Closed on our 3rd deal with private money.
Investment Info:
Small multi-family (2-4 units) buy & hold investment.
Purchase price: $54,000
Cash invested: $1,000
This is our 3rd deal we have closed on, and puts us at 7 units total now. 3 duplexes, and a single family used as a vacation rental.
What made you interested in investing in this type of deal?
We are growing our portfolio of small multi family's. Always looking for new opportunities.
How did you find this deal and how did you negotiate it?
Listed on the MLS. They were asking $65k, we offered $55k cash and they accepted. After we did the home inspection we asked for $5k in concessions to fix what needed to be fixed, they declined, and said they would fix the issues, that they had already dropped enough off the price. After they fixed all issues we closed. When the real estate agent did the final walk through she told us they had spent nearly $10k on all repairs.
How did you finance this deal?
Private investor.
How did you add value to the deal?
The "almost $10k" the sellers had put into the house updated the electrical to to new breaker boxes instead of old fuse boxes, new meters, and new main lines from meter to box. Re shingled the roof, and some plumbing work. We also charged more for the upper unit than they did, and have plans to raise the rents to market value for the tenants we inherited from the seller.
What was the outcome?
We currently have both units rented for $625, and $550 (inherited tenants, rent will go up for this unit in the future), $1,175 total. Our loan amout with the private investor is $866, at 5% interest, taxes and insurance around $200 a month, current cashflow $100+. Loan will be paid in full in 6 years.
Lessons learned? Challenges?
If soneone asks for seller concessions to give it to them if its reasonable, that way it is on the buyer to fix the issues, that may cost even more than what they asked for. Also if you fix it as the seller odds are the buyer wont be happy with it anyway.