Small multi-family (2-4 units) buy & hold investment in Stateline.
Purchase price: $540,000
Cash invested: $150,000
4plex with 2 - 3 bedroom units and 2 - studios. Once studio was completely remodeled and turned into an airbnb and the other 3 units are rented long-term. The exterior was completely upgraded as well.
What made you interested in investing in this type of deal?
It was time to finally start investing in larger properties than single family homes. It's the only viable way to scale and is the same effort as a single family house.
How did you find this deal and how did you negotiate it?
I mailed letters to about 70 homes in this area. The seller and I built a relationship over 6 months and one day he decided he'd come down to my purchase price and we bought the property less than 2 months later. He had another investment he'd prefer to spend his time and money on and was ready to dump the 4plex.
How did you finance this deal?
We used a credit union portfolio loan to only put down 16.91% instead of the standard 25-30% down on a traditional commercial loan.
How did you add value to the deal?
We remodeled one of the units and the exterior. The remodeled unit is on airbnb as a VHR and we doubled the rent of a LTR unit. We also purchased the home 160K under the appraised value so we will do a refi-cashout in a few months and pull out almost all of our initial investment.
What was the outcome?
Overall this is a huge win. We are getting a 12%+ return monthly & after the refi cashout most of the investment we'll likely be 22%+ return. The property is also in an area that will most likely exponentially increase in value.
Lessons learned? Challenges?
1. agents can ruin a deal that the seller and buyer worked out and spoon fed to the agents.
2. seller turned power off a day early creating unnecessary "fires" to put out ahead of time
3. tenants need boundaries (immediately) to limit unnecessary interactions
4. if you buy a home warranty remember you bought it.... or you'll pay more out of pocket unnecessarily
5. The tenants will try to take advantage of new buyers.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
Mountain America Credit Union has great portfolio loans but if you can get the same loan somewhere else do that instead as we've yet to encounter a competent employee. However, MACU's portfolio loan is amazing so to us it's worth it...
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