Large multi-family (5+ units) commercial investment investment in Spokane.
Purchase price: $195,000
Cash invested: $70,000
Saw this property pop up on the MLS and quickly submitted an offer after seeing the location so close to Whitworth University. We found a tenant for the house, allowing us to cover the monthly cost of holding the project, while we submit a comprehensive zoning change with the county, in order to allow the construction of 16 units.
What made you interested in investing in this type of deal?
We love the opportunity to expand our porfolio, and the location to Whitworth University was ideal for a long term hold.
How did you find this deal and how did you negotiate it?
I found the deal on the MLS, and sent it to a few clients. With the risk of the zoning change, it wasn't an easy project for most. I decided to proceed and submitted an offer over asking price, with financing, yet waiving the formal financing contingency. I beat out a cash offer and secured the property.
How did you finance this deal?
I used a conventional lender, since I know the zoning change along could take 12 months.
How did you add value to the deal?
The zoning change should take about 8-12 months.
What was the outcome?
Secured the property. Have a tenant in place currently covering all the expenses including the mortgage. Processing the application with the county to change the lot for Low Density Residential to High Density Residential, with the plan to build 16 units.
Lessons learned? Challenges?
Awesome to beat out a cash offer by waiving the financing contingency. Looking forward to working through the process of a zoning change, and the demolition of the existing home, for the next phase.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
I represented myself :)
Very cool Mellissa! Will this be your first multifamily build? My wife and I looked into it over in Tacoma for an 18 unit that has a blank pad next to it but the cost of construction here just seemed to be too high to pencil out. What do you project your all in cost to be on the project? Best of luck on this deal. Very exciting! Congrats!
@Melissa Murphy Thanks for posting your 3 deals Melissa! Its so cool to see what you are up to. The Office space downtown must be your office. @Kelsey Peters-Wittig told me after your meetup that it was absolutely beautiful. I have no knowledge of what it takes to change the zoning on a piece of dirt so it was surprising to me to see that the process could take 8-12 months to get the change in zoning done. Great subject to learn more about in the future and maybe a good topic in your meetup. Best of luck in all of your RE deals Melissa!
@James Lusk Thank James! Yes, will be our first. The cost to build is very high right now, so will be calculating lots of options in the next few months. This was a bit risky not having firm costs calculated at the time of purchase, but since it is technically a break even with the cost of holding and having a tenant in place, I feel ok holding this longer if necessary to build up enough cash to assure it cash flows day one depending on the cost to build. Plus, the zoning change alone should add value, if I decided to simply sell at a later date.
@Jeff Wittig yes!! This will be a fun project with lots of opportunity to learn along the way! Dealing with the County and the various organizations to go through the zoning change is going to be fascinating, and a new challenge for sure. I always look at each deal for whether or not we are able to test a new investing model. Great topic for our next meetup for sure!
@Jeff Wittig such a pleasure meeting Kelsey too!
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