All Forum Posts by: Stewart Beal

In 2016 I received a call from a real estate investor who had recently purchased 423 Washington a 18 unit apartment building in Monroe, MI. He said, Stewart I am in some serious trouble, I hired a property management company and they took occupancy from 16 of 18 down to 6 of 18, and they haven't rented an apartment in several months, I am bleeding cash. To make matters worse, the City of Monroe condemned the building today, they installed a illegal occupancy notice on every door in the building, I think the other 6 residents are going to move out, and the bank will take my property. I said, don't worry, we can straighten this out, hire me to be your property manager. He hired me, I called the current property manager and they said you can't fire me, and I said, look at what is going on, you can't be serious, they said no way, we are not fired, I said, I am taking over, I noticed the 6 tenants, changed the locked, and touched base with the City. We never heard from the former property management company again. The City said, the property management company has been ignoring us for months, all we need to do is an inspection, we posted those notices to get their attention. So my team and I got to work, we resolved the city issues, and signed the 6 existing residents to 2 year leases with a fair rent bump, and then leased the other 12 apartments in 3 months. I visited the property for the first time and noticed, hold up, wait a second, there is a 9 car garage at the property. I called the owner, he said, oh yeah, I forget, what do we do with the 9 car garage. I said, man, 9 car garage! That is like adding a 19th apartment! We advertised the garage units and quickly rented them for $600 a month total effectively adding a 19th unit to the building. Once the building was full the owner said, Stewart can you sell the building for me, this real estate investment isn't for me, I said I will do you one better, I will buy the building for $475,000, he said, I need $510,000 and you have a deal which I quickly agreed to. Fast forward to 2020, we have owned the building for 3 years now and have posted 3 solid years of rent and NOI growth, we sold the building today for $939,450.00 booking a profit of $429,450 in 3 years.Please note, I have investors and partners in this deal and they contributed to its success.

Yes the $400,000 is dead equity and you should put it to use as soon as possible.  You can borrow as incredibly low interest rates right now.  Just make sure you invest in something that cash flows and you will be in a good position.

Great work Marco!  3% is a big win.

I use 2 strategies, make full price offers on deals that have sat on the market a long time and ask seller for land contract financing, and the 2nd strategy is mail letters, 1,000s of them offering what you are offering, you will get more calls than you would think.

My cost segregation guy says it is not worth is on a purchase price of less than $500,000.

Big Win Yesterday! The Power of the Cash Out Refinance. In 2005 I became friends with a fellow real estate investor in Ypsilanti, MI, I had purchased 4 properties to date, and was watching this friend closely. It was cool to see him purchase the Lakepointe Center, a 24 office suite, 11,000sf complex, near my house for $746,000. I thought wow, if I keep working hard and investing in real estate I can purchase something like that one day. Fast forward to 2016 and I am driving by the building and was astonished to see a for sale sign in front of the building. I immediately pulled over and walked the exterior of the building. It was clear the building had been let go and there were not many tenants. I called the broker who had the listing and was absolutely flabbergasted to be told the building was for sale for $325,000! I said to the broker, what happened? He said that there were only 4 tenants and my friend had given the bank the building back through a deed in lieu of foreclosure and that he had been managing the building for the bank, had failed to attract any tenants for months and the bank told him to dump it. At the time my partners and I had purchased another nearby office building so I called them, told them based on my analysis this building could be worth $1,300,000 some day, and so we made a full price offer at $325,000 which was accepted the same day by the bank. We closed quickly and we went to work leasing up the spaces. Using a sign out front, basic loopnet/craigslist/FB marketing we had all 24 spaces leased within 9 months as small affordable office spaces are always in pretty high demand. In 2018 we did a small cash out refinance raising the debt on the building to $400,000. In March and April 2020 we lost a few tenants when Michigan shut down, but when Michigan opened back up we quickly refilled them and the building is 100% occupied today. Yesterday we received a term sheet from a local credit union offering a $1,000,000 loan, 10 year fixed, 3.9% interest, on a valuation of $1,300,000 for a $600,000 cash out refinance. Pretty good for 4 years work.

Please Note: I have partners in this deal that contributed to its success.

@Darian Lupton OSU is way worse

We have prospects apply through our website and then we screen them using Amrent, here are our requirements: 

Michigan: We are looking for 600 min credit score, 3x income, no evictions, no bankruptcy within 5 years, 3x income, limited criminal/collection accounts, and a good rental reference. If you have a 0 credit score and/or no rental history we will likely require a cosigner. If you credit score is slightly below 600 but you are much stronger in other areas, most importantly rental history, we may still approve you. We reserve the right to make exceptions and we reserve the right to not approve you if you meet these requirements due to other factors discovered in the evaluation process.

Toledo: We are looking for 525 min credit score, 3x income, no evictions, no bankruptcy within 5 years, 3x income, limited criminal/collection accounts. If you have a 0 credit score and/or no rental history we will likely require a cosigner or a 1.5 month security deposit. If you credit score is slightly below 525 but you are much stronger in other areas, most importantly rental history, we may still approve you with a cosigner and/or 1.5 month security deposit. We reserve the right to make exceptions and we reserve the right to not approve you if you meet these requirements due to other factors discovered in the evaluation process

The Power of Real Estate and buying buildings for no money down: In 2008 my father did a construction project at 277 Gratiot, Detroit for a man who owned 6 buildings in Detroit's Harmonie Park near Ford Field, Greektown, and Comerica Park. The man paid my father about 80% of what he was owed but admitted he couldn't make final payment. My father asked me, 25 at the time, to meet with the man and offer to manage his buildings, and see if there was a way to make him whole, as the man was beginning to default on a lot of his debt. This was back when Detroit was much different than it is today, way before Quicken Loans and Dan Gilbert, back then you didn't stop at red lights if you know what I mean. I quickly realized there was no hope to save 5 of the buildings from foreclosure, but 277 Gratiot, then known as the Tobin Building had potential, I tried to help the owner, but he himself personally was too financially distressed, so I focused on saving the building itself. Sterling Bank in Southfield had debt on the building in the amount of $1.9M and the downtown development authority had a 2nd mortgage of $1M. I asked the owner and the bank, could I have the building with no money down if I simply agreed to personally guarantee the debt and start making the monthly payments again? The bank evaluated the building and determined it was worth in a fire sale maybe $400,000 and here was a 25 year kid willing to pay the $1.9M debt and guarantee it so they said sure why not lets roll the dice on this guy, and the owner was glad to be relieved of the financial liability. It was on its face, even though the building was worth $400k a huge win for me, I just gained ownership of a 32,000sf, 8 story office building in downtown Detroit for $0 money down. I dedicated my life to the building, worked thousands of hours promoting it, caring for it, did little leases, did big leases, then in 2012 downtown Detroit started to change, here came quicken loans and Dan Gilbert, rent started to climb, owning the building quickly became more profitable. In 2019 I had paid the 1st mortgage down from $1.9M to $1.4M, for many years the building had cash flowed on a monthly basis, and I received an offer from a neighboring building owner for $5.2 million. I accepted the offer of $5.2 million, paid off Sterling Bank of $1.4M the Detroit DDA of $1M and walked with $2.8M after investing exactly $0 to purchase the building 11 years earlier.

@Andrew DeBlock Oh no, not another Spartan!  I am being over run!  Go Blue!