Offline***new note 11/11/11 We made the paper today for deal #2! Check out the link in our 11/11/11 post!***
The Tale of 2 Closings----
Closing #1: 46 units, combination of apartments, townhomes, & Duplexes. $500 Earnest Money. PP $1.25 million. Seller carries back $250,000 down payment plus an extra $50K (we got back in form of bank check at closing). Bank finances remainder at 5.75%. Closing costs offset by tax credit. We also got security deposit check of $14K. This was a great landlord, no deferred maintenance, turnkey properties. Cash Flow $5K/month immediately. Easy to raise rents- landlord hadn't ever raised rents more than $10-20. Cashflow potential $8K/month.
Closing #2: 60 Unit Apartment Complex, $2000 Earnest Money. PP $1.25 million. Seller in major financial distress on all properties, pre-foreclosure, GREAT neighborhood, LOT of deferred maintenance. Found an equity partner with farmland equity and used that to finance down payment. They will receive 5% gross rents as long as we own it. No money OOP for them either. Bank financed the remainder AND gave us $900K Operating line for rehab and operating expenses!!! AND we received a low interest rate of 5% since we used farmland for down payment. We live in a farming community. This property is in distress and we have a general contractor already lined up to start rehab next week. We are at 50% occupancy due to the need for rehab. The county commissioner board is also giving us a 2 yr. tax moratorium (NO property taxes- saves us $72K) on our rehab complex and we are negotiating a rate freeze for a minimum of 5 years. This is an eye sore in the best neighborhood in town. Everyone wants it rehabbed and the mayor is on our side too. The bank is also allowing us to pay quarterly interest ONLY payments until rehab is finished. After rehab, we will cash flow around $10K/month. We also have a potential deal with a local college for student housing, which would be a guaranteed cash flow of around $35K/month.
Both properties are in GREAT neighborhoods. We won't buy if it's not. Closing #1 properties were never on the market. We networked through landlord association and initially thought we would try to wholesale this property. Then we became focused on purchasing it ourselves when we realized seller would finance down payment. Closing #2 was much more complicated and we have actually been working on this one for exactly one year with the distressed seller. She received an offer from a big landlord in town that owns the adjacent property. HOWEVER< THIS IS IMPORTANT------FIND OUT WHAT SELLER NEEDS!!!!!! We related to her and cared about her situation. Through our long conversations with her, she revealed a note she had with her parents for $50K that was important to her to get paid off. So, guess what we offer, how about we assume that note? That was all it took. Our offer and that of other potential buyer was very close. This tipped the scales in our favor. That was a hard contract to get signed and took a few weeks. We were also diligently working with the foreclosing bank throughout the process. They wanted it in new hands and we were focused, professional, and had a plan. We spent several weeks preparing a very detailed business plan for both of these properties. The bank was impressed. We have good credit but not a lot of equity or income. We really had to prove ourselves in this whole process. We celebrated when we got each loan approved through the bank's board. We have learned a TON throughout this process that we would love to share. There is so much more but too much to write on here. We encourage questions, and would love to help others through our experience.
We plan to hold these properties long-term and have great cash flow properties to pass onto our children. There were many bumps in the road, and we are not going to lie, we could have given up SEVERAL times. It was not easy at all, but we were diligent and focused on getting them done. All of the credit must go to the LORD. He was faithful in the entire process. We asked for wisdom and guidance and to protect us if any part of it was not in our best interest. This past week has been kind of a blur. We spent most of Tuesday and Wednesday in the bank, attorney's offices, and title company offices. Crazy week but AWESOME results!
Sheila
"If God is for us, who can ever be against us?" Romans 8:31 NLT
Congrats!!! You and your team is making a huge win!!! Congrats!!!
Sheila,
Holy Cow! are these your first transactions? These are fantastic deals! I hope to be on the way to similar deals soon.
Andrew Dean
Thank you for taking the time to write all that you did. So many tips and rich nuggets of information here. Your vision, networking, team building, community support and perseverance has paid off huge. God is goooood!!! Congratulations. I look forward to hearing more of the details! Everybody wins in this deal. Nice!!
Jill Holden | San Diego
Investor Services
Team Development
glad you shared it with everyone. i'm guessing im about 90 miles due north of you guys. happy returns.
