visited the land, he agreed that there wasn't a ton of value in the frontage, and he met me in the middle by reducing the increase from $1,200 down to about $600 per year.  Not ideal, but $50 per month reduction was still helpful.  

I would let the tenant know that they would be responsible for paying for this as it is not normal wear and tear.  Do you have tenants sign a condition statement when they take possession of the unit?  We always walk through with them and have them sign off that everything is in good working order and we take pics to document everything.  This way, we have the ability to back it up in court should the need arise.  I would also recommend having this language in the lease - that they are financially responsible if they break/damage anything.  It is super important to try to address as much as you can in the leasing documents so there is no confusion as to what both of your responsibilities are.  Good luck!

We demand them.  It's for your as well as the tenants protection.  I had guy refuse once who was being super shady.  He ended up hiding a few things from us that we found out further down the road.  Anyway, we told him it was a lender requirement and that we would have to exercise our finance contingency and back out of the deal if he didn't provide them.  He ended up getting them done.  

Great question, and thank you!  It is on hold now for the time being.  Mass is closed down and they are going to start slowly re-opening as of next week.  We have an architect working on the plans now, but at this point it is hard to say.  We are anticipating a renovation cost of approximately $450k with a conservative rental income of about $5,200 per month.   

Investment Info:

Large multi-family (5+ units) commercial investment investment.

Purchase price: $540,000
Cash invested: $85,000

Acquired a three story mixed-use commercial building. The primary intention is to house our business offices. First floor is a salon and eatery - both long term tenants. Second floor is our real estate brokerage, property management and maintenance offices. Third floor is wide open space that we are trying to develop into four 1 bedroom apartments.

What made you interested in investing in this type of deal?

Needed an office space and didn't want to rent. Found an off-market building in an up and coming location with tremendous visibility for our businesses.

How did you find this deal and how did you negotiate it?

It was a referral and was a bit of a tough negotiation with the seller who is an attorney.

How did you finance this deal?

We used conventional financing through a local Credit Union.

How did you add value to the deal?

We updated the entire second floor, systems, electric, plumbing, added a kitchenette, renovated the baths, all new flooring, lighting and paint. We outfitted the offices with nice furniture and equipment.

What was the outcome?

This is a long term hold. Potential for 20 years plus.

Lessons learned? Challenges?

Speed is important as the seller's didn't want to grant us an extension for our financing. Also, the SBA 504 loan takes FOREVER and the amount of paperwork is like nothing I have ever seen.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I am a licensed broker so I coordinated the transaction.

Hi Shalom, your personal credit, income and assets will matter.  Any lender will want you to personally guarantee the mortgage.  Where do you do your banking?  I would talk to them about opening a credit card and a business line of credit.  With some history of deposits you should be able to get both fairly easily.  Run some expenses through the credit card and just pay it off every month in full so you don't have any interest/fees.  This will help you establish some credit for the business fairly quickly.  

Typically it's because the inside doesn't look/show well.  Sometimes it's because there are tenants in the property who are not being cooperative, and sometimes they are just plain lazy or haven't gotten around to it.  I usually use a professional photographer and very rarely our schedules don't align and I post with an exterior photo.  In the description I say more photos to come and add them ASAP, but I never have just one up for longer than 24 hours.  Occasionally I see some nice houses that only have one exterior picture and it's somewhat mind boggling.