Rental Property Diary - 1st Fourplex @ Fresno, CA
It has been 3 years since my last update. This is probably the final one because I am currently selling this property as a part of 1031 exchange to a larger MF (14-unit or 15-unit).
So far, this property has been performing inline with my analysis. I was able to raise the rental income from $2,250 to $2,400 and reduce bunch of expenses thanks to my property manager. The cap rate was raised from 6.7% to 10.5%. The cap rate will rise again as a new rent $2,500 will take place in June, 2019.
The bottom line is: the property has been a cash cow and I am really happy with the purchase. It is sad to let my first rental property go, but I am aiming toward a bigger goal. Wish me luck, folks!
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It is the 2nd week after we entered the contract with a 4plex in Fresno, CA. Things are going slowly but steadily.
Appraisal was done on this Wednesday. There was a small kink during inspection as one of the water heater's strap was missing. Repair was quickly completed thanks to the seller's agent. Appraiser has to come back to reinspect. :(
Crossing my fingers for the report at this moment. It is nerved cracking and exciting at the same time.
While in the waiting game, I posted my Analysis on the rental property on BP to get feedback. Overall, the feedback are positive and there are many good feedback. The analysis was updated after the feedback.
I am looking forward to next few weeks as the closing date comes closer.
Comments (11)
@Hau Nguyen @Michael Boyer @Andrew LeBlanc @Tanisha W. @Albert Ng
Wow, time flies. It has been 20 months since we are closing the properties. There were a lot of activities and I would like to share with everyone. It will be a roller coaster ride, so hold on tight to your cup of coffee, tea, beverage, or whatever :)
12/3/2015 - property was closed on time.
012016 - I was so excited. I got the first check and it is $264. Not bad since I don't need to pay for mortgage first month.
02/2016 - Oh #$#%! one of the tenant stopped paying rent. This tenant had 3 pit pulls and our lease said no pets. Her dogs pooped everywhere and other tenants were unhappy. No cash flow and had to pay $650 out of pocket.
03/2016 - Second Oh #$#%! Another tenants stopped paying rent. I also noticed that I had to pay roughly ~$200 monthly pg&e for common area. WTH! there are only 4 light bulbs. This was not right. I asked my PM to investigate. No cash flow and had to pay $650 out of pocket.
04/2016 - Eviction happened for both units. No cash flow and had to pay $650 out of pocket.
05/2016 - Tenants moved out and left a ton of #$#% and damages. It costs $8k to fix both units. No cash flow and had to pay $900 out of pocket on top of $8k. #$#%. Did I buy a damn lemon?
06/2016 - Both units were being repaired. Remember the outrageous PG&E bill from March. Yes, we figured it out. The tenant from one of the evicted tapped electricity from laundry room. Great. Another $600 to fix. No cash flow and had to pay $900 out of pocket on top of that. #$#%. How long this will last? I wanted to make money. Not spending money.
07/2016 - One unit was completed. The second unit was being repaired. No cash flow and had to pay $900 out of pocket. #$#%.
08/2016- both units were fixed. Are you #$#% kidding me? one of unit was broken in and someone squatted it. Another $600 to fix. Again. No cash flow and had to pay $900 out of pocket on top of the $600.
09/2016 - One unit was rent. Break even. No cash flow. No out of pocket.
10/2016 - the other unit was still empty. Break even. No cash flow. No out of pocket.
11/2016 - Finally, my last unit was rent. I am no longer in red. I got $500+ cash flow.
12/2016 - Things are stabilized - I got $900+ cash flow.
08/2017 - no crazy activities happened for the past 8 months. Things are settling down. I got an average of $900+ cash flow / month. My realtor informed me that a similar complex sold for $235k. It is a good amount of appreciation for 20 months.
It is not related to this blog, but I will shamefully put a plug on my next blog. I recently sold my primary property to get a fixer-upper property. I will complete the renovation next month. I will share my experience along with photo once it is completed.
This is it, guys and gals. I will see you again in 2018. Hopefully it will be a boring update. :)
Phat Vi, over 6 years ago
Thanks for sharing your experience @Phat Vi. Any update on this multiplex of yours? I'm new to REI so your post was very informative. I'm making a spreadsheet based on your analysis above. Hopefully, I'll find a multiplex this year and starting sharing my experience as well.
Hau N., almost 7 years ago
Awesome information guys,
Looking to buy my first fourplex within the next 8 months, let me know if you have any do's or dont's to keep in mind. :)
Thanks.
Andrew LeBlanc, over 8 years ago
phat, be sure and read up on that landlording...best of luck
Michael Boyer, over 8 years ago
The final moment is here. The closing documents were signed yesterday and the anticipate closing date is tomorrow 12/3/15. I will do a monthly update on the expenses and compare them with the estimated expenses.
Phat Vi, over 8 years ago
Congrats Phat! Did you find the property on MLS, or off market? I'm not familiar with the market there, but a 4 plex at $185K seems like a pretty good deal
Albert Ng, over 8 years ago
Thanks Albert! Yes, the property was on MLS. I agree that $185k for this 4-plex is a good deal. I was lucky on meeting the right agent at the right time :).
Phat Vi, over 8 years ago
@Tanisha & @ Michael (it doesn't work in this comment but I do it anyways)
Thanks so much for being interested in my boring blog :).
After negotiating with the seller, we reached an agreement on splitting the cost of this repair:
My portion: $1347.48 for the mold removal (a 3rd party will do this)
Seller's portion: $500 for the environment fee. Cost of uninstalling the water heater before the mold removal, reinstall the water heater after removal, add insulation and put on a new drywall. (I don't know how much this one will cost but Its estimation should be around $500-$600).
The outcome is not as I expected (50/50) but it is reasonable for me to accept. Hopefully we will have this fixed by the end of this week and ready to close the loan next week. Cross my fingers on this.
Phat Vi, over 8 years ago
Fun to follow, Phat, I recall your first post about the older fourplex (a club I am in, too)....Hope it goes well for you. Sorry to hear of minor issue... But sounds like you are on top of it. FYI, I now in mine they installed these originally with white plastic dryer/bath vent lines in the 80's or even some flexible metal (neither to code in most places in my understanding) so look for new, up to code (I use rigid sheet metal, foil tape) dryer and bath vents lines and make sure they work well (like new bath fans if needed). Then keep those dryer vents clean (a kit is at home depot and long vacuum hose can help, too). Best of luck... These can be great little rentals, earning money and teaching us about landlording (property and people issues at the same time)
Michael Boyer, over 8 years ago
Hi Phat, excited for you. Keep us updated. I would like to know if the seller pays for the mold repair.
Tanisha W., over 8 years ago
Today is the end of the 5th week after entering the contract with my first 4-plex. The appraisal comes back right on the money, but lender asked us to inspect on the "black marking" on the laundry room (outside the property) which was described by home inspector on appraisal report. A mold inspection was completed on Saturday (11/07/15) and estimated that the repair cost is around $2k (including masking the area to ensure mold doesn't release in the air during removal). My agent is on the quest of asking seller to take care of this expense. This is a the last obstacle before we can close on this property. Knock on wood and hope everything will be okay. ^.^
Phat Vi, over 8 years ago