Tuesday, April 21, 2009

Multi Unit financing

I have to give credit and thanks to Jeremy Peterson for the chart that he created. As you can see, conventional financing is not the preferred method of taking down multi family units. I have to say that I was surprised at the level of FHA buyers buying units. In order to qualify they have to occupy one of the units as their primary residence. Let's hope we don't see rampant lender fraud with investors stating that they will live in one of the units and then never actually do it.

Monday, April 20, 2009

Book Review

I was given this book by my friend Tony Alvarez. Once I started reading it I finished it in 3 days. The author has a very "readable" style and I liked the fact that he was able to bring real life examples from his time with the Coca Cola company and not just catchy sayings. (although there are lots of those too)


As the name implies there are Ten commandments for business failure but you also get a "bonus" Eleventh commandment which is "Lose your passion for work/for life." This chapter ties the whole book together with the following quote from George Bernard Shaw, "The reasonable man adapts himself to the world. The unreasonable man persists in trying to adapt the world to himself. All progress therefore, depends upon the unreasonable man."


What I have found throughout my entire real estate investing career is there has never been a shortage of people that wanted to tell me just how wrong I was for doing what I was doing. These people were usually the ones stuck doing something they didn't like for someone they couldn't stand. Of course they call themselves "realists" but like to call them cynics. I have a real passion for what I do and I think it is obvious to those that work with me.



Commandment three-Isolate Yourself. It can be really easy to get some success underneath you and think you are at the top of the food chain. When that happens the tendency is to stop paying attention to what got you there in the first place. To me that means making sure that you stick with the basics and don't get stuck trying to run your business from the top down but from the bottom up. As a real estate investor I NEED to be on the front lines talking with prospective sellers and buyers everyday. They have to be able to reach me.



Commandment six-Don't take time to think. Time to think is not a luxury. It is a necessity. It only takes one bad buy to wipe you out in the real estate game. The game changes so fast and sometimes I have seen investors "hoping" so hard that they try to make a marginal deal out of a nightmare. This can work the other way too. Once you have thought it through then take the right action to make it happen.



I definitely enjoyed this book. If you read each chapter and try to apply it to your business it should help give you some insight. It helped me do just that.

Two from same owner

Just made an offer on two properties side by side from same owner. #1 is a triplex with a $1750 rent roll #2 is a four plex with a $1950 rent roll. Asking price is $180,000 each.
Offer: $180k each 7% down (realtors get 6% of that) balance to be paid at $1,000 per month each, zero interest (principal only) for 167 months. The sellers actually live in one of the triplex units and both buildings are ready to go with zero repairs.
Each property has a small existing first of $60k and $65k respectively that completely pay off in 10 years. So I will be wrapping fixed rate financing with zero percent AITDs and looking at $1750 gross cash flow per month between them both.

Stay Tuned!

Friday, April 17, 2009

We had a great training class yesterday and will have another one Thursday of next week. Email me if you are interested in attending.

Wednesday, April 15, 2009

The Black Hole

I made a contact with a local property manager months ago. He decided to sell his business and relocate to another State. He called me and asked if I would be interested in buying a property even if it was a "black hole" that he was having trouble renting. I took a look at it and bought it 14 days later. The seller was so relieved he must have thanked me 5 times.
Purchase price=Subject to $204,000 (loan amount owed to bank) 26 year fixed rate loan $1878 PITI.
Cash in deal= $3,093 ($2593 for closing costs and $500 referral fee to property manager)

This property is a triplex (2 x 2 bedroom 1 bath units and one 3 bed 1 bath unit) zoned commercial, (so we can put a big ass sign in front of it) sitting on a major street 4 blocks from Weber State University. We moved our offices into the top floor and converted the main floor into shared office space for professionals that want a full time "look" to their business without the full time "cost" of it.
In the fully finished basement we have a conference room that we rent out to local professionals as well as conduct weekly real estate training for investors that are interested in knowing what we know.
I think the lesson here is that if a property doesn't fit ONE job description then maybe you should change it to something else.

Free and Clear Duplex



After our success with the triplex on Madison, Jeremy Peterson (local Realtor) called us about another long distance landlord that wanted out. This property is an up and down duplex with a 2 bedroom 1 bath unit upstairs, a 2 bedroom 1 bath unit downstairs and a shared laundry room in the basement. The property was free and clear and the seller was interested in carrying "paper" (just what I like to hear!).
Details:
Purchase price=$119,500
Down payment=$11,950 (10%)
New first TD=$$107,550 @ 8% amortized over 360 months DUE in 10 years ($851 PITI)
Strategy= We rented both units for $750 each ($1500 gross rents) for $650 gross cash flow per month. We will hang on for the amortization and of course make use of the cash flow each month.

Tuesday, April 14, 2009

Triplex "Subject To" from a frustrated seller

Here is an example of what happens when an out of State owner has had enough. The property is a triplex with a 1 bedroom 1 bath unit, a 2 bedroom 1 bath unit and a 3 bedroom 1 bath unit. The owner had been worried about filling vacancies so told their property manager to rent it fast. To most property managers that means LOWER the RENT... And that is just what they did. This building was rented for $1,000 per month. The last straw was when the water main broke ($3500 estimated repair) and the building was tagged as uninhabitable (read NO RENTS). With NO tenants and NO desire to be long distance landlords their agent contacted us.
Here is how we put it together:
Purchase price=$141,586
Down=$7500 (5%)
Existing loan=$90,930 fixed for 27 more years 6.75% $651.44 PI (took subject to this)
AITD to seller=$134,507 for 343 months 7.84% $1100 PITI monthly (wrapping around first)

We spent $2700 to repair the water main, did some clean up and now have the building rented at $2000 per month. If you are using your calculator you will see that is $900 per month GROSS rents. We will keep this building and get the benefits of amortization and cash flow over the next 10-20 years. We were able to partner on this property with an investor with IRA money and secure a good return for their future retirement.

New blog

Okay so Investors Workshops has joined the "blogasphere" as a way to keep interested investors updated on what we have going on. Look for many posts over the coming weeks.