All Forum Posts by: Derek Gibbs

Investment Info:

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

We purchased two, 8 unit buildings and are working hard to get them updated and get the property stabilized. The plan is to upgrade units as they turn over and get rents up to market. We hope to refi our cash out in a year and get into a bigger deal next time.

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

We were looking for a value add property that was owned by mom and pop and had the potential for big improvements in both the asset and the management of it. This deal was exactly that.

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

Luck! We were in our attorney's office and mentioned that we were looking for an apartment building. Her husband, also an attorney, overheard and told us of his client that had two buildings for sale. After 14 months of courtship, we finally closed the deal.

How did you finance this deal?

Through a local bank that we have had a relationship with for 20 years.

How did you add value to the deal?

We are rehabbing the units to bring them up to date, as they are original 1970's.
We have also implemented management software and several other systems to make the operation more efficient.

What was the outcome?

We have only had the buildings for two months but, the rents are up by $100, we have fixed some maintenance items that were stealing from the bottom line and its added a ton to the NOI already. We should have no trouble with the refi.

Lessons learned? Challenges?

So many lessons learned. We almost blew it right away by not communicating enough with the sellers. There were a couple misunderstandings that caused some anxiety and delays. We switched lenders twice because we tried to save a few bucks and that almost cost us the deal when we faced another delay. Being cheap never pays.

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

I can't recommend Mike and Brandy at MBC in Michigan enough. They worked super hard for us and came through in a pinch even after we tried to use another lender to save a few bucks.

@Robert Goldman It's been a few years since I looked it up but I remember calling the Assessor's Office and asking for the listing.

http://www.wataugacounty.org/App_Pages/Dept/Tax/ta...

Not sure if they still do it that way but it's worth a shot.

@Sam B. Your story is amazing! What an assortment of trials you had to deal with. Most people would have quit there and you just chalk it up to an educational experience and keep moving. I think your're going to do well in this business.

@Diane Davis I'm curious what the outcome was. Did you end up having a study done?

I am in a similar position. I own a 16 unit building but I'm not  a real estate professional, I have a W-2.  I understand that you can only have so much loss shown so maybe no benefit to doing the study if the building isn't making a lot of money.

@Mike Reynolds I hope that’s not the case. He was recommended by a local investor and has a good portfolio of work on many local apartments. I am meeting with him today so we can align our expectations. Thanks for the tip. 

@Chad Swinford My philosophy exactly. Quality is most important and I didn't set that expectation from the beginning and it bit me. 

I'm thinking of sending an email as well so I have a paper trail.

@Chris Hake I have learned my lesson and will create a very detailed SOW from now on. In fact, I'm putting together a manual with all the processes we use regularly as a how to so we don't miss simple stuff like this.

@Neil Schoepp I totally dropped the ball with the SOW. I read J. Scott's book and didn't take his advice seriously enough regarding the level of detail in the contract. Lesson learned, the hard way!

Thanks for the advice. I will definitely keep an eye on his body language when talking with him.

I am having a contractor paint the common areas and install new flooring and lighting in my apartment buildings. The contractor was recommended by a another local investor and it's our first time working together. 

After they finished painting, I did a walk through and the quality of the work is not very good. The walls have lots of debris in them, the doors are only one coat and you can see through some of it. There is a railing post that was completely missed on one side, etc.

I mentioned some things to them already such as repairs that weren't sanded and painted over and they fixed them but I feel like I need to have a sit down and ask if this is what they intend moving forward? If so, maybe we need to end our relationship now.

I really wanted to go with another painter who I liked better but these guys can do the flooring as well and I couldn't find a good flooring contractor separately so I chose them.

Anyway, any advice on how to approach this topic with the contractor?

Thanks,

Derek

@Greg Scott

I’m signed up for the Lifestyles event. See you then!