- Profit Strategy: Buy & hold
- Number of Units: Triplex
- Amount Earned: $1800 monthly cash flow (with another unit, 2 garages and 12 parking spaces still available to rent out). They estimate each garage can rent for $150/month and parking spot for $50-$75/mo which could bring in an extra $1200/mo total!
- Personal Money Invested: $30,000
- Prior Experience: Purchased a couple of houses in the past and had some experience with single family homes.
Here’s their story:
Married now for 45 years, Arleen and Dennis Severino raised six amazing children and are now classic empty nesters. Like many healthy active people their age, the New Jersey based couple enjoy activities like playing tennis, hiking, going salsa or swing dancing (and many other forms, depending on their mood) traveling (including visits to their kids out in Colorado and Montana) and spending time with their grandchildren. Though they’ve long left the business and corporate worlds behind, don’t get the idea that they’re anywhere close to retiring. In the wake of their experience with Lance Edwards’ training, they’re also constantly on the hunt for great small apartment deals.
The couple, who began investing in single family homes and small apartments in “C” and “D” areas outside of NYC in 2008, enjoy an extraordinary complementary relationship. The two function as the perfect “tag team,” with Arleen finding the deals and having a “bubbling” effect on people that creates a dynamic introduction, which paves the way for Dennis to follow up with the brass tacks details of deal making. Dennis says Arleen is the “driving force who won’t let moss grow under my feet,” while Arleen calls her husband “the math guy who takes care of the buildings. He’s also great at record keeping.” Dennis owned a construction business until the late 80s, while Arleen worked in sales and marketing for Xerox.
Both enjoy the freedom of working together from home and sharing their real estate adventures together. “I really find the daily MLS hunt online exciting and going out to look at properties a lot of fun,” she says.
“As a home builder,” Dennis adds, “I was always holding a big investment that was subject to the movement of the market. If it moves up, you’re a big winner, and if it goes down, you’re a loser. It takes about a year and a half to build a home and there’s high risk and financial uncertainty during that time. With rentals, it’s more stable because your income isn’t subject to outside market forces. I find it easier to work in the real estate scenario and have to worry less about employee paychecks and more about keeping my tenants happy.”
The 90 Day Challenge winners originally met Lance at a Ron LeGrand summit and were excited about purchasing his course. After working through Lance’s home study, they saw the larger potential of higher cash flow in small apartments through a buy and hold strategy. “We thought Lance was very sharp,” Dennis says, “and we felt he filled an important gap in the small apartment market. Some years ago when the market dropped, some of the investing experts like David Lindahl were talking about buying 100 unit apartments. Lance is more in the lane of those who want to move ahead with small apartments on a medium ground. He also pushed us on how to successfully secure private lending. We had done that in the past, but only with people we knew. He helped us expand our horizons in that area.”
Motivated by Lance’s challenge to get things going, Arleen found the property and got it under contract. It was a three-family unit and the bank had gone through a previous deal that didn’t go through, so they were pushing to get it closed almost immediately and willing to make a great deal. The original listing was $300,000 but the Severinos offered $80,000. They found a private lender to close the property with 110% financing. After they bought the property, a triplex on Lincoln Avenue in East Orange, NJ, they found a second private lender to loan them $50,000 for renovations. All told, they invested $30,000 of their personal money and secured $138,000 through private lenders. The property generates an $1800 monthly cash flow from tenants.
Uniquely, the property includes two garages and 12 parking spaces. Because the buildings within a block or two have no parking and the township charges people to park on the street, the couple initially considered renting the parking spaces for $50- 75 a month and garages for $150 a month. But with the renovation of that building, coupled with some other properties they purchased in the immediate area, they used all those spaces for those helping them do renovation and construction. Thus far, they have bought six more small apartment properties in the area, ranging from 3-plexes to 4-plexes and 6-plexes. They currently own and manage 35 units.
“The way we like to say it is, ‘After Lance and Lincoln, we were motivated to buy these properties,’” says Dennis. “The three and fours are pretty easy to manage. We’re not going to say that a 100-unit building is difficult to manage – it’s just that the average person, especially someone new to small apartments, won’t buy a building that size. The larger the property, the more potential problems it can have. If a single boiler goes bad, you’re up a creek. We’ve found that anywhere from three to 24 units is the sweet spot for us. We much prefer this size small apartment buildings over single families, because the return on a house is less and subject to those market winds. Single families are best suited for fix and flip scenarios, when you use the profit to raise more capital.”
Despite the Severinos’ many years in real estate investing and the accelerated pace of acquisition since studying Lance’s course, Dennis admits that fresh challenges arise every time he and Arleen find a new property to potentially buy. “For us the two major steps are putting in the offer and signing a contract, but every seller is different and you have to be prepared for a different level of negotiations and other issues each time out,” he says. “I think we have done very well, and that motivates us to keep going, but the truth is, there’s always hesitation to make that step when you are not sure what your next step is.
“The second most difficult part is, of course, once your offer is accepted, where do you get the money from?” Dennis adds. “We don’t always have the answer for that either. Yet somehow the answer seems to appear when you take the leap of faith and jump in. We’re lucky to use two or three lenders consistently who are happy to work with us. When you have a history of good cash flow, money is a bit easier to come by.”
Arleen says the different challenges that arise are part of the fun of small apartment investing. “Dennis and I are truly knowledge sponges and we try to learn everything we can as issues arise,” she says. “There are only so many hours in the day, but we are always willing to take chances and be open to change and surprises. Looking for new places, putting deals together, finding private funding – it’s all very exciting for both of us. Perhaps the nicest part that people find a bit unusual is the fact that unlike most building owners, we actually enjoy our tenants.”