Transcript For “From Flipping Cars to Own 40+ Multifamily with Axel Ragnarsson | The Real Estate Investing Club #31”
Unknown Speaker 0:02
Hello and welcome to another
Gabriel Petersen 0:03
episode of The Real Estate Investing club. Place investors go to learn tips, tricks and stories from other investors in the field. If you feel we provide value to you go ahead and hit that thumbs up, share whatever it may be. And if you’d like for us to cover a specific topic, let us know in the comments or reach out to us on our website. Today we have a very special guest so buckle up and grab your pen and paper and enjoy the ride.
Oh right, we are live Axel, thank you for joining us today. How you doing?
Axel Ragnarsson 0:38
I’m doing great. Thanks for having me. I’m really excited to chat about some real estate here. Love it
Gabriel Petersen 0:44
to get us started want to go ahead and tell everybody who you are, where you’re from and how you got started in real estate in the first place.
Axel Ragnarsson 0:50
Absolutely. So my backstory you know I’ll try and make it quick here but it’s it’s pretty similar to you know, a lot of people that get into real estate right I’ve been been caught on Caught entrepreneur forever sold anything I could get my hands on from, you know Middle School up until now so that’s that’s the overall background and the way I found real estate specifically was in high school and and in through first couple years of college I would actually buy and sell used cars on Craigslist. And so that was my nice little side hustle. That’s how I was making money and, you know, trying to stay away from an office on the summers between school so
Gabriel Petersen 1:26
ironically, that’s how my my partner right now got started in buying and selling used cars so didn’t mean to jump in, keep going.
Axel Ragnarsson 1:32
Now that’s great. I mean, it’s a solid business.
And so when I was doing that, I was like, Alright, what can I buy and sell that’s a little bit bigger than this. And, you know, where’s the next step so to speak? So I started watching a you know, HGTV in my spare time was watching on the house flipping shows and I was like, Alright, you know, that sounds like a pretty good next step. A little bit, you know, more expensive than cars make some more money. So I went out and got my real estate license, you know, not that you need to flip houses, but that was like, Hey, you know, I’m 19, I might as well get this. It’s cheap and easy to do. And I was living in New Hampshire at the time, which is one of the easiest states to get your real estate license. And so I was like, might as well get it. So got that and and then, you know, the next thing I knew I was doing all this research online trying to figure out how to flip houses and I came across rental property investing, and, you know, the idea of buying a rental property, and, you know, just receiving the cash on a monthly basis kind of in perpetuity. You know, that really intrigued me. So I was like that, that seems like a better business model than flipping houses, which, you know, became to realize the research is really just a job. And, you know, I said in the other part about flipping houses, too, that it concerned me was it’s, it’s significantly higher risk than buying a rental property, just in terms of the financing you need to use, you know, typically how many rented out the scope of the renovations is higher, and there’s just, you know, much more ways in which you can go wrong throughout that process. So I was like, let me get into, you know, buy a multifamily property, something small and that’s it. Get into real estate. And, you know, a couple years after that when I was doing all this research took a little bit but um, I bought a three unit property is my first deal. And I use private financing to do that and that was in college at the time. And that’s kind of what Kickstarter did. And that was three four years ago and and now I own just over 40 units of multifamily property that’s pretty much entirely financed initially with private money using the burst strategy and, and that number has been fluctuating in the last couple of years as I sell properties and try and get ready for the next step in my career, which is ideally, you know, buying these larger 50 plus unit multifamily properties. So that’s kind of where I’m at now.
Gabriel Petersen 3:37
Awesome. I love it. That is a great trajectory. So just to kind of recap real quick you started sounds like in high school, you were flipping cars you just bought and sold cars, which is very similar to buying and selling houses except for the risk is more and the reward is more on the House side. So you started looking into that. Did you actually flip a house or did you were you turned off by the by the risk risk factor there.
Axel Ragnarsson 4:01
So I have flipped houses, and it hasn’t really been a conscious thing that I’ve done, it’s more or less than a deal, you know, kind of comes your way when you’re when you’re just you know, in the business and everyone knows what you’re doing. And sometimes deals just come to you that say, hey, this could work as a flip. So I flipped probably 1015 houses the last three years. So, you know, not a not a very large number. It’s maybe been three, four or five a year. You know, this last year, I did a little bit more, but it’s certainly not my focus, you know, it’s something that happens and if an opportunity comes up great. And something that I’ve done, too, is if I, you know, even small, multi families, you know, buy them with the intention of holding them long term, but maybe, you know, the return on equity isn’t there once I go to refinance, or the cash flow isn’t good enough to justify holding on to it and the actual, you know, selling it and recapturing some of that equity makes more sense. So I flipped you know, some two three unit buildings that I originally intended to hold on to so it’s kind of been an accidental flip. So but outside of that, no, I haven’t, you know, consciously went out there and you know marketed to single family homeowners or anything like that.
