The Entrepreneur Forum | Startups | Entrepreneurship | Starting a Business | Motivation | Success

GOLD! 22 Years Old: First Apartment Building Acquisition Done

Remove ads while supporting the Unscripted philosophy...become an INSIDER.

G_Alexander

Does it Cash Flow?
FASTLANE INSIDER
Read Millionaire Fastlane
Speedway Pass
Jun 7, 2008
473
3,992
879
After many brief hiatuses I am back; and with good reports.

Many of you may remember my mobile home investment thread from when I was 19 years old. After a couple additional mobile home deals, some miscellaneous arbitrage, and saving; on Monday this week I closed on my first multi-family apartment building.


(little rainy on Tuesday morning)

The building was an REO from Wells Fargo and has 3-units, 2 of which are currently finished:
Unit 1 - 1st floor: 2 Beds, 1 Bath
Unit 2 - 2nd Floor: 3 Beds, 1 Bath
Unit 3 - Garden: Unifinished (Will be 3 Bed, 1 Bath)



The bank really polished this one up to get it sold. Brand new wood floors, 3 separate water heaters all brand new, two new kitchens with new appliances, three separate electrical meters, replaced galvanized pipes with copper piping, new furnace, separate gas meteres, new steel main-beam and supports, and more.

Got in for 70% of the current FMV (~$211,000). Put 3.5% down under FHA lending, seller closing credit of $7,500. Locked in a 3.25% 30-year mortgage.

Deal Details
Cost summary:
$5,000 earnest money
$900 due at closing

Capital Improvements:
Injecting $5,000-$6,000 cash to have top two units fully operational
Future injection of ~$17,000-20,000 to finish basement

Pro Forma garden unit renovation operations:

+Monthly Cash Inflow:
Unit 1 rent: $1,100 - ($550; because I currently occupy one room)
Unit 2 rent: $1,350 w/ parking
Unit 3 rent: $1,200 - (projected)
Laundry: $50 per month
Total: $3,700 (without me)

(-)Monthly Cash Outflows:
Expenses @ 45%: $1,665
Vacancy @ 5%: $185
Total: $1,850

=NOI: $1,850/mo

(-)Debt Servicing:
PI+PMI: $1,106

=Monthly Cash Flow: $744

The building across the street which has similar finishes and layout just sold for $300,000 in March with an unfinished basement. Instant equity has been created. I am currently appealing tax assesment to get tax amount even lower. All in, I will have spent $11,900 to own two operational units, and will likely use a HELOC for the basement reno.

You make your money when you buy, not when you sell.

I need to thank GLC65, RealOG, SteveO, and DRB for the continued inspiration over the years :cheers:

Short term: Finish basement to legal code(~$20,000), full occupancy; live-in gross rent of $3150 (I’m still living here)
Mid-term: Continue working (high paying job I am only doing for two years) and cash-out refinance the building for equity in 2 years or sell depending on market conditions
1+ years: 50 Units in an select overbuilt market and two creatively financed mobile home parks with 40-60 lots each.

Side note: I continue to dabble in domain ownership and have a few website ideas I am tinkering with also.

Stay hungry, stay foolish.

G. Alexander
 

Don't like ads? Remove them while supporting the forum. Subscribe.

Last edited by a moderator:

JasonR

Maverick
EPIC CONTRIBUTOR
Read Millionaire Fastlane
I've Read UNSCRIPTED
Summit Attendee
Speedway Pass
May 29, 2012
2,038
10,569
2,556
Traveling
Wow, great post! I know very little about investing in Real Estate, but I'd really like to dive into this subject when I get more time. Great job, you're very young.

Just curious, why are you only working your high paying job for 2 years? What plans do you have after the job?
 
OP
OP
G_Alexander

G_Alexander

Does it Cash Flow?
FASTLANE INSIDER
Read Millionaire Fastlane
Speedway Pass
Jun 7, 2008
473
3,992
879
Well done, however it seems like a shit ton of work for $750 per month. How much cash do you have tied up in it? 5900 is all?
Yes, just $5,900 right now. Seller credit of $7,500 helped out a lot there. Will have $11,900 tied up after setting up laundry, and getting everything perfect for long term for the two main units.

The goal here is not cash flow. If I sold the property next month, fully leased, it would fetch low $300,000s. I will only have $221,000 in the two units ($11,900 personal cash). That smells like $80,000 in equity to me.

On a downside, if it only sold for $300,000 with basement reno (~20,000) included, there is potential for $59,000 ($300,000 - $241,000) in equity value creation.
 