We are still processing it all, pinching myself the rest of the week. Actually, I have been buried in paperwork since it happened....trying to get all the leases entered into our computer system and setting up filing systems. Also, getting everything switched over to our business name has been time consuming. And collecting rents! That is a good problem to have I suppose, but closing at the first part of the month has been very hectic.
Tony- let us know what specific questions you have regarding multi-family commercial deals and we will try to help. It really isn't much different than buying a single family home, except you count more zeros, lol!
Sheila
"If God is for us, who can ever be against us?" Romans 8:31 NLT
Sheila, AWESOME job!
RENinja
"Remember, success is a journey, not a destination.
Have faith in your ability."
Bruce Lee
so glad to hear your good news. what a great job you've done. congratulations and here's to even more success!
Linda, Army EOD Mom
you can follow my journal at http://www.deangraziosi.com/real-estate-forums/investing-journals/45351/...
IT'S ALL GOOD AND EVERYTHING IS WORKING OUT PERFECTLY FOR ME!
Fear equals:
False
Evidence
Appearing
Real
Sheila,
these deals are over the top!!! congratulations!!
you are right about commercial-definitely more zeros on them!!!
I will contact you in the future when I start going commercial, if you don't mind...
thanks for sharing!
wishing you even more success,
Valerie
Valerie
“And will you succeed? Yes indeed, yes indeed! Ninety-eight and three-quarters percent guaranteed!” ― Dr. Seuss
"I believe in angels, the kind that heaven sends; I am surrounded by angels, but I call them friends" - Unknown
My journal: http://www.deangraziosi.com/real-estate-forums/investing-journals/59110/...
What is PP and OOP?
Purchase Price/ Out of Pocket. $2500 was the earnest money we used and all we had out of pocket for the entire 106 units. But then we walk away from closing table with $50K bank check and $900K line for rehab. We could have borrowed the $2500 for earnest $$, then it would have been no money down.
Also, if anyone would like to see one of our business plans we gave to the bank, I would be happy to share. We did an individual plan for each.
Sheila
"If God is for us, who can ever be against us?" Romans 8:31 NLT
Those deals are amazing!
I know you have been working very hard for a long time. This is just another example of NEVER give up!
Congrats! You guys earned it!
Karen
"You're never too old to be what you were meant to be!"
www.deangraziosi.com/real-estate-forums/investing-journals/59128/day-for...
"Shining Like a Star & Dancing on Sunshine"
"Shoot for the moon! Even if you fall short, you'll still land among the stars!"
Closing #1: 46 units, combination of apartments, townhomes, & Duplexes. $500 Earnest Money. PP $1.25 million. Seller carries back $250,000 down payment plus an extra $50K (we got back in form of bank check at closing). Bank finances remainder at 5.75%. Closing costs offset by tax credit. We also got security deposit check of $14K. This was a great landlord, no deferred maintenance, turnkey properties. Cash Flow $5K/month immediately. Easy to raise rents- landlord hadn't ever raised rents more than $10-20. Cashflow potential $8K/month.
Can I ask you what your interest rate is on the seller carry back of $250k?
Awesome deal!
Our seller carry-back is 8%. Initially we tried to get it locked at 6% and seller agreed until his financial advisor told him he needed to get at least 8. It was worth it to us! And we are locked there for 30 yrs.
Sheila
"If God is for us, who can ever be against us?" Romans 8:31 NLT
Congrads on a job well done, sounds like really impressive cash flows going on there for ya, auction+knowledge = success...
"Action and Mistakes" always-outweigh "Analysis Paralysis"
...Just do It"
http://www.linkedin.com/pub/john-hoening/23/2a3/164
"Action+Knowledge=Success....$$$$$$$$$.....
www.WeFlipDesMoines.com http://facebook.com/desmoinesinvestmentproperties
www.iowarealestateflipper.com
You have just set yourself for many more big and bigger deals. As I'm sure you know commercial is all about the income of the properties, with you being able to raise the rents, the tax defferance, and such once your properties are running strong, rehabbed and full occupancy, banks will be begging you to refi and take some cash out for bigger deals.
I'm really excited to see what happens for you in the next couple years.
These are the deals where fortunes and wealth are created. Fabulous job!
very happy for you and your family.
I hope you get a lot more deals.
Steve
Steve and Veronica
Steve and Veronica's Journal.
http://www.deangraziosi.com/real-estate-forums/investing-journals/58073/...
http://www.deangraziosi.com/real-estate-forums/totally-fulfilled/72344/d...