Gabriel Petersen 5:03
gotcha gotcha so awesome so you got you got started in cars. After cars you wanted to move on to houses you looked into flipping wasn’t your bread and butter and you found rentals which is in my standard the gold in my opinion, the gold standard of being in real estate is having rentals. I love having them too. And then you went on sounds like you just jumped right into multifamily started with a triplex which is fantastic. And since then you’ve been just constantly growing over the past three or four years. And you’re up to 40 units now it sounds like
Axel Ragnarsson 5:38
yeah, so 44 right now, you know, there was a peak of around it was like low 60s I had 60 something units. This was about last year. And then you know, I started to I started to overextend myself a little bit and I was you know, I was nervous about how many projects I had going on at a time with with private money. And, you know, I decided to scale it back. So I sold a couple of buildings and started You know, scaling down the portfolio, and this is like late 2019. So, I mean, we’re talking six to nine months ago here. And it worked out, you know, I just, you know, COVID happened, right? And next thing you know, there’s, you know, luckily, I haven’t had tenants, you know, not a large percentage of tenants, you know, not paying rent, but if that were, if I was kind of operating the way I was where I was taking on a lot of projects and stretching myself a little thin, that would have been a pretty stressful few months, you know, the last few months so you know, I caught myself getting a little ahead of myself and getting a little out over my skis. So I wanted to turn it back. So that’s, that’s where I’m at now, though, is I believe 44 units is what the portfolio is at.
Gabriel Petersen 6:38
Gotcha. And it sounds like your your overall strategy is the bur method by can never remember all the hours by rehab, refinance, rent out repeat, is that right? There’s four R’s something like Yeah, yeah,
Axel Ragnarsson 6:50
it’s a buy, buy rehab, rent, refinance, repeat, I know it’s like, you know, you typically forget you know, usually say the words just the overall idea that
Gabriel Petersen 7:00
That’s great. So sounds like you’re also focused on small multifamily. So not large, yet, at least you may be going there in the future. So I love it, you’ve had that you’ve had a lot of great experience, we really want to, you know, get into the bread and butter of you know, how it operates how you got here. So kind of start out and tell us first, how you actually go about finding your properties. I mean, real estate, it’s a process. And at the very beginning of that process, you got to actually find these properties. So how do you go about sourcing them? Do you do digital marketing? Do you send out letters? Do you just work with brokers? How do you do that?
Axel Ragnarsson 7:37
Sure. So it’s really, I would say three or four main areas and it depends on what you you know, what strategies you lump into, you know, a segment of that, but it’s really just a combination between relationships and marketing. And by marketing, I mean, you know, I do very little direct mail. Maybe I have and I’ll take a step back to my market that I buy in is a city in Europe. It’s called Manchester and you know, populations just over 100,000 people. And, you know, that’s not a very large market, right. So if I were to run a list of all the four to 25 unit properties isn’t as an arbitrary number, you know, I’ve done this right, with very little kind of filters on it, you know, maybe just not having been sold in the last three years. You know, that list is maybe 500 Records. So, you know, there’s just not that many people that own the types of properties I’m looking to buy in that market. You know, which is a reason I’m looking to go out of state now, because I’ve kind of tapped it out. And that’s a whole nother topic. But so I’ve done very little direct mail, maybe I’ll send a couple hundred letters, you know, quarterly, to some owners, something I need to be more consistent with, but that has generated some deals, and it’s worked pretty well. And it’s multifaceted in how well it works and that it does, you know, sometimes bring a deal to the table, but it also just puts you in front of a lot of investors in that market. And you know, the interesting thing about doing direct mail to mobile Do family owners, when you’re trying to grow a portfolio is oftentimes you’ll hit an owner that owns, you know, the building that you you know, pulled the record for so to speak, as well as five or six other buildings in the same market. And, you know, a lot of the people that I bought property from I bought multiple properties from and which has been, which has been pretty cute. So that’s one element is direct mail. And then the other is texting email prospecting, which is relatively newer for me. So I’ll find the owner, you know, I’ll do some internet research here to find their email address, you know, kind of troll through LinkedIn or you know, do a Google search or look at their Facebook or whatever, you know, there’s a number of ways to grab someone’s email. And I’ll just send them an email asking if they’re interested in selling. And then the same thing with with text prospecting, I’ll reach out via text, you know, skip trace the records and get their phone number. Email has been pretty good text is text is like a coin flip. Right? That’s I’m pretty new in that so I shouldn’t say I have definitive results but email works pretty well. And then the other is really just being conscious about about building relationships with folks who are in front of people that own you know, multifamily property. You know, and I could, I could talk about this for a while, but this is really how I find most of my deals. And it’s funny, right? Because when you’re doing single family homes, whether it’s rentals or flipping, you know, if your seller is typically the seller of a single family home, you can reach those folks a lot easier with marketing. As you know, the bigger the properties go, the more relationships become important in the lead generation process, right. So I’m like, down in this four to 10 unit space, you know, so it’s a combination of marketing and relationships will bring you enough deals to keep you busy, you know, as you go larger, you go 50 6070 Plus, you know, that almost entirely becomes relationship based business rather than, you know, marketing based. So I’ve struck this balance between using marketing and building relationships and by relationships, I mean, building relationships with investors and just you know, getting coffee with folks that own property and really just reminding them on a, you know, on a consistent basis that I’m looking to buy so When when they’re looking to sell and maybe they know someone who’s looking to sell you know, they call me building relationships with property managers if they have an owner that’s looking to sell it, I’d love to be someone they call you know, contractors lenders, you know, just folks that are working with people in the business a lot in different capacities. constantly reminding them that you’re looking to buy is really key so so that’s that’s probably gotten me like half my business is just the relationships and you know without going too deep into this you know, one quick story on how I found I think it was nine units as a couple years ago is three three unit buildings. And it was this guy that did painting for me at the time you know, we haven’t done business in a while you know, he moved but nevertheless I wish he didn’t because he was finding me deals but uh, but he was just like he was painting the the units of a ton of investors properties in the area. And I just say Hey, man, if you know you’re painting the unit and you got an you know, an older seller who’s maybe looking like he’s, you know, talking like he wants to get out of the business, give him my phone number. He did that. And I and I found multiple properties through that relationship. So it’s funny where it comes from, right? And it’s, you know, so for me, you know, long to make this long answer a little bit shorter, it’s been a few strategic marketing channels, you know, mainly email texts and direct mail and then the other half really has just been through, you know, building conscious relationships, the folks that are in the business.
