First 4-Plex Deal Deep Dive!
A little less than two weeks ago I secured my first deal and it was a BIG one. Prior to May of 2018, I knew literally NOTHING about REI. That didn't stop me from closing on a 4-Plex (Quad) in Savannah, GA about 5 minutes from my current apartment (it can be done, trust me)! I owe this all to the BP community for providing me a forum to educate myself and network with other like minded individuals. In the spirit of the Podcast's "Deep Dive," I figured I would go ahead and provide a Deep Dive of my own for anyone who has read this far into my post :)
Type: 4-Plex - Savannah, GA
Units: 4 (2BR/1.5BA, 1200 sq ft Apartments)
Price: $350,000
Current Appraisal: $395,000 :) Equity :)
Rehab Estimate: $30,000
ARV Estimate: $460,000
Current Rent Roll: $2950
Projected Rent Roll: $4500
Cash to Close: $2,400 :) :) :)
So here goes - I found this property by just searching the MLS (mainly Trulia and Zillow). I already had an agent who was referred to me by a friend that specializes in REI clients. I visited the property, spoke with the owner (by chance) and went home to run the numbers (thanks to BP's calculators). After working out the numbers I realized this is a perfect BRRR opportunity! The property was owned by a sweet old lady who had owned it for over 30 years. She was just tired of playing Landlord and wanted to move on to something else. I tried to work out seller financing, but she had already refi'd twice and needed to pay down her loans.
I was able to fund the deal using my VA entitlement (which tops out at 4 units). Also, I ran a market analysis and learned that the current owner was charging half of what she should have been charging in rent. Suffice to say, the property was 100% occupied! Plus, she put on a brand new roof and updated all the HVAC within the last 5 years! Although it was built in 1958, the bones on this Quad were solid and the risk of any major capex was quite low (knock on wood).
So now I'm in the process of applying some much needed TLC. Last week I had the "swamp" in the backyard graded and turned into a concrete parking pad for much needed offstreet parking. I also have contractors coming in to provide some much needed exterior updates. Once the tenants start turning over, I plan to update their bathrooms and pull them out of 1958 and into the 21st century which should definitely add some value to the building. All in all, I'm projecting approximately $3,000 in rehab per unit ($12,000) plus $6,500 in exterior work plus $5,000 to update the electrical with a $3,000 contingency reserve and a $2,000 management reserve - about $30,000 total.
In summary, I closed on this Quad with $2,400 cash with 100% LTV (Thank you VA). I will put about $30,000 into it while raising the rents to market value. By May 2019, I expect the building to be 100% rehabbed earning an NOI of $55,200 with a Cash Flow of about $1,600 per month (after PITI, Vacancy, CAPEX, etc.) and a CoC Return of 57%!
You show me how to do that in the stock market and I'll quit my job to be a day trader. By the looks of it, I think I'm gonna stick with REI though :)
Thank you BP for all of your insightful knowledge and showing me the path towards financial freedom! Maybe I'll be on your Podcast some day (give me like 5-7 years haha)! On to the next MFH deal :)