I need to change our personal information (via my husband's insistence) and then I will share our business plan. Thanks for all the positive comments! We haven't been on here much lately and these deals are why! We didn't really want to post about them until they were completely finished. Too many uncertainties along the way.
If we can offer one piece of advice, it would be to find your niche in the real estate business....Just because everyone is wholesaling or others are lease optioning, doesn't mean it is right for you. Find out what you are comfortable with or are passionate about. We wanted long-term cash flow and stability. Buying and holding multi-family is what we wanted, and that's where our focus has stayed. That's one reason that Dean's "Your Town" book is one of my favorites. It's about people doing what works for THEM, not what works for everyone else. Lastly, work REALLY hard for several months and you can set yourself up for a lifetime of being financially free!
Mark- You are right, we already have our sights on some bigger deals! We won't really look at anything unless it's bigger than what we just did. We want to keep growing for sure!
Sheila
"If God is for us, who can ever be against us?" Romans 8:31 NLT
Shiela,
This sounds like it was a nightmare to start, but a dream come true in the end. Congrats! I would like to see the plans that you mentioned, if possible. Thanks!
Lenee
www.allstarhouses.com
~Act successful! And you'll draw it to you.~
~Every achievement, big or small, begins in your mind. It starts as a thought.~
Sheila
Congratulations on such awesome deals. Can't even imagine we could do such big deals without much cash investment. Lots of good information on your posts. Would love to hear about your business plans. Thanks for sharing.
Your attitude determines your altitude!
I have been trying to get into commercial for a long while. I am now working in commercial wholesaling, but ultimately want to get units. I'm having so much trouble just financing my SFR investment (we're in the 11month of a 12 month HML that has a balloon in a month with no end in site for the refi). You have done a GREAT feat! This is so awesome! So PROUD of you, and jealllllous!
Way to make it happen, in a really huge way!
That's using your noggin' & getting creative. My goal is to own an apt. complex one day. You're inspiration is awesome ~ keep up the good work!
Closing #1: 46 units, combination of apartments, townhomes, & Duplexes. $500 Earnest Money. PP $1.25 million. Seller carries back $250,000 down payment plus an extra $50K (we got back in form of bank check at closing). Bank finances remainder at 5.75%. Closing costs offset by tax credit. We also got security deposit check of $14K. This was a great landlord, no deferred maintenance, turnkey properties. Cash Flow $5K/month immediately. Easy to raise rents- landlord hadn't ever raised rents more than $10-20. Cashflow potential $8K/month.
Closing #2: 60 Unit Apartment Complex, $2000 Earnest Money. PP $1.25 million. Seller in major financial distress on all properties, pre-foreclosure, GREAT neighborhood, LOT of deferred maintenance. Found an equity partner with farmland equity and used that to finance down payment. They will receive 5% gross rents as long as we own it. No money OOP for them either. Bank financed the remainder AND gave us $900K Operating line for rehab and operating expenses!!! AND we received a low interest rate of 5% since we used farmland for down payment. We live in a farming community. This property is in distress and we have a general contractor already lined up to start rehab next week. We are at 50% occupancy due to the need for rehab. The county commissioner board is also giving us a 2 yr. tax moratorium (NO property taxes- saves us $72K) on our rehab complex and we are negotiating a rate freeze for a minimum of 5 years. This is an eye sore in the best neighborhood in town. Everyone wants it rehabbed and the mayor is on our side too. The bank is also allowing us to pay quarterly interest ONLY payments until rehab is finished. After rehab, we will cash flow around $10K/month. We also have a potential deal with a local college for student housing, which would be a guaranteed cash flow of around $35K/month.