JAJT

Ha Ha! Business
EPIC CONTRIBUTOR
FASTLANE INSIDER
Read Millionaire Fastlane
I've Read UNSCRIPTED
Summit Attendee
Speedway Pass
Aug 7, 2012
2,778
14,980
2,806
Ontario, Canada
Bravo.

:eusa_clap:
 
OP
OP
G_Alexander

G_Alexander

Does it Cash Flow?
FASTLANE INSIDER
Read Millionaire Fastlane
Speedway Pass
Jun 7, 2008
473
3,992
879
Wow, great post! I know very little about investing in Real Estate, but I'd really like to dive into this subject when I get more time. Great job, you're very young.

Just curious, why are you only working your high paying job for 2 years? What plans do you have after the job?

I have always been entrepreneurial and working for someone else is exactly the opposite direction of the way my heart pulls me. My high paying job made me realize how much I truly hate having no control over my most valuable asset: my time. I knew this would happen going into it, but needed to make the time sacrifice for capital. Also, the job relates highly to the valuation of assets and therefore I look at it as paid schooling/reading. I am not concerned with security; I know deep down that I can create value on my own.

Per the end of my post above, my plans include a larger and more carefully considered multifamily project (hope to make my greatest mistakes on this small first project, and avoid them in the future) and a few mobile home park acquisitions with additional seller financing to renters in the park. I will also hopefully have an operational ecommerce store...but that is currently a back-pocket project. I honestly think deals related to mobile home assets are hidden gold.
 

MJ DeMarco

Administrator
Staff member
EPIC CONTRIBUTOR
FASTLANE INSIDER
Read Millionaire Fastlane
I've Read UNSCRIPTED
Summit Attendee
Speedway Pass
Jul 23, 2007
30,259
109,269
3,751
Fountain Hills, AZ
Great job man, pardon the language, but FN impressive. :)
 

JasonR

Maverick
EPIC CONTRIBUTOR
Read Millionaire Fastlane
I've Read UNSCRIPTED
Summit Attendee
Speedway Pass
May 29, 2012
2,038
10,569
2,556
Traveling
I wasnt advocating keeping your job, just wondering what you planned to do if/when you quit. As it looks like you have some overhead and need to keep a strong paycheck coming. Keep the posts up, they're informative and inspiring!

My first thought was...creating wealth from mobile homes to apartment buildings. Would make for a great story.
 

Steve37

Bronze Contributor
Read Millionaire Fastlane
Sep 4, 2012
164
114
89
Congrats. Nice purchase. At $211k even after your renovation costs you're looking at a 50% cash on cash return. Even though it's only got a cash flow of $750 by the time you add in interest / property tax deductions, depreciation, and income based appreciation you've got a great deal.

Wish I was smart enough to have been buying multifamily when I was your age.
 

Don't like ads? Remove them while supporting the forum. Subscribe.

mayana

Gold Contributor
Read Millionaire Fastlane
Speedway Pass
Apr 26, 2011
982
1,205
389
Georgia, USA
This is GREAT! I like the positive cash flow, the positive return on investment, but most of all, I bet you've learned a million things that will help you in future deals and/or business. Congratulations!!!!!!!!!
 

CTamme

Contributor
Read Millionaire Fastlane
Sep 27, 2012
65
37
56
QC, Iowa
If you are going to manage it yourself you can easily decrease the expenses to 40%. That is great cashflow for 3%. Nice hustle and great execution.
 

Runum

Platinum Contributor
FASTLANE INSIDER
Read Millionaire Fastlane
I've Read UNSCRIPTED
Summit Attendee
Speedway Pass
Aug 8, 2007
6,013
4,610
1,919
DFW
Congrats on the deal.

I did the same thing in 2007. Bought a 3 unit REO. Cashed out in 2010. I have all of my money out of it and I get the monthly cashflow and the appreciation.

Only difference is, you have about a 25 year head start on me.

Good luck with the future acquisitions.
 

Rickson9

Gold Contributor
Speedway Pass
Sep 4, 2010
1,673
1,708
768
Canada
This is a fantastic story! Do you mind me asking how you found this property? Are you working with an agent?
 
OP
OP
G_Alexander

G_Alexander

Does it Cash Flow?
FASTLANE INSIDER
Read Millionaire Fastlane
Speedway Pass
Jun 7, 2008
473
3,992
879
Thank you everyone for the kind words :D

This is a fantastic story! Do you mind me asking how you found this property? Are you working with an agent?
Rickson9,

I found this property through a buyer's broker. I interviewed about 4 or 5 buyer's brokers before picking one that I knew had his interests aligned with mine. He is only 26 years old and has 5 small multi-family properties in the same area himself (invests with his father). We get along great and I have faith in him. I hired him on as my PM because he has been running at 100% occupancy for a while now and is also a family friend.

