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Finding, Negotiating and Acquiring my Riverview Property.
Finding the property:
I managed to secure this property as an "off-market" deal, taking advantage on my previous purchase of the neighboring property (with the pool) located close to the main road, Utica Pike, just about two months earlier. The aerial view provided below shows both of these properties along with their shared parking area. The property closest to Utica Pike was obtained from a family friend who was selling his: 11 bedrooms, 7 full bathrooms, 3 kitchens, 4 spacious living rooms, clubhouse, pool, basketball goal and 3 separate laundry facilities, home (this setup makes it an ideal choice for my Co-Living concept). For more comprehensive insights into the acquisition process of this property, refer to my "HobKnob Co-Living Course" (coming soon).
Around two months after I purchased the pool house, the owner of the Riverview property approached me and told me that he wanted to sell his home. My initial thought was "Absolutely!" However, after a brief moment of thought, it became clear that the property didn't quite meet my Co-Living property criteria with HobKnob, mainly due that at the time it was only a 3 bedroom property (the numbers didn't make sense).
Yet, there was something intriguing about it – a quite large wrap-around balcony on the second floor with breathtaking river views. So, I asked the owner if I could bring in my contractor and property manager to explore the idea of adding more rooms to the balcony to make the deal work. The original setup of the property was 3 bedrooms and 2.5 bathrooms, which fell short of our needs. Thankfully, the seller agreed. Two days later, my property manager, contractor (along with his foreman), and myself paid a visit to the property for a closer look.
Negotiating the purchase price:
The seller initially wanted $350,000 for the property. However, considering my maximum expense allowance per bedroom, this figure didn't align with my financial projections for a property with only three bedrooms. I communicated this to him when he first brought the idea of selling his house to me. It was during this conversation that I asked about his intentions for selling. He explained that he had an opportunity in Florida involving an investment in an RV park and needed to sell his current property quickly. This told me that he was motivated to sell and open to negotiating the price.
He mentioned NOT wanting to involve any real estate agents and also knowing of a lawyer who could handle the paperwork for a fee of only $500. This reinforced that he did not want to list the property on the MLS due to the commissions he would pay, and he wanted a fast transaction without having to do any property improvements. Traditional home buyers typically follow a more conventional financing process, such as FHA or Conventional lending, which can extend the timeline to several months.
After two hours at the property, we came up with a plan to make the financials work. It involved adding five bedrooms to the balcony and installing two full bathrooms in one of the second-floor bedrooms. The master bedroom on the first floor was spacious enough for us to divide into two separate bedrooms and add a new doorway. Additionally, we wanted to add a kitchen to the first floor (fortunately, the property already had the plumbing and electrical rough in to make this happen).
I contacted the seller and offered him $310,000 for the property. I mentioned my ability to have a quick closing and accept the property in "as is" condition. My confidence in the offer's acceptance was high, given the seller's prior mention of the RV park opportunity in Florida and his awareness of my my access to capital (hard money lender) from the purchase of his neighbor's property, the Pool House. To sweeten the deal, I told him that he could keep the tool shed next to the home, as I figured he could sell it for 10k and I was planning to dispose of it to make room for parking anyway. He took my offer and he also agreed to short-term seller financing of $50,000, this helped ensure that I would not have to put down any of my own money into the deal.
(Below, you'll find images of the property when we first took possession)
Acquiring the property:
I had the support of a hard money lender named Jenny, who not only covered the purchase price (with seller financing of $50,000), but also offered funding to cover 100% of the remodeling costs.
I first met Jenny at a networking event hosted by the Kentucky Commercial Real Estate Alliance (KCREA). I was not thinking of getting into the commercial space at the time, but I was an active member of the Kentucky Real Estate Investors Association (KREIA), the residential counterpart to KCREA. It was at a KREIA gathering that I met Olomo, a commercial broker. Olomo invited me to a "Derby Commercial Networking Event" at Churchill Downs, an event that would later prove to be important. While I made numerous connections during the networking event, little did I know that Jenny would become the most significant connection at that event over the next year.
Jenny had been watching my progress on social media ever since our first meeting at the networking event, and she reached out to gain a deeper understanding of my goals and ventures with HobKnob. After a 45-minute conversation, we talked about my recent purchase of the pool house and my goal to acquire the neighboring property overlooking the river. She was very excited for me and offered to help! I had found my first "Hard Money Lender", Jenny.
As part of my deal with Jenny, I received a total sum of $362,844.01 for this RiverView Property venture, through two distinct contracts. The initial contract, was for 12 months and covered the property acquisition, along with legal fees and county recording fees, adding up to approximately $260,600 (taking into consideration the $50,000 seller financing). The second contract, also for 12-months, was for the rehabilitation and holding costs. I had initially estimated the renovation expenses at around $90,000, and Jenny extended our funding to a maximum of $110,000 (I always budget for a 10% buffer over estimated rehab and holding costs). Ultimately, I used $101,947.01 of the $110,000 allotment. (It's worth mentioning that none of my own capital was invested in this project)
Step 2 & 3
Remodel and Furnish the Property
Step 2 will provide insights into how I executed the renovation and furnished the property.