Gabriel Petersen 12:23
I love it. That’s a that’s great. So it sounds like it’s kind of 5050 relationships and actual active marketing. And in the on the active side, you do letters, email and text. And that’s strictly to multifamily owners, sub 10 units.
Axel Ragnarsson 12:39
Exactly. So, you know, the active marketing that I go out there and you know, pay for put time into, you know, the channels that you just mentioned, a really, it’s for four to 10 unit properties is really where I’m doing it. And there is still success there. Like, you know, like I was saying where a lot of those deals still come through relationships, especially in a smaller market. Like, when I’m in Manchester where there’s just not that many, there’s just not that much inventory of those properties, you know, you can pull a record of all of them, and maybe it’s 500 to 1000 names, and actual addresses, depending on how you filter it. So it’s, you know, when it’s that small of a, of a pool, you know, relationships are going to be really important. Whereas if you’re, you know, you mentioned you’re in Seattle, right, I’m assuming that you will probably find a little bit more success marketing to those owners in Seattle, because there’s just a much larger pool to work with. So So for me, I’ve had to strike a balance between the two. And, you know, other things that I’m looking to do in the future, you know, maybe cold calling, or, or some kind of, you know, content marketing with some kind of paid traffic piece to it. You know, I’m personally just not convinced that that will work really well for those types of sellers. But it’s something that I’m looking, you know, looking into, but but that, you know, those channels have kept me busy enough and give me enough deals to, you know, to kind of chew on so, so it’s been good.
Gabriel Petersen 13:57
Yeah, that’s great. And I mean, that One of the main reasons that I started this podcast is to network with other investors and to remind people that we do buy multifamily and mobile home parks. So if you don’t want to reach out to me, but Okay, so letters, emails and texts. And it sounds like you don’t do any digital, which seems to be a pretty popular thing these days. But I guess if you’re only focused on one market, one smaller market, it would be less effective. Because I mean, there’s just as many people there so great. So you that’s how you find your properties. You reach out to people, you network with other investors. You do a little bit of active marketing, once you find this property, actually, before that, once you’ve identified the property, how do you go about deciding whether it’s the property that you want to buy, you go on cap rate, do you go on cash flow? What are you looking for when you’re actually buying these properties?
Axel Ragnarsson 14:52
Sure. So I use two metrics to really quickly evaluate a property and you know, underwrite it, so to speak and 10 minutes or less, and I in my market price per unit is a pretty consistent metric to use to quickly just see if a property’s gonna, you know, be worth pursuing or not. And then I can quickly do a cap rate calculation. So for me, you know, let’s say that I got a call from a guy that owns a six unit property, you know, 62 properties in my market are typically selling for, you know, if they were to go on the MLS and they were stabilized and everything was, you know, all the capex was taken care of the rents are at market everything looks great to like a retail buyer. You know, typically between 80 and 100 you know, 105 grand a unit is the range depending on like bedroom count and what the income is pretty so. So again, that’s pretty cheap. Yeah, it is pretty cheap. It’s funny, right? You know, you live in Seattle, I live outside of Boston, right? That seems insane to us. But, um, but that’s typically where those where those properties sell for, you know, and if they’re 80 grand, you know, they’re probably one bedroom units with lower rents. And if they’re 105, they probably three bedroom units with higher rents. So, you know, I know when I’m buying, Okay, I gotta be between 60 and 80 k unit when I buy, maybe I put 567 grand in a unit, and then I, you know, I buy a building at 60 k unit put seven grand and, you know, I’m at 67 k unit and then it you know, once you get to refinance, it’ll praise it at 85 grand a unit, right? So that’s how I look at things, you know, if I’m, if I’m gonna look at a deal quickly. And then, you know, it’s simply it’s similar to looking at a single family house, they might be looking to flip, right, you take what the after repair value is, and then you just subtract your repairs, you subtract how much money you want to make, and there’s your offer price. So that’s pretty much what I do with those. And if I want to look at it a little bit further, then I can look at it on a cap rate basis. So, you know, I’ll take what I believe the stabilized rents would be, I’ll just divide it by two, which, you know, is a 50% operating expense ratio, which is a pretty safe number in my mind. And then I’ll get the noi and then I’ll just divide it by what cap rates I’ve been getting in that marketplace. So in my market, you know, depending on the street in the neighborhood, it’s anywhere from a seven and a half cap to a nine cap if you’re in a tougher neighborhood. So I say, you know, this, this market is in a cap, you know, the market rents on a yearly basis, or 100, Grand 50 grand is going to be my noi divide that by the cap, and that’s what I would guess, you know, my offer price should be roughly around because I know that when it appraises appraisers are typically to use a 35 or 40% expense ratio on my market. So that difference, I’ll know, I’ll have some buffer there. And, and that’ll get me in at, you know, 80 80% of market value somewhere in that range. That’s like, if I want to look at it in like 10 minutes, right? I can I can do those calculations, and then I’d know hey, you know, it’s telling me that I can pay 400 grand for this property, but this guy wants 600 it’s probably not gonna be worth my time to give them a call and really just even pursue this. And then if you know there’s if those numbers are close or Alright, then we’ll you know, go in further and actually get expenses and really look at the rents and see what they are and, you know further hone that down.
