What is going on? YouTube is Matt Faircloth. Welcome, welcome, welcome to our mentorship
Monday program. Like I said, my name is Matt.My company's called the DeRosa Group, and we
are a real estate investment company that also offers off awesome educational stuff
like this YouTube channel. I am grateful that you guys are here, and that you guys are watching.
And I'm grateful to have YouTube that I can put this kind of stuff out here for free for
you guys to check out.
I want to bring on my cohost Justin Fraser. So let's bring on today's guest, who sent
their question into helpme@derosagroup.com. And see what they've got to tell us. Who we
got today?
We have Rob. Hey Rob, what's going on?
I live in New Hampshire, so I'm an out of state owner. And so I do have several questions
about the best way to move forward in getting more properties. And I would like to pull
some of those types of questions to you.
Okay. I got you. How many units of the two multis?
The first unit I have is six family. And the second one is a four family. Now the six family
is just about renovated. I already have tenants and everything. The second one, which is the
fourth family needs to be renovated. The property is basically right next to each other.
Oh, no way. Justin come on in. Justin come on in. Rob, is there anything else on that
block? Like where they're at?
I mean, there's other multifamily. Well, those other family houses. I don't know if they
single. There could be a few multis. Is right down the street from the college. But what
happened to me in this situation was that when I closed last year, the college went
under. And so it kind of just-
I would not be investing on student on income from colleges anytime soon.
Okay.
Because the collegiate market is about to completely change. We're not investing on
that right now, but we got a deal in North Carolina we're doing. It's right near Wakeforest
University. A lot of our tenants or either in support structures from that, but we're
not budgeting on that. We're looking at other means. And I'm not... Wakeforest isn't going
anywhere, but they're going to change. They're going to change their model up, you know.
And that just like you got going on up there. So tell me, your six fam, your four fam. How
did you finance those?
Actually, I did it, I guess the traditional way I put down 20% for the six family. And
it was funny when I was leaving the property, the first one, and I seen the next property,
it was off the auction. So I got involved with the auction and I ended up winning. So
that's how I-
You couldn't help yourself, right? There you go.
Yeah, I couldn't help myself.
Of course.
What how'd you finance the four?
I have financing, but I did put down the 20% for that one also.
Okay. It was at an auction though, right?
It was.
Okay. Was it occupied when you bought it?
That is correct.
Was it occupied when you bought it?
No.
Okay.
The four family wasn't occupied at all.
All right.
The six family, I had several tenants in there.
All right. You've probably added a value. First and foremost, right. You've added a
value to where you could keep doing like a Burr strategy. Buy the properties, renovate
them, rent them out, refinance them. Right. So, what I would do, first and foremost, I
would do a package refi on the sixth and the four together.
If you go to a bank and say, Hey, listen, I got 10 units. That 10 unit apartment building.
We each got 10 units sitting right next to each other, you know? Right. So I would try
and get a low debt, high leverage refi. It's a lock rates for at least five years, maybe
10 years. With the bank go to the bank that already has the six family. Right. You go
to that lender and do a... They're not, they won't ding you on prepayment penalties for
refying if you keep it with them. Right. And you're rolling more into that loan.
So, I'd do a package of refi on that, and especially cause your value in the four families
probably gone up. Which means the value on your six families, probably going up to. Because
you've raising income, you know, and whatnot on those properties. Okay. That's the first
and foremost move I would do.
You said you want to buy more deals. You want to buy more properties. Right? That was your
question. Okay. Well, I mean, I hate to be like this, but just, you know, in my book
I talk about how to find people out of your own network. Now you've built the track record.
You've got a reasonable amount of deals in the pipeline. 10 units is, you know, that's
impressive. And that, so I would use that track record you got to maybe have people
come in and be private lenders to you. And to loan you money to buy dilapidated property.
Fix them up, rent them out, refinance it, return that private capital, and then drop
it back in and do it again.
So that would be the steps. What do you think about that Justin?
Use any bit of success that you've had can translate to the next bit of success. And
so that, you're doing actually what I did, which was I started with 20% down on my first
rental property. And then I was out of money, and I went and I found a partner who had some
money. After that, he had enough for one, and then we started doing private money, and
we used the success.
You have success, you have 10 units that you can build on and say, look, I'm doing this.
I know how to run the numbers. I know how to find the deals. And guess what? I can give
you something of value, right? I have something of value, which is opportunity. And I can
give you a great return on your money. And here's how I know it's going to work, because
I'm doing it on these 10 units over here. And so you can start to build that.
So just because you only have two properties, no, you have 10 units. That's a big deal.
And build on that, build on that success. Tell that story though, because how you talk
about that story will impact how people see you, and see you as a potential place where
they can invest their money.
Okay. That makes sense.
So, and Rob, there's a video on my YouTube channel about how I bought a couple of four
families. And then I kept buying for families down the block to where I assembled it into
20 units. And I sold it to an apartment building buyer who was buying based on cap rate. And
they bought it for a good bit more than what I paid for them, because I packaged it up
as an apartment building deal. Because there's 20 units all in the same strip. Right.
