15 Jul Our Multi-Family Real Estate Offer!
Our NYC house is sold and our buy, fix up, refi, and sell strategy worked! We made a significant profit in just under 5 years. We can finally set out to do what we’ve always wanted to do: take our NYC money and spend it in the midwest. We’re excited to see what we can find in this affordable real estate market.
We just came from Cleveland, OH where the real estate market is red hot. We’re starting in Ohio because we’ve got family and friends in the area, so we’re able to visit with them while checking out the markets our real estate podcasts keep talking about. We didn’t know anything about the neighborhoods in Columbus or even what the overall vibe would be like so we were excited to spend a few days exploring.
We were referred to the Eric Cliffel Team at a Columbus Keller-Williams location. Nick’s still a referral agent for KW in NYC, so we use that connection to find realtors who are investors themselves. Finding like-minded agents who are also investors is important to us no matter what market we’re shopping in. We want them to “get us”. We have an idea regarding what type of properties we want to invest in but we needed to understand what that meant in Columbus.
We want multi-family real estate investments that:
- Meet the 1% rule.
- This means that our monthly gross income is 1% of the purchase price. So, if we’re looking at a property that costs $100,000 we want to make $1,000 a month on rent.
- Each “door” or apartment/home must be under 2,000 square feet.
- We believe that this will help us keep the cost of renovations down and allow us to invest in better quality materials. We also love small spaces and believe our future residents love small spaces too. Less to take care of means more time spent doing whatever it is they love.
- Great Air BnB potential.
- It’s no secret that Nick and I love the Air BnB model. Maybe it’s our history as college RAs or my extensive experience in the service industry, but, regardless, I’m excited for the opportunity for travelers to rest their heads in our unique short-term rentals.
- Great Neighborhood
- Great neighborhoods reduce our investment risk. We focus on finding distressed homes in thriving neighborhoods.
Our first day with our agent, Carrie, in Columbus, OH was eye opening. We connected over the phone a few times before we met. We went over our criteria but, like any other relationship, we had to meet to really “get” each other. We started the morning on the outskirts of downtown Columbus in the Gahanna neighborhood. We looked at a short sale for 110K that needed about 40K worth of work. It is close to the airport so I was wondering if it would be a good corporate Air BnB opportunity.
The downfall to this property is that there aren’t a lot of Air BnBs in this area. Is that because no one has thought of Air BnBing their property in this area or because there is no need? Furthermore, every home, even if it was updated, looked exactly like this house: a brick ranch with attached garage. Nick and I can’t escape the fact that we not only love real estate but we also love houses. They are a huge factor in why we do what we do. So, it was hard for us to fall in love with the location. The street was boring. We weren’t inspired. We kept looking.
Our next stop was a duplex in a Section 8 neighborhood. This particular property wasn’t Section 8 but several other properties nearby and next door were. We’re definitely not against Section 8 housing, but while we get started we believe the conventional route might be the best place to start. There tends to be a lot of turnover in these properties and special considerations that we may not be prepared for yet. The price on this property was 127K and it definitely needs at least 50K worth of improvements. This wasn’t the investment for us.
We saw a few more properties that were in C Class neighborhoods. This means the neighborhoods have mostly 30+-year-old properties and there isn’t a lot of improvement happening. Although the prices were amazing the neighborhoods weren’t.
We needed to regroup.
So at the end of that first day we asked Carrie to stay closer to downtown and shop thriving neighborhoods.
That’s when we saw this house:
This house is a duplex located near German Village. The streets are brick. The homes are extremely well kept with gorgeous landscaping. All of a sudden we were inspired.
The rent potential on this property was just ‘ok’, however. So we kept looking. We checked out all the up and coming and hip neighborhoods, including Grandview Heights.
The moment we grabbed a cup of coffee at a Staufs Coffee Roasters, located on Grandview Avenue, we fell in love with the location. There were plenty of people out and about and it was a weeknight! It reminded us of our old home, Astoria, Queens. We started getting excited for the property that Carrie had lined up for us here.
It was a “curb offer” only listing. This meant there are tenants inside and they weren’t going to arrange to show the apartment each time a buyer was interested. Regardless, we had to see it.
This charming 4plex was listed at 425K as well. It has 4 1 bed/1 bath apartments. We couldn’t go inside but we were loving what we saw on the outside. So much so that we went back a few times to re-examine the property. The location was amazing. Not only were there numerous shops and restaurants within a 5-minute walk, but it also has 4 parking spaces in the back, a Starbucks three houses down, and tons of new luxury high rises going up all around. If the interior needs as much cosmetic love as the exterior needs, we knew we had a winner.
We knew it so much so that we put in an offer. That’s right – we hadn’t seen the inside but the location is so good we didn’t care. We made our offer contingent on an inspection and financing so we would feel more secure.
We didn’t go in at full asking. Our 1% rule worked out with this property, but that’s just the first step. There are a bunch of other numbers that have to check out. We plugged $390K into our calculations and liked our cash flowing outcome with that number, so we decided to give it a shot.
It was declined.
So we figured out what our best offer was. We plugged in a bunch of numbers – up to full asking – and decided $415K was our best offer.
It took the weekend, but on Monday – after we left Columbus, OH to head out towards Columbia City, Indiana – we found out our offer was accepted.
We were/are both excited and scared. We just had the home inspection and it went well. There are a few items we’d like the seller to compensate us for now that we’ve seen the inside. Our biggest hurdle now is financing.
Nick and I are self-employed. Although we experienced a lot of success in NYC last year and up until we moved it’s still not enough to get lender excited about our vision. We’ve got to spend all next week calling lenders and investors to see who can help us secure the property. It’s going to be a bumpy ride – hopefully this road leads us to closing.
Have you ever struggled to find financing for something you knew was a good investment? Any tips for a couple of newbies?