Duplex Buy and Hold in Lexington (southside)

8 Replies

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $181,000
Cash invested: $20,000

This is a duplex that I bought in poor shape planning to get rid of bad tenants, fix up, raise rents and re-let.

What made you interested in investing in this type of deal?

This was my first multi-family investment to work toward my goal of obtaining passive income through small multi-families.

How did you find this deal and how did you negotiate it?

MLS. Negotiated through realtors.

How did you finance this deal?

10/1 ARM, non-compliant in-house loan with local bank.

How did you add value to the deal?

Evict bad tenants, clean up property, make minor renovations/upgrades.

What was the outcome?

Bad inherited tenants turned out to be REAL bad. Stopped paying rent after first month of ownership and had to evict them both at once, which was unplanned and financially difficult. Rehab was more expensive than planned because they damaged the units more than expected. Cleaned up quick with my contractor I've used before, but has proved difficult to re-let (likely because of the neighborhood).

Lessons learned? Challenges?

Inheriting tenants provides a huge unknown. Be prepared for anything and do background checks on them before purchase. Request ALL due diligence docs re: current tenants from seller.

From this deal I have decided to be more picky about the neighborhoods I invest in. In the future I will forgo a little profit to buy in a clean, safe neighborhood where vacancies are easier to fill.

Great post! Love to see when people post the real side of investing. Everyone wants to tote their rainbow cloud around and show other people how good they are. Just remember, you didn’t lose, you learned :) 

@Megan Day I can relate! Bought 2 duplexes last year as a package deal and within the first 3 months we had lost/evicted 3 out of 4 tenants. And the 4th tenant was paying late (and not in full) and was not very responsive. We are now through to the other side. Got the units cleaned up and rented out at 100+ more per door and the cash is flowing! Inherited tenants can sometimes be a blessing, sometimes a curse for sure.

On the other hand, we inherited tenants in our first ever SFH rental and they have renewed for the 4th straight year and they are great. It can be hit or miss! Good luck with your duplex!

How are you able to get financing with such low down payments? I'm sure I haven't done enough due diligence, but I keep assuming that I'll do my first deal with 20-25% down (because that's how I bought my home and I know it works - ha!)

@Bevin Morgan typically you'll be able to find 10-15% down options on SFH investment properties(will have PMI until 20% equity threshold).... 20-25% on investment MF's.... and then if you live in one of the units.... you can get products such as FHA with 3.5% down payments(will have PMI until 20% equity).

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