Gabriel Petersen 18:09
I like it, there’s a, there’s a lot of things that jumped out to me actually. So for one, it sounds like you use 50% operating expense ratio, we do 40. But 50 sounds more safe. And so you use 50% off decks, and then you try to buy at a cap rate at around eight to 9%. It sounds.
Axel Ragnarsson 18:28
Yeah, exactly. Well, and good. And I forgot to mention there too, I’ll just jump in real quick. So let’s say you know, it’s in a neighborhood, I think the cap rate is eight, you know, that’s an appraiser would give it that’s what a retail buyer would pay. You know, when I do my analysis, maybe I’ll do an eight and a half or a nine cap and there’s an extra little buffer there. And that really ensures that I’m getting in at below market value and that there’s going to be meat on the bone when I add the value and bring everything up to up to a stabilized level.
Gabriel Petersen 18:54
Absolutely. You have to you have to build in your own safety margins per se. When you’re looking properties.
Unknown Speaker 19:03
Okay, that’s that’s,
Gabriel Petersen 19:03
uh, that’s really interesting. So you use cap rate and rental values. How do you go about actually finding the comps for rents? Do you use rental meter? Do you just pull up Zillow kind of do a spot check?
Axel Ragnarsson 19:19
So it’s it’s funny, right? It’s like, I can’t even remember this point. Since I’ve been in such a small market for so long. You just these are the rents right? But it’s but but it’s interesting because I’m, now I’m trying to move out of state and, you know, because I can’t stay busy up in such a small market there. So I’m like having this problem right now. And the way I’m doing it currently is I’m using rent ometer. I use Craigslist. And what I do with Craigslist is filter down based on the same bedroom count. And I’ll just go to the map and I’ll, I’ll try and narrow it right into the address where I’m looking. And then I’ll ask for referrals for like, you know, property managers in the area. You know, in my current market, I asked my property manager if I’m unsure about what rents I can get for a unit I say, you know, are you managing buildings on the street or in this area? You know, oftentimes, you know, they manage a lot of buildings, oftentimes, they’ll be like, yeah, we’re managing, you know, one, two blocks down, they’re getting 1200 for their two bedroom, you know, you don’t have a dishwasher and your units, you probably get 1100 you know, so that’s the other way I lean on my property manager. But when you’re starting out, obviously, you don’t want to bug you know, your property manager, especially if you haven’t done any business with them. They’re just gonna get annoyed. So, you know, I would rely heavily on on web research, right? I use so rent ometer is great. I do rely on that. I do find that their that their rents seem to be high. Yeah. In every market, I look, that’s the case and I sometimes I’ll you know, for just so that I can see what it says about my my home market, you know, Manchester, right, I’ll go look at what it says. You know, put in one of my properties, what I’m getting for rent, and I’ll see what it says and it’s like your rents extremely low, and I’m like, No, I know that’s market rent for for my building, so you know, so I’d be careful with rent. I’m going to play it towards the The lower end of that of that range and you’ll probably be safe and then cross check it with other folks in the market and, you know, maybe Craigslist or hot pads or Zillow, depending on what site
Gabriel Petersen 21:10
has a lot of properties in that market. It’s funny you said that because I’ve actually emailed rent ometer and I asked him like, Hey, can you guys reduce your prices by just 10% even though you’re a little bit high for what in I mean, we we market nationally, so we get properties from all over the place and I’m never I always double check rent ominous numbers, and I’ve never found it to be 100% accurate, though, it does give you a good range. And so if you veer towards the back end of that range, it’ll it’ll be safer that way. So
Axel Ragnarsson 21:37
yeah, and I think another thing too, is rent ometer is and I shouldn’t say this because I don’t know where they’re pulling their numbers from. But it seems like they pull it from what a lot of the asking prices for rent are in the area as well as you know, maybe what things are actually leased at. You know, it’d be similar if you’re pulling you know, comps from Zillow, and they’re using what the asking prices of all the nearby prices. are no that’s not what they’re selling for just someone who an apartment guy can ask 1700 dollars for his unit. Maybe it’s only a 1500 dollar a month unit. So I say that with like an asterisk, right? Like, I’m not sure, but it seems like when I look at their maps, they’re using like listings to kind of populate that information, which, you know, could probably skew it upwards. Right? Yep. So rent ometer
Gabriel Petersen 22:20
if you are listening, we love you just reduce our prices just doing a great job. We need you, you know, yeah,
Axel Ragnarsson 22:26
totally great frame of reference. So
Gabriel Petersen 22:29
great. So okay, so that’s how you analyze. And the next step in in, you know, taking out a property is finding money to buy it sounds like you use private equity. How do you go about finding those private investors?