Okay. Okay.
Yeah.
So one issue that I did [crosstalk 00:06:27].
... apartment complex.
Okay. So, one issue that I am facing with the second property was that I wasn't going
to get a loan on it. However, the bank required that the plumbing and electric to work, and
it was in pretty bad shape. So it wasn't working. So it was the catch 22 where they wouldn't
give me the loan, because the electrical wasn't working or the plumbings working. So I've
been kind of a little stuck right there, and I wanted to know how do I get past that? I
mean, I thought about private money, but I'm just-
What's it working now?
... that's the best way to go. It's not working right now.
Is it working now?
No.
Oh, I thought you said you were occupied. Okay. Well-
There's six families occupied.
Oh, okay. I'm sorry. I misunderstood. How much more money do you... But you did a bank
loan on the four fam. How much more money do you need to renovate it?
That's a good question. I have been talking to several plumbers in the area. My best guess
it would be any maybe where to 20 or 30,000 to do the whole thing over correctly.
Is the bank willing to kick in anything on reno capital? I go to that. Is the bank willing
to lend you any reno money?
That's something that I'll have to look into. I am not sure.
I would ask him that. So I misunderstood. You need reno money now to get the four family
done. I would either refi the six family, pull some cash out and dump it into the four
family. I would do that as like probably easiest option. I would go into your own pocket, if
you got it, and dump it in. You could go down and dirty. If you got reasonable credit you
can get a couple of low interest or no interest credit cards, right. And go and get like two
or three, $10,000 limit credit cards. Take the cash out, put the cash on the property,
get it fixed up. Then refinance the property and pay those cards off inside 18 months.
Because it's typically an 18 months, 0% interest period. Right?
You could also go to a bank and ask for something called a signature loan, which is if you've
got good enough credit. They'll typically give you 50 grand on a line of credit. It
just based on your say, just like a loan with your signature as the guarantor.
Create a business plan, and it doesn't have to be something fancy. But if I put 30,000
in, here's what I'm putting it into. Bathroom, whatever, right? You're going to list out
everything you're going to do and what it's going to cost. But by doing this work, the
property now is going to be worth, why? It's either, you know, like a flip or something
and you're improving the value or I'm going to be able to rent it. And then we can show
whether it's going to rent for, and what the new value of the property is going to be based
on the cap rate. And then you could possibly get a private loan from someone.
Let's say, you need that 30,000 and you say, Hey Justin, I need $30,000. I'm going to say,
well, okay, what are you going to do with it? And how do I know I'm going to get my
money back? You have to build that case. So show me what you're going to do with it. Show
me that the property is going to be worth X amount more afterwards, and that you can
sustain the rate that you're going to pay me. Eight, 10, 12%, whatever you're going
to pay me in my interest payments. And then that you're going to be able to have enough
cushion on the out sale that you can refinance and pay me back. And that you're not going
to be stuck having to pay me. That this is really just a short term thing that you can
get me out in, you know, six to 12 months.
Okay. Okay.
Yeah.
So, those are your options I think. So I think that get this four family done, that's your
meat. You got law, you get short term longterm goal, right? Your short term goal is get this
four family done. Get it refing. And then take the longterm advice that Justin and I
gave you in the beginning, which is a use those two properties as your track record
piece to go and talk to more investors about maybe giving you private loans. So you can
scale up and get up from there.
But don't make the mistake that I did when I first got going, was getting too big, too
fast. Don't go buying more property right now. Don't do that. Finish that four. Get
that four unit done. Get it leased, then you can refinance it. And then you can go and
buy, you know, buy to buy two more, you know, and then maybe make, turn two into four. Okay.
Of properties I mean, door. Not units, you know, properties. And before you know it,
you might have seven or eight of them right on that same block.
But even if you drive it out of there next week and you see another auction property,
man, don't do it. You know.
Okay.
Get that four done and that, because you could end up digging yourself a bigger hole to climb
out of and losing money on all on everything if you don't just get the four finished. Because
you view that for family as like a hot potato right now, right? It's costing you money to
hold it. It's not making anything. Get it up, get it turned around, get it finished.
Find that 30 g's to get the plumbing and electrical done. We gave you a few options here on how
to do that, but put the pedal down on getting that work finished, and then you can take
it, then you can level up. But if you get that done impeccably, and fast, the faster
you'll level up and be at 20, 30 units. Okay.
Okay.
All right?
Yes.
Rob, I expect to see you posted on DeRosa's insiders, man. I'd like to see you contributing
to the community, letting us know how you do.
Thank you, Justin. Thank you, Rob. For joining us. Come see us on insiders or email us @helpmeatderosagroup.com
to come here and be a part of the show. Let's do it together. Justin. Ready? Have a great
proper week.
Have a great proper week.