Both properties are in GREAT neighborhoods. We won't buy if it's not. Closing #1 properties were never on the market. We networked through landlord association and initially thought we would try to wholesale this property. Then we became focused on purchasing it ourselves when we realized seller would finance down payment. Closing #2 was much more complicated and we have actually been working on this one for exactly one year with the distressed seller. She received an offer from a big landlord in town that owns the adjacent property. HOWEVER< THIS IS IMPORTANT------FIND OUT WHAT SELLER NEEDS!!!!!! We related to her and cared about her situation. Through our long conversations with her, she revealed a note she had with her parents for $50K that was important to her to get paid off. So, guess what we offer, how about we assume that note? That was all it took. Our offer and that of other potential buyer was very close. This tipped the scales in our favor. That was a hard contract to get signed and took a few weeks. We were also diligently working with the foreclosing bank throughout the process. They wanted it in new hands and we were focused, professional, and had a plan. We spent several weeks preparing a very detailed business plan for both of these properties. The bank was impressed. We have good credit but not a lot of equity or income. We really had to prove ourselves in this whole process. We celebrated when we got each loan approved through the bank's board. We have learned a TON throughout this process that we would love to share. There is so much more but too much to write on here. We encourage questions, and would love to help others through our experience.
We plan to hold these properties long-term and have great cash flow properties to pass onto our children. There were many bumps in the road, and we are not going to lie, we could have given up SEVERAL times. It was not easy at all, but we were diligent and focused on getting them done. All of the credit must go to the LORD. He was faithful in the entire process. We asked for wisdom and guidance and to protect us if any part of it was not in our best interest. This past week has been kind of a blur. We spent most of Tuesday and Wednesday in the bank, attorney's offices, and title company offices. Crazy week but AWESOME results!
My next statement might sound ridiculous: it's often easier to obtain financing for a larger, commercial property.
First, you might consider getting a commercial, blanket loan to buy a commercial property and pay off your HML. Second, another option is to do a commercial wholesale deal that's large enough such that your assignment fee will be enough to pay off the HML. Third, you could equity partner with someone, and have him/her to come up with the amount to pay off the HML. And the list goes on. . . .
I've tried on a few occasions, but I've found it's a little more complicated & in depth as you think. It isn't really based off the value, as it is off of GRI, NOI, CAP rate & all the other fancy numbers as well as location. I've never come across a direct commercial seller ~ it's always been a broker or whoever. Now, I'ld be interested in doing a master lease option. Your ideas are great, dp2! Thank you.
My next statement might sound ridiculous: it's often easier to obtain financing for a larger, commercial property.
First, you might consider getting a commercial, blanket loan to buy a commercial property and pay off your HML. Second, another option is to do a commercial wholesale deal that's large enough such that your assignment fee will be enough to pay off the HML. Third, you could equity partner with someone, and have him/her to come up with the amount to pay off the HML. And the list goes on. . . .
Sheila is right, commercial is only a little bit different from residential. Don't be afraid of a few more zeros!! It just means a bigger paycheck.
RENinja
"Remember, success is a journey, not a destination.
Have faith in your ability."
Bruce Lee
Would like to see the business plan! Again, congrats!
Congratulations! That is very exciting news! Thank you for sharing. I look forward to the posts your next (bigger) projects.
Best of Success,
Take care.
My family is why I do this, for my wife and my 2 boys - Nay, KII and NiK. Without you, my life would be meaningless.
Way to grab the brass ring and hang on! Much more success to you!
Kay
Sheila, you have just totally changed my real estate paradigm! My initial business plan was to acquire numerous rental properties (single family and townhouse) and then trade them up to larger properties (duplex, apartment houses) as time goes by. The ultimate goal is to own million-dollar apartment complexes like yours!
Now I think I should think even bigger and be on the lookout for big apartment complexes. When you think small, you might miss out a lot of great opportunities.
I'm totally inspired today, thanks for jumpstarting my week with such a wonderful story!
Also, I have several questions for you:
1) Why did the landlord for the first deal decide to sell all his properties that are still producing great cash flows?
2) How did you find out about the 2nd deal? Did you just reach out to the seller directly after seeing the building in town?
3) What kind of property management company are you going hire to manage your properties? (especially the apartment complex) How do you decide who to hire to maximize occupancy?
4) What are the property FMV for both deals?
P.S. We would definitely love to study your business plan since it survived the intense scrutiny of various boards. And I feel like it's a very important aspect of the deals that made them work out in the end
Kudos to you and your husband for making your dreams come true!
Real Estate Investor, if you would like the chance to work with me in the US East Coast, send me a PM (Private Message) anytime to see if we are a good fit for each other.
Wishing you abundance,
Ken Siew
Congratultions, am very impressed with what you have accomplished. Look forward to hearing about your future deals.
Cathy B
Follow my progress at:
http://www.deangraziosi.com/real-estate-forums/investing-journals/44397/...
Sheila, thanks for sharing.