- Profit Strategy: Buy & hold
- Number of Units: 10
- Prior Experience: While Jean was a career dental hygienist, Norman had been involved in a multitude of real estate endeavors, including buying, developing and selling real estate in MD since 1973.
Here’s their story:
Eager to win Lance Edwards’ trademark 90-Day Challenge after attending his boot camp in June 2019, Norman and Jean Lutkefedder did something out the ordinary after zeroing in on a 10-unit multi-family apartment listed for $330,000 in Columbia, South Carolina.
With the clock ticking, the Lutkefedders made the rare move of negotiating up! To encourage the seller to select their offer over the large handful of others that were being made and settle quickly, the Annapolis, MD couple submitted their contract offer for $335,000, with a $5000 deposit check (to their Title & Escrow company), a 20 day period for Inspections and Financing, and closing to be held within ten days after the expiration of the inspection period.
Norman and Jean were introduced to Lance via his 2018 webinar “7 Moves to $1 Million with Small Apartments” by being longtime members of Ron LeGrand’s Gold Club. Though, LeGrand’s program focuses on single family houses, Norman incorporated the logic of a few of his philosophies into their decision to offer more than the asking price. “One of Ron’s sayings we like is ‘Don’t kill the goose, keep the goose alive,” and we agree that the longer we keep this property, the more we can make,” he says. “He also advised not to worry about small amounts like 5% when the deal rests in the balance. Sometimes, it’s important to take a look at your potential downstream profits. Another $5-10,000 is no big deal when you realize that the property will go up in value. Why worry about five grand when you’re talking about potential $40-50,000 profit down the line? It’s peanuts.”
Considering the current climate for traditional bank financing, the Lutkefedders plan on future deals to follow Lance’s advice and seek out properties where owner financing is an option. Unfortunately, to complete their first transaction, they were unable to make this happen. Based on the couple’s conservative analysis and prior to receiving the Deal Review, they submitted a Letter of Intent to the Seller/Owner’s agent at SVN, showing two options for owner financing at 100% and 90%, along with an all cash offer. The owner rejected both options and stated that she needed the cash to purchase a home for when she moved from her present apartment (on the property) after settlement.
“After calling several finance organizations and being rejected because of the short 20-Day financing period, I received a return call from a mortgage broker close to our home in Annapolis,” Norman says. “He had located a firm in Florida interested in providing a full recourse 80% LTV mortgage fixed at 6.0% for 30 years. This loan could also be “Fixed at 6.625% for the first 60 months if we selected the 5%, 4%, 3%, 2%, 1% pre-payment penalty reduction option, and thereafter at Prime Rate (currently at 5.25%) plus 1.375% adjusted every 12 months. We selected the reducing pre-payment penalty option, and finally received financing approval on September 12, 2019…a 34-Day financing period. We signed 6 addenda to the contract, because of the extended financing period, the need for electrical and plumbing repairs, and other matters.”
Realizing that opportunities for owner financed deals are often difficult to find, the couple also plans to work on establishing strong relationships with finance organizations which provide reasonable rates and terms for apartments in the states they have selected. Their primary reason for initiating this business is to maintain a comfortable income stream after Jean – a career dental hygienist who had held the same job for 22 years – retired at the end of 2020. Their plan is to purchase additional multi-family buildings from Maryland to Florida, with at least partial owner financing.
The numbers they’re aiming for are ambitious: a total of 100 apartments (or “doors,” in Lance’s words) within their first year, which at $100 profit per door per month, they estimate will lead to $120,000 in income. Though their three adult children are all successful and comfortable in their current lives and professions, the Lutkefedders are looking forward to building a business that they can become part of – and eventually inherit.
While Jean worked in the dental industry, Norman has been involved in a multitude of real estate endeavors after years of working for several government agencies, including the Navy Dept., NASA, the Department of Transportation, the Federal Energy Admin. and the Department of Energy.
His experience includes buying, developing and selling real estate in Maryland since 1973. His first development was a 4-condo subdivision along Spa Creek in Annapolis in 1976. Since then, he’s been involved in assembling, subdividing and developing other waterfront, assisted care, multi-family and commercial properties. He also established and operated a real estate brokerage with up to 19 agents and licenses in Maryland and DC. Norman was also hired by Lennar Corp. (one of the nation’s top five residential housing companies) as Senior VP Land Development and developing several major projects in Maryland and Delaware, comprised of 1,000+ acres and 1,000+ homes each.
“I’ve listened to Norman doing real estate for years and some of it was bound to sink in,” says Jean. “Now I’m tired of working for everyone else. Rather than do the 8 to 6 routine every day, I like the idea of being in my pajamas, drinking coffee and looking at the computer for deals and checking in with the property management company we’ve hired to see if profits are coming in. The multi-family concept is very appealing because even if you have a 10-20% vacancy rate, the profits can still flow. In the long run, the stock market and mutual funds don’t offer the returns that real estate provides and won’t take as long to recover should there be a major recession.”
The ownership of the apartment building in Columbia and all subsequent investment properties will be in the name of the Lutkefedders’ corporation, Chesapeake Properties Development, LLC, registered in the state of Maryland. Anticipating the potential advantages of having a minority owned business (in this case, a female owner), Jeanie owns 51% and Norman 49% of the business. “Jeanie is faster on the computer than I am, and can search for and locate potential new investment properties much quicker than I can,” says Norman. “She also has a woman’s sense of what makes sense or doesn’t, and she also has great talent in dealing with property managers. In South Carolina, she enjoyed sitting down and making a deal with someone at the property management firm we eventually hired for the property. I’m really enjoying collaborating with Jeanie on these very challenging endeavors.”
Despite his many years in real estate, Norman says there is a constant learning curve in a realm where Murphy’s Law often prevails and there are so many potential obstacles to hurdle before a deal can come to fruition. One of the most important details he and Jean gained from Lance’s teachings is the need for a great property manager to “take care of tenants and toilets.” Along the way, they also learned about the need to incorporate as an LLC and apply for certificates that allow them to do business in other states.
“You always have to be concerned about new unexpected expenses, vacancies, property damage, insurance…so much can go wrong when you’re buying a building and after you have it,” says Norman. “Yet for us, there was also the excitement of successfully completing the 90 Day Challenge and the possibilities of enjoying a lot of passive income in the future and working with our kids in the business. Ultimately, if you want to be successful, you can’t let setbacks discourage you, you have to work very hard and you have to pull the trigger when you believe you’re getting a great property. I’ve been in this business 40 years, and every day is still like a school day with many new lessons to learn.”