Small multi-family (2-4 units) buy & hold investment in Gainesville.
Purchase price: $257,500
Cash invested: $103,000
This project was a bear. Originally the property did not appraise (the first lender used an out of area appraiser and the comparable properties were not true comps). So at the 11th hour we had to move through a new broker and get approved and run another appraisal. Which came back appropriate. We then proceeded to fully renovate the interiors of all the units. We asked that the seller leave all units vacant in order to shorten the renovation timeline. Side note; the roof was replaced as part of the contract so one less thing to worry about. We replaced all flooring, painted all interiors, replaced all outlet plugs and covers, new light fixtures, fans in living rooms and bedrooms, re-faced kitchen cabinetry and countertops, refinished all bathroom tile/tubs, re-faced bathroom vanities, replaced shower fixtures and overhead hood vents. A few curveballs: we managed this project ourselves due to the budget. Only issue we had regarding the management of the project was with the handyman portion of the job as he was slow and the work was not up to par(he had to redo tile and several fixtures). We also ended up replacing an AC unit that was unexpected and re-plumbing the washer hookup box due to a leak. But that kind of thing is the norm when renovating units. Expect and budget for it!
What made you interested in investing in this type of deal?
The opportunity. Previous owners were not experienced landlords and as a result the property became distressed. Significant deferred maintenance and lower than market rents.
How did you find this deal and how did you negotiate it?
Property fell out of escrow at higher price due to appraisal. Our team was able to increase down payment whereas other buyer could not. Asking price was $279k we agreed to $257,500.
How did you finance this deal?
How did you add value to the deal?
$50k estimated budget to completely renovate interiors of all units.
What was the outcome?
Former rents were between $550-$600/month. After renovation units were rented at $900/monthly. 18% cash on cash return.
Lessons learned? Challenges?
Tried to get cheap and replaced all appliances with used versions from local vendor. Tons of service calls the first few months eliminated any savings we achieved. In the future we will purchase new. Not worth the hassle and money.
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