I'm about a month late posting this, but better late than never right? On January 31st marked my first year of being a landlord. You can read a little more about that purchase here Closed on very first property!!! and here Congrats on Skipping the SFR Phase and Going Straight To Multi's. We ran into a bit of hiccups in the first few months of ownership.
First off 5 of the 6 units were occupied by USDA voucher tenants. the other unit was a full pay resident. This was new to us and had to jump in with little knowledge on how the process works. For the first 4 months of ownership we only received the tenant portion of rents which amounted to a little less than half of the full monthly rents. Luckily once we started the process of getting those voucher payments sent to us we ended up getting back payments. We ended up eating only one month of the Voucher portion of the rents.
Month 4 of ownership we ended up having a vacancy. This was scary as this was our first vacancy and really didn't know what the process of turning a unit. This vacancy also occurred at the worst possible time as my partner and I also work full time as farmers, this happened in the middle of spring planting. We had already been in contact with a handyman and with the help of another local investor we were able to assemble the team needed to help get the unit turned. I believe on that unit we had it rented within 3 weeks of the vacancy. Pretty good given the circumstances
Fast forward another month we ended up having another vacancy due to the tenant passing. This time around we had planned to do some minor updating. We had our handyman put down new flooring in the kitchen area. Along with light fixture updates and upgrades in the bathroom. We had to wait a bit for the family members of the tenant to move out the belongings and our handyman had to finish another job, so this turn did take us about 1 month to get filled.
With all that this property still produced an 89% cash on cash return. Look forward to what this year may bring. We increased the NOI from about $15k to $17k as well.
With the success from our first purchase we decided to look for our next acquisition. In December 2017 we acquired property number 2 and 3. A 9 unit and a SFR. These were on the MLS as a package deal. The current owner was ready to retire. We had looked at this property about a year and half prior but felt that the property was listed for too much at $350,000. At the time I was timid to offer much less. After sitting on the market for over a year they reduced the price down to $300,000 at this point I knew we were getting closer. We decided to make an offer at $250,000. The seller didn't want anything less than $280,000. After a few times going back and forth we ended up purchasing the property at $280,000 on land contract. She agreed to 20-year amortization @ 2% interest with a balloon payment at 5 years. With the option to extend. Currently the NOI on this property is at $24k. Rents are $100 - $150 per unit below market. I would expect to get those rents to market rent within the 5 years to refinance to pay off the land contract.
On the look out for the next property!
Congrats Corey and all the best on the next deals
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