All Forum Posts by: Ben Baye

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Rice Lake.

Purchase price: $70,000
Cash invested: $14,000

two story duplex needing update in lower unit and full renovation in upper unit

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

Building capital for more investments

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

I met with a potential client for an addition and during the conversation investment properties came up. I mentioned I was looking to start a portfolio and they reciprocated with a desire to get rid of one of their properties. I scheduled a showing and made an offer with two options. They countered with a combination of both offers and I drew up a P&S.

How did you finance this deal?

Through bank: 4.25% 20 Yr Amortization to purchase, switching to 4.25% interest only construction loan for 1 yr on purchase price and renovations (aprox $65k), this will transfer to a 4.25% 20 yr amortization commercial loan when Reno completed. I can pull up to 80% ARV post Reno.

How did you add value to the deal?

Lower unit: new floors, texture and paint walls, new light and plumbing fixtures, new doors
Upper unit: making a larger kitchen with an open concept living dining and kitchen, new floors, rock, tape and paint throughout, new trim and doors, new cabinets and new bathroom
New windows and siding, 12x12 decorative concrete patio for each unit, new concrete floor in garage, new driveway, removing elec baseboard heat and putting naturally gas forced air in both units.

What was the outcome?

Will provide when completed

Lessons learned? Challenges?

I did not know that I can use the equity to cross collateralize multiple properties as down payments instead of withdrawing the money as cash for reinvestment! This was first property I’ve purchased without a realtor and it was very straightforward, the process was actually rather fun!!!

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

Tom McCarthy at Cumberland Federal Bank
TM Title for closing

@Mark Mahoney

This is a great question. While I’m not from MA I do a lot of renovations and our appraisers (At least the ones I’ve worked with, I’m sure there’s someone who will read this and have had a different experience) will allow a “IKEA” or similar cabinet style closet as long as it is fixed to the wall like a cabinet.

Usually when I have a question like this I contact the inspector for the town or city and they typically can answer those questions.

@Stephen Tanquary

Looks like a lot of good advice for analyzing the value in the purchase. It does appear you have done your homework and have a solid purchase for the time we are in.

I personally think if it is going to be your personal home and you are currently renting the necessity to make every penny possible diminishes. Obviously you don’t want to intentionally make a poor decision but If you’ve analyzed the deal and it makes sense, just go for it. Home ownership is rewarding in itself and worst case scenario you may need to live there longer or hold it longer for the market to recover “IF” it does collapse.

Don’t get hung up worrying about what might happen. Evaluate, which you’ve done, make a decision and move forward. There’s never a perfect time for action and rarely a perfect option.

Good luck!

@Charlie Anne

Sounds like everyone is kicking the same can a bit but as a general contractor I have to agree. A 7/2 home for $45k only needing $25k sounds unrealistic. That’s a large home and just painting it would be near half that budget. However if you are a DIYer that may be realistic for materials only for a moderate cosmetic face lift. Definitely need to get real numbers on the Reno. I would suggest getting 3 quotes. You can see pricing and get 3 different perspectives on what needs to verses what could be done. Best of luck

@James Hamling

This is great advise. I have also seen sellers lie to get a problem gone.

@Nicholas Sheridan, Jr.

Congratulations!!! That is an excellent start. Sounds like you have a great market. I wish our property taxes were that low in my market.

@Tiffany Hayes

I definitely vote for BRRRR. While the numbers aren't as high long term and cash flow isn't as high, they can recoup capital quickly to acquire more properties than after you have a larger cash basis you can go for cash flow and lower mortgages. Owning your own business I'm assuming you don't "need" the cash flow.

Good luck!

I’m in the process of buying a duplex that needs minor renovation on the lower unit and a decent amount in the upper unit. I got it under contract while it was rented but while discussing the need to have the renters move out to do the renovation the owner said he would ask the tenants to leave. The upper tenant moved out this week and the lower tenant is in process of finding a new place. I’m very excited to buy it without tenants and move right into the renovation!

@Josh Bugbee glad to hear your desire for RE. It’s an exciting thing to get started. I live in Northwestern Wi. About two hours from your market. One thing I would suggest if you want to get your feet wet, but don’t own your own home yet, is to buy a single family that needs renovation. I realize this isn’t for everyone but it’s a lower risk way to learn a number of important lessons.

First, rates are ridiculously low for personal homes right now so great time to buy a personal home. The purchase process is similar for your own home as it is for a rental so this teaches you to talk to lenders and what information they require. You also need far less capital to purchase a property. While you can’t get some specific loans if it is a large renovation, but you can still get into a livable property that needs some solid updating.

If you can do a majority of the work or at least do the project management, you will learn about the construction process. Which will go a long way with investment properties. You don’t need to become an expert but knowing the general process how a building is put together and what contractors do what is invaluable knowledge.

Then refinance it on a home equity loan and pull the equity out that you built up in the property through your improvements. This gives you a bit more knowledge with lending and starts a solid relationship with a lender. Definitely let the lender know your plans from the beginning and inform them that you will be pursuing rental properties.

My Vision!  It’s been years in the making but I struggled for years with that question. Why try?  My purpose was found after pursuing money for years, than I had a life changing experience which made me realize money isn’t a good why! Now my pursuit is giving, which is far more motivational as it’s outside of myself and reaches to those around me and beyond. 

For me the Bible provided guidance to this answer but regardless of your belief system taking time to think through a vision and put it on paper.  A purpose beyond just you is highly motivating. 

I can provide very well for my family with moderate effort but it gets boring only focusing on yourself and family. The challenge of raising other people up and helping them is rewarding on an internal level which commands motivation from within to achieve goals at a larger level.