Small multi-family (2-4 units) buy & hold investment.
Purchase price: $225,000
Cash invested: $80,000
Advertised as a portfolio sell, acquired two (C - Class) duplexes (1 bldg - 2 x 3 bed / 1.5 bath; 2 x 2 bed / 1 bath) in the five points area of Huntsville.
What made you interested in investing in this type of deal?
After spending a few months reading, listening to podcasts and webinars, i was anxious to get started with applying the strategies i had just learned. I was primarily looking for MF. There was a great amount of excitement with all this talk about growth within Huntsville and Madison. I wanted to take advantage of this opportunity by buying in the heart of Huntsville...5 Points. Also, the rent rolls suggested that the current rents were grossly under market and an ineffective property manager.
How did you find this deal and how did you negotiate it?
These sets of duplexes was on loopnet. The owner was unloading a good amount of his portfolio to invest in commercial retail buildings. He had these last two duplexes for sale at $240k. I worked with the transaction agent from SVN Realty and based off the analysis ran, I offered a price of $225k. This was accepted with the opportunity for retrade. In the end, I was able to get a few things fixed. But I should have focused on the electrical service...
How did you finance this deal?
I had already refinance two of my longterm held properties that gave me the capital for the down payment and renovations on the first unit which was vacant at the time of purchased. I went with a local community bank (First Community Bank Cullman) that offered a portfolio loan, 5.99% fixed for 5 years on a 20 year amortization.
How did you add value to the deal?
We did an overhaul on the first unit which was vacant. Expanded the upstairs bathroom and closet in the adjacent bedroom. LVP flooring all throughout the 1st floor. Upgraded the kitchen with new countertops and all SS appliances, too include W/D. I purchased the appliances through FB marketplace at a great discount.
What was the outcome?
After 10 months, i increased my rent to 26%, by November will be by 36% after we renovate our final unit. The properties were recently appraised for $313k based on the sales approach, which the bank went with. The income approach was $17k greater. I was able to get a business LoC for $74k which will fund our next deal later this month...
Lessons learned? Challenges?
Vet your contractor. I was in a rush and didn't check to see if they were licensed. As soon as they began demo and exposed walls, city inspector popped by and shut the project down.This delay humbled me and after 3 months going through 4 more contractors, i finally found one that was "Licensed/Insured" but also that would work with me. The city required me to bring the electrical up to code for BOTH units. Costly venture that I didn't forecast and set me back.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
Steven McRea - FCB Cullman, Paul McDonald - SVN Realty. These gentlemen made my vision a reality by finding, negotiating, educating and funding my first deal that is now in the process of funding my next deal. I also connected with my Realtor/Property Manager (Matt McDermott), thanks to me having to go through the eviction process of one of the tenants. I would definitely say that something great came from that experience!
Way to go @Samuel Garrett ! What LTV did you get on your loan?
@Kiley N., I was able to get an 80% LTV, interest only Business LoC for two years.
I talked to a handful of local banks throughout the area and all were in the 70-75% range, some even had a seasoning period. This bank along with another (Iberia Bank) offered the best terms and rates. I also believe it is dependent on your financial status and most importantly your relationship which I have developed over the course of a year with the two.
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