He knows the neighborhood very well and has a great strategy for pulling high quality tenants from a nearby neighborhood where prices are higher by showing them the benefits of heading up the transportation line a couple extra stops.

We searched for Homepath properties (search homepath on google) which usually give a first-bid benefit to owner-occupiers. Esentially this prevents investors from coming in and scooping up all the good properties from would-be homeowners, because owners who will occupy get the option to bid for the first 8 or first 14 days.
 

Omerta

Bronze Contributor
Read Millionaire Fastlane
Speedway Pass
Oct 21, 2011
616
311
155
fkn great! That's what I'm talking about. My only concern for investing appartment is the tenants, from what I heard they can be a pain in the a$$, I'd rather invest in multifamily homes.
 

The-J

Legendary Contributor
EPIC CONTRIBUTOR
FASTLANE INSIDER
Read Millionaire Fastlane
I've Read UNSCRIPTED
Summit Attendee
Speedway Pass
Aug 28, 2011
3,647
8,697
1,966
Ontario
I absolutely LOVE seeing real progress here. It's like a little fire to warm up my a$$.

Speed+, mostly cuz I thought you were dead
 

Jamillah

Contributor
Read Millionaire Fastlane
Sep 23, 2012
81
52
65
CO
Congratulations, you definitely took action. We need more young people who have the ambition and will to get things done!
 

VanToai

New Contributor
Sep 23, 2012
14
15
43
DC Area
G - congrats on your continued success, and thank you for sharing. Yours is definitely an inspiring story, and the details that paint the process behind the events are fascinating.

I honestly think deals related to mobile home assets are hidden gold.
My main focus is software/mobile, but I love learning about the real estate market (perhaps for future reference). This statement in particular piqued my curiosity. Were there any resources/reading out there that helped you formulate this opinion? Mind sharing?
 

Don't like ads? Remove them while supporting the forum. Subscribe.

OP
OP
G_Alexander

G_Alexander

Does it Cash Flow?
FASTLANE INSIDER
Read Millionaire Fastlane
Speedway Pass
Jun 7, 2008
473
3,992
879
G - congrats on your continued success, and thank you for sharing. Yours is definitely an inspiring story, and the details that paint the process behind the events are fascinating.

Originally Posted by G_Alexander
I honestly think deals related to mobile home assets are hidden gold.
My main focus is software/mobile, but I love learning about the real estate market (perhaps for future reference). This statement in particular piqued my curiosity. Were there any resources/reading out there that helped you formulate this opinion? Mind sharing?
VanToai,

No problem, thank you for the kind words. To answer your question, the one resource that pushed me toward mobile home investments was a book by Lonnie Scruggs called "Deals on Wheels". I read it when I was 19 and decided not to waste any time in my execution.

Successive deals were all gravy from that point on. Personal experience with mobile home assets has shown me that they hold extreme potential for value creation and rest in both a segment and in markets that are typically less competitive (read: not overcrowded with under-sophisticated, over-funded competitors).

You won't get Joe-blow Hedge Fund/Private Equity Fund coming in to compete with you over a mobile home park or mid-sized apartments, but you will compete with them in the foreclosed single-family housing space (they buy 800 homes at a time) and in the mega-sized apartment complex game.
 

danoodle

Freedom Seeker
FASTLANE INSIDER
Summit Attendee
Speedway Pass
Feb 1, 2011
252
292
181
Kansas, toto
Damn boyyyy! Mad props to you! I have been buying houses with only cashflow in mind, but 80k instant equity is sick! May have to consider buying properties for the goal of appreciation to diversify my strategy. Thanks for posting this and will definitely be looking forward to hearing about your next acquisition. :)

Also, I am curious about the financing. You said you saved up quite a bit with the lonnie deals and whatnot, is that money what you used for additional collateral or was the bank willing to just straight up finance it since it is technically owner occupied? I am assuming you have a good credit score.
 

awesom-o

Contributor
Aug 10, 2011
138
68
55
United Kingdom
Amazing achievement G!
I read through your mobile home thread a year or so ago and was majorly impressed/inspired with the action you had taken :)
It's great to see your natural progression into multi family complexes.
I had one quick questions if you wouldn't mind pointing me in the right direction. I've seen the Scuggs book recommended on a couple of RE threads... is the book USA market specific or would it be suitable outside the US?