Axel Ragnarsson 22:42
Sure. So I use a lot of private money from folks that aren’t in real estate. And I can further clarify that too. So without diving too deep into this story, I did an internship in college where I interned at an angel investment group in the same market that I’m buying now. And it was just you know, 10 guys 10 wealthy guys who are investing in startups and I just did a lot of the administrative work, you know, arranging the meetings and everything like that. And I met a guy there who he did some real estate lending on the side certainly wasn’t his, like core business. It wasn’t a structured business, but he worked with a couple of investors and you make loans at, you know, 10 to 12% interest. So, he was actually one of my early you know, investors or lenders as the is the better word. So he was one of my early lenders, I basically said, hey, look, if I find a deal that looks like this, would you be interested in lending on it, you know, despite the fact that I’m 21 years old, and haven’t done this yet? And he’s like, yeah, you know, if it looks like this, and it’s actually a really good deal, and I’ll run it by a couple people. Yeah, we’ll talk about it and, and that was how I found you know, the first lender that I really worked with, and as time goes on, and you do more deals, you know, just be intentional about finding lenders. You know, if you do a deal put it up on LinkedIn or Facebook or Instagram and say, you know, hell of a deal. You’ll Have a numbers, you know, I, you know thrilled to offer my investor on this deal my lender on this deal and 11% annualized return. And people are gonna see that number and say, you know, if this guy’s done a few of these, he probably knows what he’s doing, I’d like to speak with them. So the way I found them over time is communicating what I’ve been doing in my business, like in a conscious way, you know, not not bragging about, like what I’m doing, but mainly just, you know, putting up some content and having conversation with people in the market, you know, talking about what kind of deals you’re doing, you know, what, more or less kind of what the end results of them have been and what the end result has been for the investors that have invested in them on their lending capacity. So, so that’s really what I’ve done. And I’ve broken down finding lenders into into three main categories right here, they have high income professionals, you know, doctor, a lawyer, someone like that is making a, you know, a boatload of money stock market doesn’t really do it for them. And they want to invest in real estate, but maybe they don’t want the hassle of owning real estate so why not lend on real estate Or you have and then you have the business owners who are also making a lot of money. But again, their focus is elsewhere. They don’t want to be in real estate, but they like the idea of having some exposure to that and earning some above average returns. And then other folks in real estate, maybe, you know, successful brokers or other successful investors, or, you know, former investors, you know, I worked with a guy who he sold his portfolio. Unfortunately, not to me, I was a little late to that. But I met him and he said, Yeah, I just, I just actually sold a bunch of buildings sitting on lost money, and I don’t really know what to do with it. And I said, Well, do you want to lend? And he’s familiar with the whole process. He understands private lending understands that he’s like, yeah, you know, why not? That makes a lot of sense. So I worked with a guy that you know, who was a little bit on the older side, he’s in his late 60s, since sold all his real estate. He understood the business understood the game and he went on a few deals and then you know, but it’s, it’s really, it’s not like you can do this and that’ll, that’ll get you lenses. You just have to you You need a lot of at bats, you have to talk about your deals, you have to talk to a ton of people. And you have to be really intentional about telling the people that you meet with what you’re looking for so that they can go out and find it for you.
Gabriel Petersen 26:10
Right? It’s the cumulative effect of all your interactions with pretty much everybody that you’re meeting in the day to day. Yeah, exactly. brings it back back to relationships we talked about earlier. You find your deals through relationships, you finance your deals, through relationships, relationships is definitely a real estate is definitely a relationship business. And so it all comes together with the people that you’re interacting with every single day.
Axel Ragnarsson 26:33
Yeah, and it doesn’t even really need to be that hard either. Right? So I’m, I’m working with private lenders. So you know, individuals who maybe don’t have a company that that they’re lending out, right, it’s a less formalized structure, and they’re more negotiable, right? So you got private money, they got a hard money, and I’ve used hard money multiple times as well. And hard money might be easier for a newer investor, because you can just google hard money lenders, wherever you are, and you’ll find hard money lenders and you know, they’re the requirements are a little bit more structured and a little less negotiable. But you know, that’s an avenue to get into the business as well. So private money is a little bit better, it’s a little cheaper, a little bit more flexible. You know, it’s the same thing as negotiating with an individual right then and accompany it’s two different things. But, you know, if you do want to find lending to take down that deal, you can use hard money that’s a little bit easier to find.
