All Forum Posts by: Melissa Murphy

Thanks Richard! I need to post some before and after photos!

Investment Info:

Single-family residence commercial investment investment.

Purchase price: $122,000
Cash invested: $210,000

Found this property as a foreclosure, with 3 offers on the table. Had 4 hours to pull together cash in order to execute on the deal. I called a friend for a private money deal to close immediately, allowing me to beat the other offers. I then worked with a great firm in town to execute on tenant improvements turning the space into the nicest real estate office in town! 8 years later, it still impresses visitors.

Investment Info:

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

Purchase price: $175,000

Cash invested: $62,000

Large corner lot in a desirable location with multi family zoning. Bought at the peak of the market, rehabbed, failed to appraise and still underwater today. Lots of lessons learned on this one.

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

In early 2007, I found a single family house with an unfinished basement with zoning allowing for up to 6 units. Applying for a commercial loan, the property at acquisition was expected to appraise after the rehab was done at $310,000, but then the market changed.

How did you add value to the deal?

After spending 9 months on the rehab and over $120,000, costs kept rising. Although it was on budget with our estimates, the market changed, and I paid for 3 appraisals to secure end financing on this deal, and I couldn't get an appraisal over $210k. Essentially, I was underwater on a construction loan by almost $50K. With an interest only loan, the monthly balance just kept climbing.

What was the outcome?

After calling the local lender to see if I could work out a short sale option, the bank was absolutely not going to take a penny less than what was owed, even though this was late 2009 after the market had fully adjusted. Finally refinancing and taking a second note from a private lender, I was able to keep the property although it was frustratingly underwater.

Lessons learned? Challenges?

Looking back, it could have been so easy to walk away from this property being $50K underwater, and today, almost 10 years later, I still break even with a great tenant in place and the outstanding balance. Today, I barely have equity in the property and will continue to hold the property until some day I can take advantage of the zoning. Biggest lesson learned is being so excited about the zoning, that I overpay on the acquisition when the strategy didn't match the investment planned.

Hi Caleb! Unfortunately, I just had a commercial loan, on a 20 year note, with a 5 year balloon and a 10 year call. I sold just before I had to refinance. Not having a lot of extra funds at this time, primarily because the market turned about 18 months after I bought the unit, so coming up with cash while I had a lot of other investments at the time became challenging. In hindsight, I should have set aside much more of a reserve up front versus just squeezing into the deal with what cash I had available and then limping along. Good luck with you 12 plex!! An exciting move for sure!

Investment Info:

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

Purchase price: $625,000
Cash invested: $125,000
Sale price: $614,720

I was hooked on real estate after turning my first condo into a rental and getting $250 dollars a month in positive cash flow. I became a real estate agent in 9/05, and one of my first deals was my own. It wasn't a small deal, it was a 12 unit apartment complex for $625,000. I think my broker thought I was nuts at 24 years old.

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

Becoming a real estate agent, I wanted to learn everything I could about investing, and become a more seasoned investor than just a few condos and owning a home, seemed like the fastest way to learn.

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

I found the deal on the MLS, and with 4 other offers on the table, as a new real estate agent, I waived my commission (with my brokers' approval) in order to sweeten the deal by 3% without having to worry about appraisal issues.

How did you finance this deal?

I knew that the larger deals are not as dependent on the strength of the borrower, but on the strength of the asset and cash flow, I quickly compiled all the data on the property and marched into several bankers offices. I was perplexed at how many "no's" I received. The cash flow on the units showed under market and the expenses ran too high. I finally got a yes from a local credit union and closed quickly.

How did you add value to the deal?

After closing on the unit, I knew the units were worn and dated since the building was built in 1978. Upon each unit vacating, we would spruce up the units, add new flooring and carpet, clean up and bathrooms, and finally upgraded the doorways, hallways, and common area. One setback I didn't expect was the fire! In late 2008, we received a call from our property manager at the time, that the building had caught on fire. One of the tenants was on oxygen and smoking at the same time.

What was the outcome?

After working with the insurance agent after the fire, we have the place back in order. Vacancies were higher than I expected, and I kept getting the run around from the local property manager I hired. They couldn't give me any reason why my units weren't renting, such as condition or price, just saying they were hard to rent. So, I fired my property management company and hired a longtime housekeeper, and she very quickly had the place up to full occupancy.

Lessons learned? Challenges?

After improving each unit, dealing with the fire, and finally getting the vacancy under control, it was time to say goodbye to this building. Buying a building this run down, needed so many constant improvements took more cash flow than I expected. Holding the unit for almost 10 years, I sold it for less than I paid for it and took a hit on the capital improvements. As my accountant and I always reference though, I had so many write-offs!!

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

Naturally, I cannot say more about our great property manager Julie Shenyar of One Property Management Group here in Spokane Washington. Without this building, I wouldn't have started a property management company. A fantastic partnership formed through this property and this experience. Additionally, buying this building at the age of 24 gave me the confidence I needed when working with other real estate investors with confidence.

@Lee Gagnon Hi Lee, I am not familiar with your specific market, but I do know here in our market, 2 developers have had great success with furnished corporate rentals. They command a higher price than the unfurnished competition. One discussion worth mentioning though is what I find is the units typically have to be more flexible on lease terms, offering month to month options. These are ideal for buyers relocating to an area and not being able to buy because of low inventory, or they sell their current home, and haven’t found a replacement home, or they rent while they wait for new construction. Many will pay a premium for the convenience of fully furnished unit but won’t want a one year contract. Something to keep in mind as you crunch numbers. Good luck!

As an investor and owner of a property manager myself, I don’t like seeing headlines about our local City’s council seeking to pass more tenant friendly initiatives such as rent control, registration and inspections of all rental units and lengthening the time necessary for evictions. 

If such policies are passed, my guess is it will stifle competition, eliminating a lot of small landlords/investors because they will be fearful of being sued, dealing with the bureaucracy and having to wait months to evict tenants. 

Who has experience seeing legislation like this affecting their market? Does it truly ultimately backfire and eliminate market competition and raise rents?  Any successful strategies for convincing politicians this is not the best course, although it sounds good to the masses? 

Thank you!

Investment Info:

Single-family residence buy & hold investment in Spokane.

Purchase price: $340,000
Cash invested: $90,000

Beautiful single family home close to downtown. This was acquired with the intention of being my personal single family home, until I discovered the profitability of airb&b. For two summers of and on, I have rented out this 3 bedroom 2 bath home for an average of 150-170 a night almost consistently full. Soon, I will transition the property to a full time airb&b after some additional upgrades looking for $200 a night minimum.

@Richard Sherman thank you so much Richard! Well I missed the 30 deadline, but think 40 is doable! 😊

Hi Steven,  Would love to connect if you haven't already.  I'm a broker owner of a real estate company and a property management company in Spokane.  Also, work in the CDA and Sandpoint area.  I have been investing since 2003 myself and would love to help you navigate our market accordingly.  You are going to love it here!