I got a third property under contract on 6/1. As I’ve said before, the market is going nuts right now, with MLS properties going 10% – 20% over asking – sometimes quite a bit more. There are also a few owners who are clearly just testing the market to see what they can get. In the case of my latest property, the owner bought it about four years ago for next to nothing but has done a lot of work – remodel, new roof, new windows, mechanicals – so the place is fairly turn-key. They tested the market and listed it way above what it should sell for, and I’m happy to get it under contract for $40K under asking – which still gives them a healthy return.
Unlike the first two properties where I worked with a normal bank on a conventional mortgage (actually, STILL working as of writing this – what a PITA), I’m exploring private lenders with this property. I suspect the fees and rates will be much higher, but so long as the numbers support it, I’ll favor speed and convenience over my experience with the first bank. I don’t think my poor experience is representative of all banks – I just have run into an underwriter who is fine-tooth combing at a level that doesn’t make sense. The communication has been poor, which has led to mismanaged expectations. And if I were getting a great deal on the first loans, maybe I wouldn’t care as much, but the deal isn’t great – it’s okay (at best) but not great. So, I’m probably not going to work with the first lender again.
This new unit will give me two properties and six units within a few blocks of each other, and I’ll continue to look for deals in the same area to build some additional density. I’ve decided to have someone professional manage the properties for now, which is included in the purchase analysis. That is, even if I were going to manage the properties, I’d pay myself to do it separately from the passive income I’ll get as an investor. For now, I’d rather spend my time finding deals and growing my portfolio than managing the day-to-day operations within the four walls of each unit. Once we scale to a point where there is enough potential revenue for property management, I may take that in-house, but that’ll be down the road. For now, it’s all about finding more deals that’ll produce immediate cash flow.
I’ll write another post about the private lending experience once that irons out. Wish me luck! Once we close on this one, only 91 to go for the first 100 doors!