Gabriel Petersen 27:24
Yep, and I’ve used I’ve used hard money quite a bit in my career as well it is it’s a little bit more difficult. If you have private money, definitely go that route. But it’s, it’s an option if you if you need to take it down. Jump on hard money. It’s there for you. Exactly. So we’re kind of at the last of the RS. Well, I guess you haven’t gone through rehab, but I’m gonna I’m gonna skip that one because it sounds like most of them that you’re working on are relatively stabilized. So we’re just gonna jump right to refinance. I mean, refinancing is real is kind of self explanatory, but if there are any, I guess what do you do when you go About refinancing your properties. What’s the process used? Is there any specific bank that you feel like gives you better rates? You know? And then once you get that money is there do you do? I guess you’re not selling them. So you can’t do a 1031 exchange, but kind of take us through the process of the final are of refinancing?
Axel Ragnarsson 28:17
Sure. So refinance can be it can be tricky, especially if you’re newer to real estate, and maybe you don’t have so I’ll take a step back and describe my borrowing situation, which is a little wild, you know, so I’m, I’m 25 years old. I’ve been doing this full time for a couple of years now. And before that, I was working as an agent to kind of pay my bills while I was trying to get it off the ground. So my tax returns are just all over the map. You know, my debt to income is crazy. I don’t have that consistent w two that, you know, every lender that’s going to sell the loan off to Fannie Mae or Freddie Mac like needs to see so I don’t fit in any of those boxes. So you know, even on a three and a building, where you can get 30 year fixed rate financing on it, I typically don’t qualify. So I’ve been forced to go out And use local community banks and credit unions to refinance on the back end of this process. So, you know, my terms in my, in my dead typically looks like, you know, 20 to 25%. Down, you know, so really the term would be 75 80% loan to value, you know rates and then in the mid to high fours, which is higher than what you can get, you know, on a 30 year fixed rate loan. So I’m paying a little bit more in interest and 25 year amortization periods. So, it’s a little bit more expensive than that 30 year fixed rate, you know, pretty Fannie Mae debt that’s in the threes in terms of an interest rate, but I just don’t qualify for that. And I’ve tried, I’ve tried, I’ve tried, I just don’t, so I’ve had to go that route. And it’s actually been a blessing in disguise, because doing refinances with commercial loans and commercial products from local banks is just a much easier process than working with a lender where you have to check a number of boxes in order for them to sell the loan off. So
Gabriel Petersen 29:57
that’s typically how I write
Axel Ragnarsson 29:58
how I go about refunding See my properties. So, you know, other pieces of this process are, you know, you really have to be mindful that the appraisal, you know, the appraiser and the appraisal are like, like the biggest part of this entire process, you obviously have to buy, right, you have to do your numbers, right? You have to, you know, rehab at a number that makes sense, you have to all that you got to do, right. But that’s all kind of in your control more or less, you know, the appraisal is not in your control, you can control it to an extent but there’s still an element of it that’s out of your control. So, you know, for me, I’ve really focused on doing my best to get the appraisers where I need them to be so I you know, when I do an appraisal, I you know, I bring the appraiser like way more documentation than I know any, any other investor does like an itemized list of all my costs with us, you know, or my itemized list of upgrades with their associated costs. You know, what I’ve done to the unit in the building and I’ll literally like write out a story of What the deal was, where I found it what the seller situation was, Why did I buy it at such a low price? Because you’re going to get this question every single time you do this? Well, you bought this at 200 grand, you know, you only put 40 grand into it, why do you think it’s worth 300? Like I, you know, and you got to have an answer for that, right. So I say, you know, I bought it from a distressed seller, it was a distressed situation, because the seller and his partner co on the building, and they had a falling out, and they needed to liquidate. So that’s why I’m buying a 200 K, you know, and this is what I did to the property. This is how much I raised the rents. This is how we increase the tenant profile. You know, and then just really tell a good story, provide evidence of what you’ve done. And then also provide comps as to what you feel are good comps, right? And then don’t be you know, don’t pressure the appraiser and say, Oh, this is like the perfect comp like you gotta like you got to use this one as like the main one, just provide them the information that helps your case, and let them do their thing and just be pleasant throughout the process. And, you know, that’s helped me to get the numbers that I needed appraisals because Have a number comes comes in low you know maybe at the bring cash to the table maybe it’s a substantial amount 10 2030 grand, you know, for the sizes of deals that I’m doing that I’ve been talking about, that’s pretty substantial. If you don’t prep for that it can really you know, it can be you can find yourself in a tough spot especially when all the money in the bank so, you know, those are the things that I really prioritize on the refinance. And a lot of that, you know, becomes easier with time and repetition but you know, I think those are a couple of big tips is you know, local banks are great when you’re doing these refinances, especially when you’re doing a volume. They can just, you know, they can be really flexible on the terms and the programs and everything they offer you in the keep that loan in house and then and then don’t be lazy when it comes to the appraisal, you know, do a ton of work to help that appraiser give you the number that you need.
