All Forum Posts by: Richard Lovering

Originally posted by @Hector Rodriguez:

PART II "The What and the How""

Now that we knew there were viable investment opportunities in Lowell, the rest was easy… it was no longer a matter of if we would buy, but of what, when and how much we were willing to pay. As far as what to invest in, relevant opportunities include single-family, multi-family and apartment buildings. We will at this point not pursue single family investments due to the typical low cash flows associated with them, at least in our area of interest.[1] Apartment buildings are not realistic at this time due to limited capital, opportunities and experience. Multi-family properties on the other hand are affordable, provide good cash flow, and can be financed easily.

What we want is relatively clear… we look for:

• 2-4 family properties,
• Providing a minimum 12% cash-on-cash return,
• Which are comfortable and of good design,
• Which will rent in the low-to-mid rental rates, and
• Which may need basic improvements, but which won’t require structural repairs.

Real estate property is often classified using letters A (New), B (10-15 years old), C (30+ years old, potentially in need of updates) and D (old and likely uninhabitable.) Class C property is clearly our sweet spot. Class C properties are affordable to purchase, and therefore affordable to rent; this characteristic makes it attractive to our prospective tenants and are a solid fit for us as defensive investors.

[1] We may invest in 1-family properties based on exceptions (e.g. advantageous price, part of a block of properties, property can be easily split into a 2-family, etc.).

How:

We acted quickly, contacted two agents whom we knew well (and who continue to provide tremendous help) and got the process started. Within days we had scheduled visits to several properties… memories came flashing back! There really was no difference between the properties we used to own in NJ in ‘98, and the ones available in Lowell in ’18… none at all. We placed offers on the following properties:

• November 13th ‘17- Powell St – large 3-family, solid, needed some updates. It went under contract at full price immediately before we presented our offer! In hindsight, we are glad we ended up not buying this property. It needed to be completely repainted, and needed entirely new heating systems. It may have been a little too much to buy as our first property after our long hiatus.
• November 16th ’17 - Agawam St – two 2-family properties, good condition. We ended up placing offers 15% under asking and purchased them almost 10% under asking price. These properties are solid, with garages and parking, and will be permanent assets for us.
• November 16th ’17 – Pine Hill Rd – 2-fam property in good condition. Placed offer under asking price… seller never responded. It appears that he was carrying a high mortgage, limiting his flexibility. This house didn’t sell in ‘18.
• November 24th ’17 – Durant St – 2-fam property, side-by-side. Had offer accepted, but we pulled out after some retaining wall issues were identified after inspection. In hindsight, again, we’re glad we did not buy this property. It was on the other side of the river, much less convenient for commuters and relatively far from our Agawam properties as well.
• December 10th ’17 – Myrtle St – 2-fam property in good condition. Placed offer under asking, eventually sold over asking.
• January 9th 18 – Agawam – 3-family property with “rehab qualities.” We placed an offer but it went over asking price to a cash buyer.
• February 13th ’18 – Elm St – 3-fam in good condition. Had offer accepted, which we pulled out from due to some issues identified during inspection, which the seller was unwilling to address to our satisfaction.
• November 14th ’18 – Central, a 1-family with ready made additional unit. Fantastic numbers. Went over asking price.
• November 27th ’18 - Whipple, a 1-family with a full ground level basement in need of renovation. Great numbers. We were able to purchase this property early on in ’19.

While it feels like a lot of action when one reads about it, fact is that the speed at which deals were appearing in the MLS was not sufficient for us… good deals were far too infrequent, and there was a lot of competition for them. Was there another way? We had heard of "direct mail" campaigns, where buyers contact potential sellers directly via mail, inquiring about potential interest in selling their properties directly to us. We tried it… and it worked!!!

We crafted simple, hand-written letters (OK, photocopied, hand-written letters) and sent them to all owners of multi-family properties in just two of the six neighborhoods of interest. We received our first call within 3-4 days of sending the letters, and eventually visited six properties through this first campaign!

1. Agawam St – Good 2-fam property. Interesting to us as it was right across from our two Agawam properties. The Owner was however clearly fishing and not really interested in selling. He was still holding the property at year-end. (UPDATE: Property still held by the same owner today).
2. Moore St – A great rental property. 2-family. The Seller asked for more time, and eventually listed the property in the MLS through a family friend. We were a little disappointed he didn't call us back. The property was still listed as of the end of the year. (UPDATE: Property never sold and is still held by the same owner today).
3. Griffin St – A good 2-fam property. We liked it and presented the Sellers with a documented offer, never received a formal response. Property was still held by the same owner at year-end. (UPDATE: Property was listed last week and went under contract two days later).
4. Andrews St – A 2-fam property with some promise, but we were too far apart in price. (UPDATE: We ended up purchasing this property in '19!)
5. Lawrence – A large 2-fam property, with a built-out attic as well as a spacious walkout basement. Each apt 3-BR’s. We presented an offer, which was quickly accepted. 
6. Central – A beautiful, well maintained 2-fam property and a 1-fam house in an adjacent plot of land. The owner had built a bridge connecting both properties (he owned them for over 30 years), which made it impossible to sell to separate buyers. He was therefore looking for a single buyer to take both… when our letter showed up! It took a while to finalize the paperwork with the City (we had to put both properties under a single deed), but we were able to buy our best property yet; low maintenance and high rents.
7. Central – A large mixed-use property, in need of too much work. We passed.

We sent an additional batch of letters once we came back into the market later in the year and once again had some responses… we saw some interesting properties, although none panned out this time, this approach has worked well in ‘19 again, but I'll cover that in a few months...

While the MLS will in fact continue to be the main source of deals, we now know that Direct Mail is an effective way to pursue them as well. In both instances where we ended up purchasing properties directly from the owner (in '18) we found highly motivated sellers, who, for different reasons, did not want to go through the hassle of listing their properties in the MLS. We expect the financial returns of both of these properties to exceed expectations for years to come.

Next Week: Part III, "The How Much"

Originally posted by @Patrick Foley:

@Richard Lovering that would be great. I would be happy to meetup. I can do most afternoons or an evening late in the week. Just let me know time and place and I’ll make it work.

Patrick

Welcome to Bigger Pockets! Great resource when you're getting started for sure! I live in Hollis as does my partner. Happy to have a coffee or beer, if you prefer, and chat. We just started our journey this year with our first purchase in Manchester (6 unit) and under contract on our second (4 unit). We're long-term Brrr and hold strategy driven. Not experienced by any stretch, but happy to talk through our challenges and experiences. 

You should also consider going to the Nashua REI meeting. It's the 17th this month at Fody's tavern in Nashua, 7pm-9pm (downstairs room). I've only made a couple but my partner goes every month. We met our agent there as well as some other great contacts. Great place to go and connect for sure! 

Cheers!
Rick

Originally posted by @Patrick Foley:

Good Afternoon,

My name is Patrick, I live with my family in southern NH. We have run a successful bathroom remodeling business for the last 10 years.

I have read and listened to a ton of books about investing and know that this is what I have always wanted to do.

Taking that first leap of faith is where I’m at right now. I have always been able to get my hands dirty and do whatever it takes to power through a project.

Do you guys think I’d be best suited to find a mentor or partner for my first couple deals? Or should I just go for it on my own?

Thank you in advance for any advice!

@Richard Lovering

Thanks a lot. I haven’t been to a meeting yet. Do you mean the BP meet ups? Or is there something else as well?