Small multi-family (2-4 units) buy & hold investment.
Purchase price: $296,000
Well kept 4 plex on a quiet street, close to a grocery store, church, library and school. Attached garages for all 4 units, separate meters for water and electric usage and newer vinyl siding and roof.
What made you interested in investing in this type of deal?
It was newer construction with great amenities. It hit the 1% rule based on estimated rent. It was a little unnerving buying it as it was vacant but was a nice thing in the long run as we could "start fresh" with new tenants with stringent background, credit and income checks.
How did you find this deal and how did you negotiate it?
Actually on the MLS and through an agent. There were 6 total offers and we still negotiated down about $20k from the original listing price.
How did you finance this deal?
Commercial loan, then refinanced in 2020 to a lower rate for a portfolio loan, fixed for 10 years at 4.5% with another property we bought in 2018.
How did you add value to the deal?
Really did not need a ton of updates but added new washers and dryers for each unit, a new sump pump and gutter guard system throughout the 4 units' basements (not a drop of water since even with the heavy rainfall and snowfall the last 2 years) as well as a radon mitigation system which surprisingly has interested a lot of renters.
What was the outcome?
Excellent property, has cashflowed well and very low vacancy.
Lessons learned? Challenges?
The biggest challenge that I did not anticipate and I didn't see mentioned in any book, blog or podcast I used was not factoring in the losing of the homestead exclusion. The previous owners lived in 1 unit and rented out the other 3. Year 2 that we owned it the property taxes jumped substantially. The other thing that was a bigger challenge was the previous owner that lived in one unit smoked VERY heavily and that unit needed a very thorough cleaning, new carpet and new paint.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
Yes, Cheryl Evans (now a co-worker) at MN Lands and Homes in Marshall, Stan Holmberg at First Independent Bank in Marshall and Van Binsbergen Property Management company.
Thanks for sharing @John Rickgarn ! Starting with fresh tenants is the way to go IMO. Can you share details on the 20k decrease?
@Adam Tafel Well just highlighted the concerns from the inspection report and stressed the time it would take to get rent ready and with it being vacant would take time to fill, this cutting into the cashflow.
@John Rickgarn that's a pretty huge reduction, nice work!
Well original list was high IMO. Originally listed for about $316k, we bought for $296k, appraised for $299k in 2016 and $310k in January of this year.
Great investment @John Rickgarn ! Thank you for sharing your story. The info on the Radon Mitigation System adding more interest to renters is great to know. Did you do anything specific in your offer that you think made it stand out from the others?
Wooowee. Way to go on this duplex. Congratulations.
@Stephanie Haggerty well we included a signed personal letter, highlighting how we wanted to get into real estate investing and continue to take care of the property. Our agent said it seemed to make a difference.
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