Gabriel Petersen 32:45
I love it. So you work with local banks and then you you really, you know, you put in the effort to build a picture to paint a picture for the appraiser. It sounds like you go into incredible detail with with the rehab that you did the clinic So you think are apropos to the property? And you really help him understand, you know, take him along the journey that you went through when you purchase the property, and and rehabbed it and now are being reappraise. So I love hearing that. So this is we try to keep this up the show to around 30 minutes. So I’m going to move us along here just a little bit. I do want to hear just one experience from you. I love to hear, you know, we all know real estate, it’s a it’s a, it’s a roller coaster, you got your ups, you got your downs. And, you know, it’s just, it’s just part and parcel to the game. So take us some one of the lowest periods that you had so far. And then, you know, tell us what was the main lesson that you learned from that experience?
Axel Ragnarsson 33:43
Well, yeah, and I mean, I have the perfect
Unknown Speaker 33:45
Axel Ragnarsson 33:47
I didn’t even I get to know this question was coming but but I but there’s one experience I’ve had in one deal that I did that was like a complete masterclass seminar on how not to do a bunch of things. So the first flip that I tried to do And this has really turned me off of flips since then and I only deal with really makes a lot of sense was a foreclosure. It was a it was a foreclosure duplex and a really great town in the seacoast in New Hampshire and the deal itself just needed a ton of work. And like I just tell every investor like if you’re going to do your first deal, make it one that doesn’t need that much rehab because that’s really where you’re going to lose your shirt. If you don’t have the experience you don’t know what you’re doing. So the rehab went way over budget it was just over my head in terms of what was involved and a bunch of things that were you know, kind of out of my control happened where like while we were under contract, the pipes burst now this is a northeast in the winter, so I had a bunch of mold in the basement when I took over. And the first contractor I hired was stealing materials and that was a mess. Second one I hired was doing six jobs at the same time that you know, I always ask I say is this how many jobs you working on right now? Because speed is obviously important with these deals. Oh, I got nothing going on right now. I can work on this deal. And it was like a referral from like a trusted investor in my network. So I was like, Alright, this will be good. Turns out He was doing six jobs, a couple of his guys quit to spread the news only at the job say once or two days, you know, once or twice a week. So I was in this project for almost a while I was in it for a year took me a year and a half to sell it lost a bunch of money, it was a complete pain in the ass. So as for what I learned from it right now, when I’m doing a rehab that, you know, is larger in nature, like I’ve just realized that like, I need to be a babysitter, you have to be a babysitter like, it’s crazy. It doesn’t matter how experienced a contractor is and how well you trust them. You got to be there. You got to be there multiple times a week. And if they’re not working out, you need to move on quickly. I moved on quickly from my first guy and I moved on. I didn’t move on quickly from my first guy. And same thing with my second guy. And it wasn’t till a third contract that I had done. And in hindsight, right, I should have said, He’s only here. He’s only been here, you know, once or twice a week for the last three or four weeks like we’re moving on next. And the way I pay my client contractors at that time to is we separated all the portions of the job, you know, I pay half up front half of it was complete. Now I do like 25 or 30% up front, you know, and then 30% of the middle of the majority at the end, I parcel out the payments a little bit more. But at the time, you know, we had done number of jobs here, those are gonna pay you half up front half when you’re done. Like, it’s not the way to do it. You got to pay so little upfront to keep them incentivized to keep coming to the property and God forbid you have an issue like I did. If you have to fire them and walk away, you’re, you know, you’re not you don’t have to chase as much money or you’re walking away from not as much money as if you pay half upfront, and they only get 10% of the job done. And then you’re like, find yourself in a paralyzing situation. So when you’re doing rehabs, especially large rehabs you just really need to be it’s a it’s a job, it’s an active job, you have to be that you have to babysit and you have to be mindful of how you’re structuring your contracts with your contractors. So I would say that that’s probably my big learning experience just a masterclass in how our renovation can go wrong, but a lot of great The great lessons learned on that one for sure. I could talk about that a whole podcast if you want me to stop it there.
Gabriel Petersen 37:05
No, I love it. And, and, I mean, it really rings true for me because people who have not done flips, your contractor is going to be the linchpin to that experience. I mean, sure, you got to buy it right. But if you’re not there on site, they I guarantee you things are gonna go wrong. And and if you’re not there, there’s no accountability. I like that you you know, big lesson that you learned was do a little bit up front more in the end, I’ve had a problem doing 5050 as well. And so, great experiences, great lessons learned. Sorry, you had to go through it. But now you come out the other side. And sounds like you’ve got those lessons in the bag, so you’re not gonna make that mistake again.
Axel Ragnarsson 37:45
Exactly. And you’re gonna make a mistake if you’re investing in real estate at some point hopefully it’s not too big I’ll place on as big as mine. Right But you know, that’s you learn from them. So it’s you got to look at it as paid education. Right. That’s how I do it.
