How I increased the value of my rental by $255k in 6 months

18 Replies

Hi fellow members,

I closed on a 4-plex six months ago, with three units occupied and one unit vacant.  Rented out the vacant unit at market price ($2700) on the weekend after closing.  I also submitted application for rent increases on all three occupied units to the maximum rent schedules, which gave me a total increase of $865/month.  Upgrades to property: new windows, exterior paint, new laundry room, hot water boilers, landscaping, total cost: $50k.  Offered cash to  all three existing tenants to move out, and one of them accepted and moved out on the 4th month.  I spent one month and another $50k fixing up the apartment, and increased the rent from $1743 to $2800.  Total rent increase since purchase: $4622/month.  Immediately after I made my 6th mortgage payment, I applied for a cash-out refi with the same mortgage broker that got me the purchase loan, and am closing on the refi with a 0.125% higher interest with a $170k cash out this week.

The original purchase price was $920k, with $300 down.

Total cash invested=$300+$100=$400k, 

COC before refi: $35,280/$400,000=8.82%

Current appraised value=$1.175m, new loan=$800k, cash out amount=$170k

Total equity gain=$75k, 

COC after refi: $24,080/$230,000=10.47%

I am a rookie investor, and would love to hear any comments/questions on my deal and/ the calculations.  

Thanks for reading!

@Carol W. I think you did a great job for your first deal. I think this is just one example of how investors can increase the value of their properties. 

Are you managing the property yourself? Is the property in Oakland? A 4 plex in the bay area for 920 seems like a great deal to begin with. 

Next time someone says "Bay Area real estate is too expensive, and unfriendly to landlords because their a bunch of evil lefties, and it's impossible to make anything cash-flow positive, and the cap rates suck, and bla bla bla," I will refer them to this thread and your outstanding success in....

(drum roll for those that can't pull property profiles)

...The People's Socialist California Republic of BERKELEY!

Well done at proving that there are deals to had in any market, at any time, if you just look hard enough and take appropriate calculated risks @Carol W. .

Medium logo behlChris Mason, Bay Equity Home Loans | [email protected] | 415‑846‑9211 | https://www.bayequityhomeloans.com/chris-mason | CA Lender # 1220177

Originally posted by @Chris Mason :

Next time someone says "Bay Area real estate is too expensive, and unfriendly to landlords because their a bunch of evil lefties, and it's impossible to make anything cash-flow positive, and the cap rates suck, and bla bla bla," I will refer them to this thread and your outstanding success in....

(drum roll for those that can't pull property profiles)

...The People's Socialist California Republic of BERKELEY!

Well done at proving that there are deals to had in any market, at any time, if you just look hard enough and take appropriate calculated risks @Carol W. .

 It's not so hard finding deals, if you have 400K cash on hand.

Great job @Carol W. . How much cash did you offer your tenants to move out?

Originally posted by @Carol W. :

Hi fellow members,

I closed on a 4-plex six months ago, with three units occupied and one unit vacant.  Rented out the vacant unit at market price ($2700) on the weekend after closing.  I also submitted application for rent increases on all three occupied units to the maximum rent schedules, which gave me a total increase of $865/month.  Upgrades to property: new windows, exterior paint, new laundry room, hot water boilers, landscaping, total cost: $50k.  Offered cash to  all three existing tenants to move out, and one of them accepted and moved out on the 4th month.  I spent one month and another $50k fixing up the apartment, and increased the rent from $1743 to $2800.  Total rent increase since purchase: $4622/month.  Immediately after I made my 6th mortgage payment, I applied for a cash-out refi with the same mortgage broker that got me the purchase loan, and am closing on the refi with a 0.125% higher interest with a $170k cash out this week.

The original purchase price was $920k, with $300 down.

Total cash invested=$300+$100=$400k, 

COC before refi: $35,280/$400,000=8.82%

Current appraised value=$1.175m, new loan=$800k, cash out amount=$170k

Total equity gain=$75k, 

COC after refi: $24,080/$230,000=10.47%

I am a rookie investor, and would love to hear any comments/questions on my deal and/ the calculations.  

Thanks for reading!

Awesome to read and hear this. Good for you and hopefully many more deals like this for you.

@Radhika M. Thx!  Yes, I am managing the property myself right now, so that I can learn the in's and out's of being a landlord.  And yes, the property is very close to where I live, which makes it very convenient to check on it often.

@Chris Jones.  I only offered a month's rent plus their moving cost to the tenants to motivate them to move out.

Originally posted by @Amit M. :

@Chris M.  that's funny brah, but you were singing a different tune on this thread:  https://www.biggerpockets.com/forums/311/topics/26...

Care to reconcile -;)

I am HAPPY to be proven wrong by someone making something work that I might have suspected would be improbable. :)

Any rule of thumb is going to have examples of folks doing the opposite and succeeding. Somewhere out there is someone listened to the entire BP "A Beginner's Intro to RE Investing," did the exact opposite of everything suggested, and somehow made a million bucks.

Medium logo behlChris Mason, Bay Equity Home Loans | [email protected] | 415‑846‑9211 | https://www.bayequityhomeloans.com/chris-mason | CA Lender # 1220177

@Carol W. Congrats on your deal! Sounds like you've done really well!

If you don't mind me asking, what improvements did you do to the units? I'm working on a handful of properties in Berkeley near the Oakland city line that sound similar to yours.

@Carol W. , this is inspiring! I'm also a beginner in the Bay Area and I love reading what you've done.

Congratulations!

That is awesome, congratulations on your success. 

@Carlos Mendez Roca I renovated the unit from top to bottom, it was an expensive renovation and I have learned where I could have saved money next time.  I would be more than happy to share the details with you if you send me a message.

Are you sure your a "rookie"??? Wow, Congrats! Very inspirational to say the least.

Very inspiring story! I am too very interested in how the upgrades went, and your opinions on where you could have saved some cash. We are in the process of upgrading the unit we are living in. Saw your previous reply- cannot find a way to message you- says contact info is hidden. Thanks!

@Camille Joos-Visconti I think if you become someone's colleague on BP, you can send a direct message.

To answer your question, I spent $50k on remodeling the entire 2-bdm apartment, including new sheet rocks, ceiling, paint, kitchen cabinet, countertops+all new appliances, new flooring, new bathroom, re-finished all doors, new recessed lights....but I learned that I could save money on hiring a good GC, instead of negotiating with individual sub contractors myself. Another advantage to using one GC with a sizable project is when something goes wrong after the remodel, you can go back to the GC instead of trying to figure out whose mistake it was, because I learned that most of them would just try to blame the others for the problem.  Also, I would use middle of the line quality materials, instead going high end on rentals, like I did.  Lastly, add upgrades that will increase your rent, not ones that will just make the place look better.  For example, I used the money on adding more kitchen cabinet+a dish washer, instead of adding a tiny window above the sink to make the kitchen prettier.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you