Deal Deep Dive: 3029 Garfield AvenueJune 7, 2021 by Paul Begich
I’m a big believer that where there’s a will, there’s a way!
Emily and I put it out to the universe at the beginning of 2021 to purchase TWENTY-FIVE apartment units by the end of the year. Crazy goal…? Oh hell, yes!
When we put this goal out there we most certainly did not have the money to acquire $4 million dollars worth of real estate (roughly the value of 25 units here in Minneapolis) and we most certainly did not have a plan to get there.
Regardless, we put it out to the universe! And we wholeheartedly believed, “where there’s a will, there’s a way.”
This brings us to April of 2021 – four months into our quest of reaching 25 units.
We’re proud and excited to announce that with the acquisition of 3029 Garfield we’ve brought the apartment unit count to TEN!
Below, I wanted to take a minute to do a deep dive and share with you what this deal looks like, the business plan for the property, and how YOU too can step into real estate investing with little money out of pocket (or even a plan in place!).
We closed on April 15th, 2021 on 3029 Garfield Avenue. It’s a six-unit building just a block off the busy Uptown intersection of Lyndale and Lake.
The property was purchased off-market and came to Emily and I through the cold calling and direct mail efforts.
We purchased the property for $810,000 with $0 out of pocket. Wait… how the heck is that possible?!?!
We used something called the Contract for Deed. The Seller owned the property outright with no mortgage on the property – he’d owned it for over twenty years!
The Seller agreed to “carry” 90% of the $810,000 purchase price at a set monthly interest rate to be paid in interest only payments for the next ten years – with a prepayment penalty for any balloon payment occurring within the first three years.
We funded the remaining 10% from a private equity individual – again at a set monthly interest payment paid in interest only payments but with a three year payoff on the $81,000 investment.
Confused yet? I know this can get heady! If you ever want to chat specifics on real estate investing you can schedule time directly with me here: https://meetings.hubspot.com/paul314/chat-w-paul.
Our minds were blown! Not only did we buy a six-unit apartment in one of the best areas of MPLS for rentals but we did it with $0 out of pocket! Meaning, once the property is renovated, stabilized, and refinanced we’ll have zero dollars into the deal and our monthly cash on cash return will be infinite!
The niche we’ve found that works great for the above model is the mom and pop apartment owner that owns a 5 – 20 unit apartment building but is sick of managing. They’ve owned it for a number of years so their level of equity in the property is extremely high. But they don’t necessarily want to sell because their capital gains burden will be extremely high. The solution… the Contract for Deed or Seller Financing.
The business plan over the next twelve months will be relatively straight forward at 3029 Garfield. Stabilize the tenant base, renovate where/when necessary, and bring the property’s income in-line with market value.
Once the above has been completed, we’ll be able to refinance the property into longer term debt and pay off the private equity sponsor and the seller financed portion of the purchase price.
I share all of the above for a couple reasons – 1) to give you an update with where Emily and I are at on our journey towards financial independence. But also, 2) to show YOU that you DON’T need a bunch of cash to make a real estate investment happen. Or even a plan in place to acquire your next (or first!) property! The universe has a funny way of making things happen when we tell it what we’re hoping to achieve – this property being a case in point! My question to YOU, what are YOU hoping to achieve over the next six to twelve months? Please, please, please, tell the universe and watch your dreams become a reality!
As always, feel free to connect with anytime you want to chat real estate or multi-family investing: https://meetings.hubspot.com/paul314/chat-w-paul.
Paul Begich, Urban Realtor