All Forum Posts by: Matt Smith

@Steve Vaughan

One key component to the seller carry was that in the event I'm unable to refinance through a financial institution after 3 yrs, I have the option to re-fi with the owner for additional down payment and same payments and interest (just recently re-fied for round 2).  I have not been able to refinance the warehouse to date in large part due to the tenants.  The front section of the warehouse had over 70 electrical outlets all around the walls  spaced about 18" apart.  I was told it was an electrical appliance retail at one point associated with Western Auto (founded by George Pepperdine of Pepperdine University fame

https://en.wikipedia.org/wiki/Western_Auto).  The electrical outlets seemed to me to be early 1980s commercial grade, very professional, just circa 1980s style.  I always thought, it would make a great ecommerce fulfillment mix center, but I get ahead of myself when discussing rural areas...it'll happen one day.  

Since I lost the original tenant prospect, and oil prices were falling, I decided to "jazz it up" as best as I could in hopes of attracting a strong tenant.  The result was about $18k to redo the electrical, convert an office into two ADA restrooms and a kitchenette.  During this time (Jan 2015-May 2015) there was no interest from any oil support companies, or solid tenants; however, there was interest from someone looking to open a Game Room.  In Texas it's kind of a shady business operation with slot machines.  I'm not proud of this fact, but the income has been great and has allowed the funds to make further improvements to the warehouse.

So, the first official tenant was a Game Room and they leased the entire 6500 sf.  In fact it has only been leased to Game Rooms until this year.  I've turned the warehouse into a duplex by adding a new electric meter loop.  Now have a resale shop in the back 3000sf and a Game Room in the front 3500 sf.  

In terms of value, it's hard to say.  I know it is hard to sell a property like this.  The taxes are extremely low on this property .  Not because of the tax rate, but because of the tax value that the tax assessor determines.  In the rural areas, most locals undervalue their property.  I guess it might be the same anywhere.  Some outsider comes along and sees value that others don't.  A great way to create wealth, in my opinion.  None the less, it's still a great income producing property that served as the catalyst to leaving my full time job and aided in acquiring other assets.

Investment Info:

Single-family residence buy & hold investment in Kenedy.

This Auction was for a 4/2 on oversized corner lot with an additional 2000+ sf of warehouse space for great price in rural town in Texas. Still vacant, but worth the wait. This was purchased during the bottom of the Real Estate market crash.

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

This was/is an ugly house purchase. The attractively low price, oversized lot, and tons of concrete improvements made this acquisition a no brainer.

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

I found this deal online during the shadow inventory dump years. It was an REO offered on an online auction site. Negotiations were very difficult mainly because I had won, or thought I won, the auction 3 times in a row. As soon as my offer was submitted with seconds left, the auction was extended automatically, and I would be informed later that I had been outbid. All three times I never increased my max, but several months later the auction holder contacted me to strike a deal on my offer.

How did you finance this deal?

This was an all cash purchase.

How did you add value to the deal?

To date, no improvements have been done; however, due to the existing improvements, value and perceived value have been on the rise.

What was the outcome?

This is still part of my portfolio. Plans are in the works to convert, remodel, into multi-family and lease out for long term hold.

Lessons learned? Challenges?

That sometimes no in real estate means "no for now." I had tried to acquire this property for a year, or longer. After every auction, I would be "outbid" only to see it relisted several months later. Finally, when my offer was accepted, there were legal implications the took another 6-8 months to settle. I'm convinced most investors would have given up, but persistence to see it through has provided for a very valuable property, and experience to boot.

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

There were real estate agents involved during the first attempts at acquiring, then all communications shifted to a law firm representing the bank that owned the property.

@Justin Windham

I am only invested in rural Texas ( I live in Houston), though Milwaukee down to Chicago looks great to me.  Racine, Kenosha, you know who you are.

Investment Info:

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

6,500 sf Warehouse with extraordinary ROI for a long term income play.

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

After some research, I realized there was a shortage of warehouse space, office space, and commercial space in general. I thought I might be able to lease as a warehouse. After seeing the inside of this ugly eye sore of a warehouse on a small lot, I thought it could be a tremendous opportunity to be able to lease as is.

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

This deal was listed for several years.

How did you finance this deal?

I was able to negotiate a 7% down payment with the seller carrying the note. Win win situation.

How did you add value to the deal?