Gabriel Petersen 37:56
Absolutely. Last question on kind of your experience. are more your advice for people get, you know, in real estate or investing or just getting into investing here to go back to the axle? You know, who is just finishing flipping cars just getting into real estate? And you were to give that guy one piece of advice? What would it be,
Axel Ragnarsson 38:15
um, become extremely focused on what you want and why I spent so much time learning about flipping and wholesaling, and rental property and, you know, just all the different things you can do in real estate and shiny object syndrome is a real thing. And I got caught up in that, you know, it took me a bit to realize flipping wasn’t for me, and, you know, the rental property investing was and then I spent so much time trying to buy condos and single families before I was like, let’s just, you know, even a small multifamily is a better rental property than a single family, especially in my market. So I spent so much time just, you know, planting shallow seeds, if that makes sense. Rather than planting less deep seeds, which is really what you got to do, you got to be like, this is exactly the strategy that I’m going to follow. These are the people that I need to talk to in order to make this you know, make this process easier. And just put your blind On just do that, and just commit commit to doing that for a longer period of time seven, you know, nine months a year. I’m not gonna try and flip houses I’m not gonna try and wholesale houses, I’m just going to look for multifamily properties. And once I did that, you know, I started to get some traction, but I spun my wheels probably from age 19 to 21. And then even after I bought that first property, I was still like, oh, maybe I want to flip houses, you know, a $40,000 check. Well, we buy rentals, and it does, but it’s harder to find the rentals when you’re doing that. So I would have just been a little bit more clear about what I wanted and what needed to be done to get there.
Gabriel Petersen 39:35
Absolutely. And I loved one thing you said you said put the blinders on. And that is, I mean, I’ve had shiny object syndrome or whatever that thing is. I’ve had that happen to me multiple times. Especially when you first get into real estate. There’s there are so many different ways to go about doing this game. I mean, there’s there’s different asset types, different strategies, you can learn, you can buy you can wholesale, and when you just get into it, you just want to do it all but that’s not the way Do it, choose one strategy, put the blinders on and go towards it, because that’s the way you actually get good at that one thing. Exactly. Awesome. Well, Axl, thank you very much for coming on the show. I appreciate it a lot. And I’m sure everybody listening and watching did as well. We all need things in our lives, You’re no different. You’ve already given us a lot. So if someone were to bring something to you, what would you want to receive?
Axel Ragnarsson 40:25
Oh, that’s a good question. Well, first of all, I appreciate you having me Second of all, to answer that question directly. I mean, it’s just it’s deals who doesn’t want deals? Right? You know, I, I like to work with folks that are newer investors and kind of show them how I find deals and the process that I follow, and and then I basically just teach folks how to do that. And if you find a deal you want to bring with me, I’m happy to partner on it with you happy to pay you for that deal. Learn something, make some money. And as I’m looking into new markets, specifically a couple of markets in Alabama, a couple of markets in northern Florida and you know, The southeast as I try and buy larger properties, I’d love helping doing that. And if anyone’s listening to this in New Hampshire, it’s probably maybe a handful of any but always looking for deals up there as well. So feel free to reach out to me, I’ll show you how I find deals give you the playbook. And then once you do find them if you want to, you know, wholesale it if you want to take it down yourself, I’m happy to be a resource for that too. You know, so I can if I don’t know if you if you have a segment for this, but I can kind of share how people would connect with me. And if they did do that.
Gabriel Petersen 41:28
That is my next question. If somebody did want to get in contact with you, what would be the best way to do that?
Axel Ragnarsson 41:34
Sure. So you can find me on Instagram, it’s at multifamily wealth. And then where you can just search Axel Ragnar single Find me on there. You can email me off there too. I mean, my my emails in my profile. You can find me on LinkedIn accelerate Gunnarsson on LinkedIn. And I also host a podcast myself. It’s called the multifamily wealth podcast and we talk a lot about multifamily real estate but there’s a few episodes in there too about, you know, smaller multis and single family investing as well. So Any of those channels will be the best ways to reach me.
Gabriel Petersen 42:03
Awesome. I love it. So you guys heard it if you want to get in contact with Axl, he’s on LinkedIn multifamily wealth.
Axel Ragnarsson 42:10
Was that it the multifamily wealth? Yep,
Gabriel Petersen 42:12
multifamily wealth, or sorry, he’s on Instagram multifamily wealth. And I will put the link to LinkedIn, his LinkedIn profile below. So if you want to get in contact with him, you can reach out there. Great. Alright. Again, Axl, thank you very much for coming on. We appreciate it all the wisdom you shared for everybody else. We look forward to seeing you guys on the next episode.
Unknown Speaker 42:32
Awesome. Thanks again for having me.
Gabriel Petersen 42:37
Thank you for joining us on The Real Estate Investing club. If you feel we’ve provided value, we would appreciate it if you hit that thumbs up, share with your friends online, whatever it may be. If you’d like to share or partner with us on an investment deal, we are always looking for quality projects, go to www dot real estate investing club.com get contact with one of our partners. Otherwise, I hope you guys Have an absolutely fantastic day and I look forward to seeing you on the next episode.
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