All Forum Posts by: Austin Fruechting

I was a florist.

Jan 2008 I negotiated a deal to buy an established flower shop seller financed (I knew zero about flower shops or design). I graduated college in May 2008 and took over the business Jan 2009. It provided ok income for the area, but not much. Fall 2009 was introduced to Rich Dad Poor Dad. June 2010 bought my first rental property. We lived off my wife's income and invested everything I made in real estate. August 2015 I sold the flower shop. This year my wife left her job too. 

What type of investment are you talking about? Flipping? Wholesaling? Buy and hold? 

I've never done any direct mailing or marketing. But I'm a buy and hold guy. I don't have to have a constant stream of deals to make my living. Different story if you're a flipper or wholesaler. 

I think this guy has watched Shark Tank too much and thinks he’s Kevin O’Leary He wants to loan the money AND get paid 50% for doing so. . . . Typical on a smaller deal is 50/50 from the beginning for the cash person and the time/experience person. However, a glance at your profile does not list any experience. If that’s the case you’re missing 1/2 of what is usually brought to the table by your side.

You can do it one of two ways (assuming the contract just has one bulk price and not broken apart by property). The 5 packages I’ve bought were this way. So my accountant used my numbers for how I was valuing them and breaking them apart for my analysis. The other option is to used the appraised values of each property, and pro-rate those to the purchase price.

I have a bit of a different take on all this... 

I really don't care about sharing a document I spent money on. That money is gone, a sunk cost. I've already got my value out of it. I actually feel I'm getting more value out of what I spent by sharing it. I spent a few thousand for my partnership LLC agreement and have shared that a few times. Writing this post takes me as much time as that. I don't care about a request for a document that I spent money on in the past.

The thing that gets me are the requests for my time. All the messages from tire-kickers who ask me to be their mentor and want hours of my time in person for a coffee, beer, or lunch. I respond to them all the same: "Most of the information and advice I can share is on my blog. Go read that and if you have any specific questions then feel free to email me."  They often don't even do that @JD Martin ! They won't spend the time to read my blog before asking me for my time. Crazy. 

Out of the 100+ people I've sent that to, only about 1-2 people have actually came back and said I've read your blog, and have this question. The other 98-99% were most likely pure tire kickers that will never do anything, but are requesting my time. I've already spent the time to put free info out there for everyone. At least check into it before expecting me to be your mentor or asking me to meet in person! So that became my way to weed out the tire-kickers after my podcast. 

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So to the people expecting/wanting a meet up and potential mentoring from me (or anyone else), at least put in some effort first. Don't email me saying you saw a post or listened to my podcast and can you buy me a coffee. I'm perfectly able to (and would much rather) buy my own damn coffee to not waste time with a tire-kicker. If you're serious, show your serious. You'll have a lot better odds that way. 

Originally posted by @Velma Trayham:

Wow! This is really awesome. How did you get the lead ? Keep up the great work. 💪🏾

 Thanks. I’ve addressed how I found the deal earlier in the thread 

Originally posted by @Richard P.:

I think I followed all of the numbers except for the $100k credit with the $890k contract.  Could you elaborate on that?

The sellers are giving me a $100k credit for repairs at closing. After we agreed on the $790k price I requested we write the contract as $890k with $100k credit back to me at closing. It doesn’t matter to the seller. Their net is the agreed $790k. But now I get $100k back. 

My bank was a little hesistant to give me $100k back at closing because I only put 10% down, so that actually gave me back more than I put down, lol. But they were ok when I suggested putting it in an escrow account I would draw on for work so they know it’s going into the properties. Plus I was still providing the down payment and said I would deposit a minimum $50k in an account to cover more of the work. 

I had to get creative here, because even with 10% down, some closing costs and work I was going to need $300k, which I have nowhere near. So the 1031 timing was perfect, the credit, then put in the majority of my free cash, and I'll pull another ~$50k of short term at the end to finish work, then immediately refinance. That should get me about $300k cash out at 70% LTV. Pay back the $50k short term, get my $50k cash back, the $90k from the 6-unit sale, and another $100k+ cash... all tax free. REI is beautiful!

Originally posted by @Pablo Mendez:

Wow. Amazing deal, Great Job. 

P.S How can the appraiser put a value down to the within $5... I mean why $1,264,725 vs. $1,264,730 vs $1,265,000 (why dont they round)

 Lol. Yeah I thought it was a little weird too. There were 17 individual appraisals though. A separate one for each property, but still!

I also pat myself on the back for putting my proposal together for the bank and I stated Estimated As-Is appraised value: $1,260,000. Just 0.3% off!

Originally posted by @Account Closed:

My big question is how exactly was the portfolio valued at 1,140,000? At 22 units (obviously a little rough) that averages the unit value somewhere around $50k per unit. For single family homes and duplexes, this seems low. What exactly am I missing in understanding how a deal like this exists?

Seems low for where? For California? For Colorado? Of course that’d be war zones. But that’s not where I’m buying. 

What your missing is knowledge of the specific market where these properties are located. After the repairs these are B to C+ properties, and a value of $1.5-1.6mil. 

Originally posted by @Justin Young:

@Austin Fruechting Rookie question, did this package just so happen to be in its own portfolio loan from the seller or did the seller break off 22 units from his entire portfolio then you turned around to obtain a portfolio loan? I'm assuming he could only break them off if they were paid off free and clear but could be totally wrong.

I’m not sure how the seller had things financed. But I’ll address what I believe the core of your question is. If I wanted to sell one property out of the package how would that work since it’s all under one mortgage? The bank would just want a certain percentage of the mortgage paid off to release that property. Most likely the pro-rated amount based on the appraisals. My payment would remain the same though. So if I sold say half of it, I would probably want to refinance after it to get the payment down based on the remaining balance instead of the original.