At first the deal was placed online for lease, in which a broker's client offered to lease absolute NNN for 5 yrs. I made some rookie mistakes, and a partner got a little greedy, and the deal was blown during final stages of signing. As a result, I paid approx $18,000 remodel, repairs, restrooms, electrical, lighting, and ADA compliant. It has since been a great income producing property for over 3yrs.

What was the outcome?

The first couple of years were tough due to the perceived condition. It sat on the market for lease for about 3-4 months, so I painted the outside to improve curb appeal and it has been leased with low vacancy rate for the past yr and a half. Great income producing commercial property that nets the equivalent of $18-$20 hr full time job.

Lessons learned? Challenges?

Never judge a property by it's curb appeal...especially if it is commercial. Older commercial property may be built with higher common sense standards, and better material than what is available today. You may be pleasantly surprised to find some valuable traits that an ugly commercial has to offer inside. It never hurts to look. And, don't be greedy, and don't let partners get greedy.

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

Yes, an agent was involved, but not very helpful for the sellers.

Consider rural towns/cities like the following:

Kenedy, 78119, Karnes City, 78118, Edna, 77957, Brazoria, 77422, and Lake Jackson (and surrounding areas Angleton, Clute)

All in Texas

Easier to leverage money and find owner finance deals, easier to find prices in the <$70k range, and rents are very good.  Why invest in these "cities" of small populations?

Karnes County Oil Boom (Eagle Ford Shale), went from one of the poorest counties in the nation to one of the wealthiest due to fracking.  Billions in commitment from ConnocoPhillips, Marathon Oil, Ashland Chemical, Pioneer, Wood Group, and more.  Not to mention that even when oil was rock bottom, all of residential units stayed lease with reduced rent, which was still great return based on purchase price (Ex triplex purchased for 54,000+17,000 remodel/repairs nets 1300+/mo). 

Edna (Jackson County) benefiting from jobs in Victoria, Port Lavaca, and Port Comfort. Duplex recently purchased < $55k and bottom unit leases for $850/mo (all utilities included up to $150), and upstairs scheduled to rent for $750 (same)

City of Brazoria experiencing growing pains due to Lake Jackson area overpopulation up and down 288, and seeing Hwy 36 as healthy alternative.  Billions in commitments from Freeport LNG, DOW, BASF, more, and Port of Freeport.  Port of Freeport will contribute jobs to economic growth and is taking great strides to be the deepest port along Texas coast in efforts to attract the Panamax Tankers from the Panama Canal.  Most of Brazoria County flooded during Harvey, but deals can be had along Tx Hwy 36 (commercial/residential) that stayed high and dry.

If all else fails, consider buying half, or less, of a nn performing commercial asset where you'll receive 1/2 of the income, appreciation, and none of the management; however, you'd still be responsible for 1/2 taxes, liability, etc.  

Available to answer any questions about any real estate anytime. These are examples of what I've done, and I've spent less and made more ROI overall than my inner city investment pals.

Rural is easily overlooked, but full of hidden gems in my opinion. Look for low cost, low taxes, Jobs, and path of progress.

Happy investing

Investment Info:

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

Very affordable Duplex has been solid cash flow income for 7 yrs and counting.

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

After a recent sell, this was the only property I could afford to get into all cash. This was before I knew anything about creative financing.

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

This was a friend of the family deal that worked out for everyone. Since it needed repairs, the seller was happy to discount with an all cash offer.

How did you finance this deal?

This was an all cash deal.

How did you add value to the deal?

Immediately after purchase, rehab/repairs performed to convert this property into a 2-story duplex. Separating the units, adding plumbing, electric, bathroom, and kitchen would double the income potential of this good deal.

What was the outcome?

After repairs/rehab, this property has steadily leased for great ROI.

Lessons learned? Challenges?

The contractor cut some corners with the bottom unit that cost more to correct in the long run. The challenge was keeping an eye on progress as work was being performed. I was in Houston working full time, and property was 3.5 hrs away. This experience provided a fast learning curve. I now set deadlines with payment penalties, and I know more about the remodel process so as to not be taken too easily moving forward.

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

No agents were involved in this deal.

Investment Info:

Single-family residence commercial investment investment in Brazoria.

Negotiated a seller finance deal on this property that sat on the market for a few years. I saw value in the 1.87 acre lot on a growing Tx State Hwy.

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

Due to DOM, and marketing more as residential, I saw tremendous value in this commercial property on Hwy 36. With the Port of Freeport expanding and billions in commitments for many years to come this investment seemed like a solid long term play.

