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REAL ESTATE Investing in Townhomes

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Connor

Connor

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Know it's been a few months, so I thought I would share an update. We are still at 6 units, but we are hopefully about to pick up 2 more here by 8/1. We're going to have to do a bridge loan for 30 days or so, as the banks will only loan up to 75% of the value or purchase price, whichever is less, when doing a portfolio loan. Since we're going to be purchasing these two well below market, we'll have to wait a bit before including them on the portfolio loan with the 3 other units that we have yet to refi as well.

Thought we were going to close on our first 3/2 recently, but the guy ghosted us. We were going to assume his loan, but his ex-wife was listed on the mortgage, and we suspect he couldn't get her to sign off on it.
 

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So definitely been a little frustrating this summer, as we've had a few deals fall through in a row. The last one was especially frustrating, as we've known the people who own the two units for years, but one decided at the last second that he didn't want to sell. Not even 100% sure on the reasoning, but hopefully he'll change his mind and allow us to scoop up those two units.
 
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Closing on townhouse #7 on the 9th. Funny enough, we've tried to purchase this one as a part of a 4 unit portfolio twice, and this unit was the best of the 4 that this guy had, but we're getting it for $5k less than the other 3 sold for. It's not fixed up, and the rent is commensurate with that, but the tenant is month to month, so hopefully they will leave soon and give us the ability to get it to the level of our other units in the neighborhood.

Just goes to show persistence pays off, though of course it would have been nice to pick up all 4 of his units instead of just 1.
 
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Know it's been a while since I've posted an update- not that much exciting, other than having a few move-outs and renovating one of our units before getting it leased up. Prices have mostly gone up to levels that doesn't make sense to buy, though we did just put an offer in on one unit, but it's going to require a significant amount of work even for a townhome.

Good news is that we've built up some nice reserves and should be able to acquire the next townhouse with the money we already have in the bank rather than having to put in additional money. I know it's ridiculous, since we're so fortunate to be able to afford to own 7 units already, but it's frustrating to not be able to keep acquiring deals, especially since we passed on some ones early on that would be awesome deals now. I have to remind myself that we're in this for the long haul and will be able to scoop up a lot more when the market resets.
 

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I have to remind myself that we're in this for the long haul and will be able to scoop up a lot more when the market resets.
Exactly. Keep your head up Connor. It's a marathon, not a sprint.
 
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I keep saying that I know it's been a while since I've posted an update, so I'll have to come up with a new phrase haha. It's been a little crazy at work with all of the Coronavirus turmoil going on. We're still at 7 units- had one tenant move out on 3/31, and we're finishing up the clean-up/reno there. They treated it well, so going to be less than $1k to fix it up, which is great. We've gotten 5 of 6 tenants to pay us for this month, so not too bad considering all that's going on. Think we might get the 6th as well in the next few days (hope I didn't jinx us).

We're likely going to pick up another unit for 5/1. Pricier, but it looks like we'll be able to get it for $10-15k under what others have gone for in that development via a wholesaler. Also, it's funny how things can change quickly- not too long after I was complaining above about not having enough things going on, we uncovered an opportunity for a 12 unit group of townhomes for sale. While we ended up putting in an offer, the owner has put things on hold with all of the uncertainty, but we're going to refinance out our private money from the other 4 units we have to free up the capital to close that deal if it comes back up.

Hope everyone is staying safe out there!
 
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Just acquired townhome #8. As I mentioned above, one of our pricier ones, and it probably won’t cash flow as well as some others. However, it will help our balance sheet, as the ARV will help our equity overall.

We also executed our second refinance, taking our a loan across the last 4 units that we had acquired. Didn’t completely take out all the private money we had out there, but took care of 90% or so.

We want to get to 10 this year at least, and I definitely think that’s achievable.
 

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Just acquired townhome #8. As I mentioned above, one of our pricier ones, and it probably won’t cash flow as well as some others. However, it will help our balance sheet, as the ARV will help our equity overall.

We also executed our second refinance, taking our a loan across the last 4 units that we had acquired. Didn’t completely take out all the private money we had out there, but took care of 90% or so.

We want to get to 10 this year at least, and I definitely think that’s achievable.
Slow and steady wins the race. This virus situation will shake out the RE business some -- depending on how long it lasts...
 

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Great job! Keep buying them whenever you see value. When I started buying rentals, I bought primarily townhouses. They were significantly cheaper than a SFH, but the rents weren't much less. I did learn over time, that the appreciation increases have been less in the TH's(at least in my market), but I was always more focused on cash flow anyways.
 
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Connor

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Great job! Keep buying them whenever you see value. When I started buying rentals, I bought primarily townhouses. They were significantly cheaper than a SFH, but the rents weren't much less. I did learn over time, that the appreciation increases have been less in the TH's(at least in my market), but I was always more focused on cash flow anyways.
Definitely agree that SFRs appreciate more than townhomes, and you're seeing more money flow into the big funds who have bought up thousands of homes (was a WSJ article about it today), so that should continue. However, the institutions don't like dealing with HOAs and that risk, so it should help us still have opportunities going forward from a cash flow standpoint, as the margins get squeezed in SFRs.
 

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