All Forum Posts by: Holly Brown

MTR is going to be less $ per night than STR but is more stable income. I find my MTR guests take better care of the home (like it is their own) while STR usually break more items and tend to cause more wear and tear. I do MTR and fill the vacancies with STR on all my rentals inside the loop now and they are all doing very well.

@Ikenna Okafor is also doing some premium STR in the Medical Center and is doing well.

Investment Info:

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

Contributors:
Karl McGarvey

We found this property off market on Galveston Island. The property has two doors, a 3/1 Single Family House, with a 2/1 Apartment that sits over a 2 car garage and extra storage unit. Property was purchased at estimated $40,000 under market value with two long term tenants occupying the property, both with rent under market value.

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

Multiple income sources in a single purchase. This was also offered to us at 10% down owner financing, thus no up front loan fees and a very streamlined closing.

How did you finance this deal?

Owner financing at 10% down

What was the outcome?

Low cash flow upon purchase but this property has significant income potential. One tenant has been offered a new lease at a rate closer to market value, and the second tenant will be vacating the 2/1 apartment which we will then rehab and turn into a medium term rental for traveling workers who come to the island seasonally. The storage unit next to the garage will also get a face lift and be turned into a workshop/studio to provide a third source of income from the property.

Lessons learned? Challenges?

I have never inherited tenants before and after only one month of working directly with them, I don't think I will ever purchase another property with tenants that transfer with the purchase.

Investment Info:

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

Contributors:
Karl McGarvey

We found this property off market on Galveston Island. The property has two doors, a 3/1 Single Family House, with a 2/1 Apartment that sits over a 2 car garage and extra storage unit. Property was purchased at estimated $40,000 under market value with two long term tenants occupying the property, both with rent under market value. One tenant has been offered a new lease at a rate closer to market value, and the second tenant will be vacating the 2/1 apartment which we will then rehab and turn into a medium term rental for traveling workers who come to the island seasonally. The storage unit next to the garage will also get a face lift and be turned into a workshop/studio to provide a third source of income from the property.

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

Multiple income sources in a single purchase. This was also offered to us at 10% down owner financing, thus no up front loan fees and a very streamlined closing.

How did you finance this deal?

Owner financing at 10% down

How did you add value to the deal?

We are renovating first the garage apartment and turning it into a medium term rental when the tenant moves out in February 2022

What was the outcome?

Low cash flow upon purchase but this property has significant income potential. We are increasing the front tenant's rent in February 2022 and turning the garage apartment into a medium term rental. Estimated cash flow on the entire property is over 10k, giving an estimated 20% cash on cash return after the garage apartment renovations.

Lessons learned? Challenges?

I have never inherited tenants before and after only one month of working directly with them, I don't think I will ever purchase another property with tenants that transfer with the purchase.

 @Alicia Marks

I have had many people over the years ask me to partner on properties together. I have two partnerships and have learned so much along the way. 

My advice is to partner with someone that has different skill sets than you. It is easy to partner with someone that thinks just like you, but I chose to partner with someone very different than me so we bring different viewpoints to the table. We have differing political views, strengths, personalities and he keeps me engaged in buying more deals more quickly. Communicate early and often and set the boundary between business conversation and friendships. Lastly, set very clear expectations prior to partnering, and write them down somewhere so you can reference if there is a differing view in the future. 

I believe partnerships are incredibly valuable. I am able to leave on last minute trips because I have at least one person that cares as much about a property as I do to handle things when I am away. Also, you are able to diversify more quickly and learn from your partners. It is a marriage, so choose wisely and start small. Buy something small and if it goes well, buy with that person again.

@Edward Jackson Refinancing is expensive, easily in the $3000-8000 range. It may be a strategy if you were doing a quick value add to increase the value of the home, but that would be the only time I would refinance quickly. 

I have purchased owner finance deals with higher percentages (7-10%), performed renovations and refinanced to a much lower rate after a few months. You just have to do your research in this scenario to ensure you are estimating a proper ARV. With the owner finance deals, the buyer fees are significantly less (usually just 1/2 of the attorney fee costs) so you aren't paying for loan origination twice.

Hope that helps! If you want to jump on a call sometime, I am happy to help answer any of your questions. 

@Edward Jackson

If you have good credit, I would highly suggest the conventional loan with 5% down and PMI fee over the FHA loan. The PMI fee drops off when equity reaches 20% of the loan to value but the FHA fee is constant for the life of the loan.

Hope that helps! I have house hacked 3 times in my investing journey and definitely recommend it as the best way to get started.

Thank you @Karl McGarvey! 

@Luke Haberkern

Hi Luke,

Reading your small novel reminded me of the exact mindset I had when I started my investing journey. I’m an engineer as well and now spend about half of my “working” hours still in engineering and the other half in RE. I’m 9 doors in and have built a decent portfolio here in Houston with a very similar strategy that you have laid out.

My advice is to stick to your numbers of that $400 to $500/door per month. There are good and bad months but it all ebbs and flows. I have no regrets and low stress knowing I will at bare minimum break even with that $500 per month cushion from the original numbers. You are an engineer, so trust your numbers and buy in when the numbers run. It’s really that simple.

I also advise you to be the property manager for your first few. You will learn so much as to what is important to your landlord standards. It sounds like you are currently doing that now but it does add a new level when you don’t see the property every day.

My drive is also the same as yours. I want my time and my freedom. Let that be the driver to not buy the premium car and to curb lifestyle creep. I promise you it’s worth it. Good luck! I hope to see you back on here in a few years encouraging others to chase that freedom.

Hi @Ikenna Okafor, I just sent you a private message!

@Karl McGarvey Thank you! Just sent you a private message.