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

This deal was on the MLS and advertised in The Real Estate Book. Verifying some older Google Map street view dates that suggested this property was on the market for 4 yrs, I thought it might work to reach out to the listing agent and offer 10% down, with seller finance.

How did you finance this deal?

The owner financed with 10% down and carried the balance.

How did you add value to the deal?

I subdivided the property by separating the small house on about 15,000 sf lot, and keeping the remaining 1.5 acres as another property.

What was the outcome?

Now have two properties on Hwy 36. A small stand alone building on an oversized lot, and 1.5 acre plot of land.

Lessons learned? Challenges?

The City presented some challenges during the subdividing. It required a city council vote, and a few changes to the overall plat. This process took several months. Keep in mind that towns and cities may have different ordinances that may require city approval before tackling your plans.

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

The listing agent was very helpful in negotiating and closing this deal.

Investment Info:

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

Bought a single screen theater in a small town and flipped it a year later for 50x.

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

This was the deal that would put my movie making aspirations on the map...not! My plan was to buy this single screen theater, fix it up, and begin my theatrical movie distribution business. The problem is that the theater was in very bad condition.

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

I was passing through Kenedy (population about 2500-2800) in 2008, or 2009. I noticed this cool old theater called the Rialto. I dug into research thinking maybe there's a chance I could make a movie and show it in this small town theater, only to wind up buying it a few years later.

How did you finance this deal?

This was a cash purchase deal.

How did you add value to the deal?

I advertised on the marquee for the year that I owned it. It was used to promote my website. Needless to say, all the traffic, low as it was, was from this small town area.

What was the outcome?

There was an oil boom in the region that directly impacted the real estate. An investor made an offer a year later and I was able to 50x my investment.

Lessons learned? Challenges?

If you're passionate about real estate investing, you'll probably see value and have ideas that no one else will understand. That was my experience with this property. Friends and family advised not to buy it, because they wouldn't buy it. The look on their faces a year later after I sold it was bitter sweet priceless.

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

No agents were involved in this deal.

Investment Info:

Single-family residence buy & hold investment in Houston.

Got this deal as a "subject to" and currently holding for amortization paydown, rental cash-flow, and appreciation.

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

Seller needed "x" amount to sign over and walk away. A win-win situation on this property that has had positive cash flow ever since.

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

Found this deal through word of mouth and a lot of persistence.

How did you finance this deal?

Cash to seller was borrowed and in process of being paid back.

How did you add value to the deal?

House needed very little, but ended up putting some money into updating the kitchen and restrooms, as well as a few spot repairs.

What was the outcome?

Positive cash flow within 30 days.

Lessons learned? Challenges?

Persistence works. This deal was made possible simply by reaching out to the seller, keeping in touch over the course of a few years (in a neighborly manner, not as an investor). Met up with the seller out of the blue and he mentioned the idea of selling his house. Since I didn't have the cash to buy out, and he still owed money, we worked out a plan that would get him his cash portion. I paid him off to sign the property over, took over payments, and the rest is history.

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

No agents were involved.

Took a trip there a few months ago to investigate the area...mainly around Racine and Kenosha.  Milwaukee revitalizing downtown...lots of construction. Over the years there's been slight loss of population, loss of a major beer distributor.  The Bucks have new stadium and recently agreed to new NBA G League stronghold in OshKosh.  I felt the same way about prices.  Could be things are turning around for the better after many years of blight...possibly connected to politics.  Locals I spoke with did confirm a reality of the area.  It is somewhat racially segregated as if by preference by each group.  Aside from this, there was hint at some drug problems in areas outside Milwaukee.  And then there's a claim from someone in Texas, where I'm from, that Wi is 95% white....except for Milwaukee.  I drove up from Chicago to Milwaukee and stopped at Kenosha, and Racine along the way.  I didn't notice the 95% part, but wasn't thinking about it either.  I was thinking about Real Estate.  Hope someone from there can elaborate.  I had/have the same questions, but based on my short experience during a freak snowstorm in middle of Spring, I kept thinking that I would really like to be a part of this renaissance.  But there is concern of a barbell economy.  Foxconn and Amazon are definitely game changers, and this is not like Detroit.  I'm rooting for good things to come.  Best to you moving forward. 

https://www.bizjournals.com/milwaukee/news/2018/07/30/sba-celebrates-65th-anniversary-reflects-on-growth.html