This investor–seemingly out of the blue–bought 21 units across five separate plex acquisitions (about $5 million acquisitions). This represented growth of 60% in their portfolio, and it kind of all happened at once.
In these acquisitions, this investor also racked up over $3 million of excellent Supercharged Seller Financing–which, if you know anything about my methodology of real estate investing, I’m a BIG fan of.
I’m pleased to share Part 1 of 3 with you here and now.
But perhaps I should first come clean about something important.
The investor? It was ME.
(So I’m going to switch over to the first person now 🙂 )
The First 4 Units
Several years ago, I bought a four-plex from a great couple (with Supercharged Seller Financing of course!).
How did I meet this seller? One of my normal letters—exactly what I teach in my coaching programs. It was a great deal in every way.
The sellers and I stayed in touch as I paid on their loan, getting together for coffee a couple times per year. They owned another four-plex that I REALLY wanted to buy. MUCH much better location than the first one I’d bought from them years ago. Every time we met for coffee, I’d remind them: “Whenever the time comes to sell that property, I’m your guy!” We had essentially agreed years ago that I would be the next owner of the property, we just had to determine the right terms.
In April or so, they gave me a call: the time had finally come. We sat down and began the discussions. I originally proposed $1.2 million, and they asked for $1.4 million—which we agreed to. They wanted $100k down, $1.3 million on a note (Supercharged Seller Financing at 5%) and a ten year term of interest-only payments. So I put the property in contract. We conducted our due diligence, and found a few issues. My lovely sellers are very reasonable people, and so we negotiated credits (not a price reduction) of $35,000, which reduced my cash needed to close by a third. We closed in early July. I ended up roughly $65k out of pocket for a $1.4 million acquisition–less than 5% down.
I felt the units could rent for FAR more than they were—and frankly, they HAD TO, because the rents didn’t otherwise support and justify the purchase price I’d paid. But I knew we could get the income up, and I knew our purchase price had been a reasonable one (even though the financing alone was totally worth the whole deal!). As you may know here in Oregon, it’s expensive and time consuming to get tenants out of units in order to remodel and re-rent. But we proceeded to give the notices we needed, pay the relocation payments, and began remodeling units one at a time. We are now on the third of four units. Units that were previously renting for $1,150-$1,400 are now renting for $2,200 to $2,500.
If you know anything about Supercharged Seller Financing (which I teach my coaching clients in detail), this financing alone was the huge win. BUT, I also got to buy an awesome property in an incredible location in my town…and it’s already worth a lot more than we paid for it.
Up until this point, I felt I was having a pretty slow year.
Turns out I was just getting started…I had NO idea just how busy the following few months were about to get with opportunities coming my way.
I’ll tell you more in the next post.