Four-Unit Residential Purchase

I just closed on my first four-unit purchase in Charleston, SC. I have purchased two commercial properties and one single-family flip in the past but this was my first residential rental. I’m going to recap the highlights that made this deal great and cover how I raised money to purchase the deal with two partners.

Highlights:

• Off market deal, I negotiated directly with the out of state owner
• Great location, walking distance to a small downtown with bars, restaurants, fitness, grocery stores, shops and a new Whole Foods opening in the Fall
• Purchase price $470,000 in rent ready condition, monthly rents projected to be $5,700, monthly cash flow $2,200 and cash on cash return year 1 greater than 21%
• Major value add opportunity to upgrade units in 1 or 2 years with new appliances, countertops, flooring, etc.

One of the hardest things in the real estate game is raising money for your deals. As investors, we understand the “risks” and rewards that investments offer. We willingly risk our money to buy real estate but trying to convince your funny uncle or close friends to invest in your deal is a different story. I got started by taking the plunge investing by myself to establish myself as an investor. After I did my first deal, I quickly found my second opportunity but knew raising money could be a challenge. I was able to raise money from a couple of close friends (utilizing my first deal experience) to structure the second purchase. For the four-unit purchase, I contacted the same investors and we reviewed the highlights, discussed the numbers and they were ready to write checks. I structured the deal so the two investors brought more than 70% of the money required. I put in the remaining percentage to close out the down payment and make sure we had start up funds. My investors and I agreed to have an even equity split and I got the extra one percentage. Having some experience and putting some of your money into the deal is the best way to have investors invest and build relationships with them. I don’t have years of experience or even ten investment purchases under my belt but I focused on the experience I actually have (which is more than my investors) and utilized my existing investor relationships. This strategy will be able to help you close a few deals using your close family and friends’ network.

What’s next for me, is focusing on building my brand as an investor and what I’m working towards. I could spend my time finding more off market deals and could close another deal or two with my existing network but I’m only prolonging my greater issue. My greater issue is having a plentiful amount of investors ready to invest in my future deals, which is why I’m focused on building that brand.

Thank you for reading. I look forward to your comments and replying to your questions.