All Forum Posts by: Tyler Blackwell

@Cara Lonsdale I never thought to submit a letter for an investment property, but we thought that our work right next door was compelling. Also, the fact that I literally WANTED that fourplex when I saw it needed to make it's way to the seller somehow. The rents will be below market only for the 24 month period, and then as folks move out I'll bump up. I did raise the rents initially because they were so low (an investor's gotta carry a mortgage, after all!), but I thought a short sacrifice would help us win the contract. The one benefit of lower-than-market rates (not that I'm an advocate of low rents, per se) is that there is more motivation to stay. If tenants look around they'll see other similar units renting for $1050-1100, so paying $850 is a good reason to stay.

Last week we closed on our first BRRR multifamily property! We've employed the strategy a few times now, but never on a multi-unit property. In our tight market (Olympia, WA), it's so rare to find a deal anymore, especially on the MLS. Which is why I was surprised when a 4-plex hit the Olympia market (right downtown!) with an asking price of $325k (disclosure: I live on the coast. No doubt midwesterners are shaking their collective head). We offered a strong $370k cash, knowing the property is easily worth somewhere in the $450k-475k neighborhood (the property was marketed very inexpensive as this was an estate sale property.) Despite 19 offers on the property within just 2 days, our offer was a winner!

So here's how it works out: we bought using hard money, which costs us about $7,500. Total "investment" is $377,500. There is NO REHAB. The previous landlord had done wonderful maintenance. We'll just continue to make small repairs and minor upgrades as we would any other buy-and-hold property. Let's say this property appraises for $475k (we feel this is conservative with two recent sold comps at $475k, $500k, one pending currently at $525k). Our lender wants 75% LTV to refi, so they'd loan $356k. So, while we don't get a FREE property here, we only have to bring ~$20k to the table to acquire this fourplex. Not sure about you, but I'll give up $20k cash for $100k equity any day of the week!

Why did they pick our offer? After speaking with the listing agent, they definitely had options! They had an escalation clause that capped at $467k, and on top of that they had a no limit escalation. If the seller wanted to accept these offers, the sales price would have been $470k!! Not to mention there were a few other offers over $400k. In speaking with the agent, they chose my offer because I wrote them a letter! Obviously money wasn't the most important thing to these sellers. I told the sellers I flipped the house right next door and that I LOVED the neighborhood, that after seeing the fourplex I knew I wanted to OWN it. I told them my intent was to keep rents lower than market rents for at least 24 months (the owners were advocates for affordable housing), and told them if rents were raised to market that I'd donate 10% of net profits toward our favorite non-profits and charities as long as I own the building. The letter worked! My wife and I are calling it the $100k letter :)

I'll update with actual appraisal values. You never know in the BRRRR game, and the appraisal value is critical! What do you guys think?

Wow @Carson Wilcox, is that what they charge in CA for an appraisal? The last couple I've done for refis or purchases were $600-800 out here in the Puget Sound area!

I agree with @Jacob Evans, you gotta be in the right ball park before you put a bunch of time and effort into it. I do marketing and get a lot of this type of response, "give me an offer," but it normally means they want full market value and won't be doing much bargaining. Of course, that's  not always the case. Sometimes I get calls back on these properties and I'll just let them hang if I have other properties/owners that show more promise. Or, I go back to them with a very broad range (one that includes where i want to be and includes where he is as well), then maybe the owner would be willing to give financial information. For sure with a portfolio you've got to account for all income and expenses before making a real offer. 

@Nate Burgher Yep, I snagged the 4-plex on Quince. I actually bought and remodeled the house right next door to it just last year. I'm a big fan of the 4-plex--it has lots of promise. 

I'd be up for getting together in person. Fair warning though: my wife is 9 months pregnant, so I'm juggling that and this property while working a full-time job, but we'll make it happen. Just PM me your info.

Personally I've looked into buying in the Spokane market, but price-to-rent ratios out there have started to get a little high as well (though still much better than Olympia). I'm still looking for the oddball deal in Olympia--just landed one actually, an absolute STEAL on a 4-plex downtown--and I'm doing some marketing now because it's so dang hard to find a deal on the MLS. Even fixer-uppers are going for crazy amounts. You can definitely get more bang for your buck in Spokane, but you just have to be mindful of the neighborhood. Ohio is cheap in terms of purchase price but have you seen the taxes out there?!

HI @Tierra Petersen, welcome to BP!
No doubt it would be a little weird to be the one that snatches up the neighbor's property if they go under, but if you don't, who will? As investors we're supposed to put on our "impartial hat" and make attempts to act without much emotion toward properties, but it wouldn't be easy for me to do the same for a neighbor's property, especially if I knew them on some level. That isn't to say you shouldn't buy it!!. Actually, as sad/awkward as it may be, you kind of have an informational advantage in this situation that might be helpful. Then again, how do you bid on a property if you have no money?
Is this a tax-foreclosure sale? or do you just know they're behind on their taxes? How is it being sold? When?
I have been looking in the Rochester area recently, so if you'd like to chat about the deal or how to go about it, PM me and we can toss ideas around. 

@Jordan Moorhead Big congrats on your purchase! I'm looking to buy a larger multifamily in the coming months by marketing to owners (almost nothing on the market!). One question: you say that the owner preferred the financing versus the whole sale so as to avoid capital gains...I've heard that this is possible but how does it work exactly? I'd like to be able to "sell" the idea of seller financing to my prospects as well. Your perspective is appreciated :) 

I've worked with a few lenders in the area, and I've enjoyed having a couple to work with in case something doesn't work. 

I like Brandy Nelms at Guild for conventional mortgages as well as refinances post-hard money purchase. She's easy to work with and gets things done. Olympia Federal Savings is a classic portfolio lender. We have our personal accounts here as well as our business accounts, and they'll loan on things other banks won't. They also offer personal lines of credit, completely unsecured, based on your income, which can come in handy for investing in real estate. Also, Ryan Guisness with Absolute Mortgage (actually in Bellevue, not Oly) did the last refi we did on a hard money loan/remodel. They do cash-out refis after 6 months, if you need that. They require a bit more paperwork than some other lenders, but they're real professionals. 

For hard money, Eastside funding is cheapest but you may get what you pay for, and I've used Veristone capital, which is a point more but you get what you pay for ;)  Good luck in Oly! Let me know if there's a deal you need to pass on!

@Wendy Carpenter Yeah, 1016 N Pearl certainly looks like it would require some work, I've driven by and moved along, but that's when the price was $125k and the market was a little softer. Probably is a total bulldoze project since, even at 79k, it's not moving. 

I've used the same Olympia-based realtor since I moved here. His name is Jorge Ruiz, and is an investor himself (one of the VERY best). This is a good thing and a bad thing. He won't be looking for great deals for you, but if you find them, he's  responsive and easy to work with.