Lior is a real estate investor out of Boston and owns a $9 million dollar portfolio. Originally, he was planning to become a doctor but got interested in earning money outside of the traditional methods. He purchased his first multifamily property and later got into condominium development projects. In this episode, he talks to us about building a long-term portfolio in Boston.
Lior was working with a management consulting company during his gap year. It allowed him to save up enough money to purchase a $520,000 multifamily property through an FHA owner-occupied loan with 3 ½% down payment back in 2016. His cash flow from that property was around $1,000-1,500.
Following his first deal, his buyer’s agent introduced him to some local developers. He made a deal with them to let him become part-owner and learn from them if he brought them a deal that made sense.
He withdrew his medical school application and found an off-market deal within a couple of months. A couple of months after his second deal, he found another condominium conversion project in the same neighborhood.
When it comes to finding the agent and the properties, Lior met his agent through BiggerPockets, and the agent met the developer through a networking event.
Lior’s condominium conversions were full gut rehabs that typically took 8-12 months to complete. It involved redoing everything including plumbing, electrical reframing, and plastering.
He and his partner brought in the private lending themselves and got the property for $650,000. They underwrote the deal and thought they could do the work for $350,000 which would come to $125 per square foot. Their holding cost was about $150,000.
But they had to learn a lot about managing contractors as they ended up doing the reframe three times and dealt with the plumber quitting on them a couple of times.
On the day Lior was supposed to close on his second condominium project, he had a big client deliverable at his job. He was able to close on the property deal but barely missed the deliverable. At that time, he and his employer realized that he probably should quit.
For the next year and a half, he was working full-time on real estate and had to go through a lot of bumps and learn along the way. He didn’t make a lot of money, but he had money saved up from his previous job.
Since his partner at the time has been an agent for 3 years, they were able to make a good income from the agent side. Being a good cold-caller, Lior spent half a year hammering the phones.
Lior was able to build himself up as the go-to, investor-friendly agent on BiggerPockets by always providing valuable information to people asking in the forums and writing original content. His clients included a lot of house hackers, which still make up a big portion of his business.
The pandemic didn’t have much of an impact on their acquisitions as they were still able to close on $2.5 million on rentals in February. The way Lior sees it, it just takes more muscle for deals to push through.
Lior believes in the Boston market, and he’s after building a quality portfolio and thinking long-term. This is the reason why he doesn’t want to just invest in the Midwest where it’s cheaper.
Cash flow is important, but Lior sees it more as a way to hold onto a property as it builds appreciation through the years.
Because Lior has 2 out of his 3 units for Section 8 tenants, he got guaranteed rentals which were mind-blowing. Since then, he started going after neighborhoods where he can maximize the opportunity.
Section 8 calculates rentals by zip code, so, in a super segmented metropolitan area like Boston, you can get incredible premiums to what you would otherwise get in the market.
Lior focused on triple-decker units and properties with at least 3 families as he wasn’t interested in single-family or 2-family homes.
Since Lior has established relationships in the industry already, he was able to leverage those to get lower interest rates. He applies the BRRR strategy in his properties. He raises equity from private lenders and spends the first year on construction or renovation where they are on an interest-only note. After the first year, it becomes a fully amortizing, 25-30 year note that they can refinance after 2-3 years.
But Lior prefers to be able to hold onto a property for many years rather than sell it out.
Most of Lior’s acquisitions were between $600,000-1,000,000, so they had to raise funds in the vicinity of $200,000-300,000.
They can get loans from local lenders or community banks, but they have started exploring getting agency debt by getting Fannie Mae to back commercial loans.
They’re also considering combining assets and placing them all under one blanket loan.
Lior bought a 3-plex for $650,000 and spent close to $100,000 fixing up the place. The property is now worth $925,000 and is renting at market rents which are between $2,300-2,500.
The biggest thing is to pull the trigger. Learn by getting your hands dirty, but at the end of the day, you have to jump into it.
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