To your continued success wwinesmiley2.gif
 

oddball

Bronze Contributor
Read Millionaire Fastlane
Speedway Pass
Mar 8, 2011
715
387
172
Austin, TX
Speed+
I am currently looking for a 2-4 unit as well. With my app business, I really haven't had time but I deal with this stuff work work so I can still keep my eye out for properties. Hoping to pick something up within 6 months.
 

Steele Concept

Bronze Contributor
Read Millionaire Fastlane
Sep 3, 2012
199
173
91
Connecticut
Very impressive. I know nothing of real estate, but do know you grabbed that bull by the horns and went at it! Did you go to college? How could you afford such a thing with student loans?

I'm very interested in this.
 
OP
OP
G_Alexander

G_Alexander

Does it Cash Flow?
FASTLANE INSIDER
Read Millionaire Fastlane
Speedway Pass
Jun 7, 2008
473
3,992
879
Also, I am curious about the financing. You said you saved up quite a bit with the lonnie deals and whatnot, is that money what you used for additional collateral or was the bank willing to just straight up finance it since it is technically owner occupied? I am assuming you have a good credit score.
The bank was willing to finance the acquisition due to my full-time employment; no additional collateral was necessary. The FHA loan federally protects the bank in the event of a default. I do have a strong credit score as I have been building it since I was 18.

I had one quick questions if you wouldn't mind pointing me in the right direction. I've seen the Scuggs book recommended on a couple of RE threads... is the book USA market specific or would it be suitable outside the US?
The book is written for the U.S. market. I am not sure how many mobile homes (or similar more affordable home-types) there are in your location, but the concepts in the book can be applied to almost any asset. I would give it a read regardless, it will take you one or two days and is very valuable.


Very impressive. I know nothing of real estate, but do know you grabbed that bull by the horns and went at it! Did you go to college? How could you afford such a thing with student loans?
Yes, I did go to college. I earned scholarships for a significant amount and was fortunate enough to have my parents cover the remainder of my educational expenses. I saved personal money to get the first mobile home deal done. I competed in, and won, entrepreneurial seed funding competitions and saved everything I earned from operations then-on in order to have a substantial cash position for the apartment acquisition.

Thankfully I am not hampered by much student loan debt, and had a very strong credit score and solid income when locking down the financing for this property.

This building is essentially the backbone to my future operations. It is the castle I can work from for free as I pursue my future challenges unhindered by the worry of one major necessity: shelter.
 

Milkanic

Gold Contributor
Read Millionaire Fastlane
I've Read UNSCRIPTED
Summit Attendee
Speedway Pass
Apr 17, 2012
587
1,067
384
36
Madison, WI
BOOM. Congratulations. Is this in Iowa City or Chicago?
 

Create an account or login to comment

You must be a member in order to leave a comment

Create account

Create an account on our community. It's easy!

Log in

Already have an account? Log in here.

Sponsored Offers

  • Sticky
MARKETPLACE Fox's Web Design Guide: Earn $100K this year (Yes, 2020!) and Go Fastlane
It's definitely possible, although it may not be feasible right away. I'm from the U.S. but have...
  • Sticky
FEATURED! Introducing... WEALTH EXPO$ED, A Short Story By MJ DeMarco
Amazing book! Actually I bought it, before I joined the forum and it motivated me to join...
  • Sticky
MARKETPLACE How To Create A 100K-1M+ Sales Funnel
@LynX You know, this is a "Marketplace" Thread. Completely appropriate to offer goods and...
  • Sticky
MARKETPLACE You Are One Call Away From Living Your Dream Life - LightHouse’s Accountability Program ⚡
Dropping a quick note in here to say... if you are on TFL, you are part of an elite group of...
  • Sticky
MARKETPLACE KAK’s “Kill Bigger” Incubation Program- With DAILY personal attention.
I joined @Kak's business incubator in the first week of May. During our daily chats we uncovered...
  • Sticky
MARKETPLACE Lex DeVille's - Advanced Freelance Udemy Courses!
This is your May reminder that you can do this. I'll keep it short. These are the May promos...
  • Sticky
MARKETPLACE Grow Your Business With a Book (An Unorthodox Marketing Strategy That Built One of the Largest...
Thanks! This is a cool idea, actually. I would like to use your experience as I heard that these...


Visit A Forum Sponsor
sponsor

Fastlane Insiders

View the forum AD FREE.
Private, unindexed content
Detailed process/execution threads
Monthly conference calls with doers
Ideas needing execution, more!

Join Fastlane Insiders.

Top Bottom
AdBlock Detected - Please Disable

Yes, ads can be annoying. But please...

...to support the Unscripted/Fastlane mission (and to respect the immense amount of time needed to manage this forum) please DISABLE your ad-block. Thank you.

I've Disabled AdBlock