Small multi-family (2-4 units) buy & hold investment in Anchorage.
Purchase price: $547,500
Cash invested: $5,000
2020 Year End Update:
After closing on the property, I immediately rented out the vacant unit within 3 hours using Facebook. The next month, Unit 1 moved out of state & Unit 4 decided to move-in with increased rent. This gave me the opportunity to completely remodel Unit 4 increasing the rent. Months later, my best tenant had to move out. She was kind enough to give me 2 months of notice. It got rented quickly. All in all, I'm very fortunate to have increased the cash flow from $408 to $904 per month.
What made you interested in investing in this type of deal?
Financial Freedom. As a kid, I've always been a bit of an old soul worried about how to secure my future. Of course I've dabbled in stocks, retirement plans, & other investments but I feel that I've finally found my vehicle to ensure my future with real estate. Also it's very gratifying to know that I'm giving people a place to call home and getting rewarded for it in return. The cash flow, equity build, appreciation, and most importantly.. the tax benefits! One of the best decisions of my life~
How did you find this deal and how did you negotiate it?
I actually found out about this property when it went live on the MLS. I'm a licensed realtor in Alaska which helped me because I was checking the MLS everyday for a fourplex property. Once I found this property I immediately contacted the listing agent, received a current rent roll, requested a showing, called the utility companies to confirm expenses, analyzed the deal, & submitted my offer. Using strong comps, I was able to negotiate $27,500 below asking with $13,500 in closing costs!
How did you finance this deal?
Before financing this deal, I used a mortgage broker to shop around for the best rates & least amount of closing costs. After pending, I put down my initial $5,000 in earnest money. At closing, I used my 3% commission as my down payment since I represented myself as the realtor. From there, I received $3,650 in prorated rents and $3,900 in security deposits. I had closed at the beginning of Feb & filled a vacancy so I was able to collect 2 full months of rents before my first mortgage payment.
How did you add value to the deal?
I was able to create instant value by getting $13,500 of my closing costs paid for. This covered all of my prepaids, reserves, & I even had a little left over to go towards my equity. I was also very fortunate to have a such a generous seller who agreed to pay to replace & repair a good portion of the building. Also I made very good use of the two months without a mortgage payment by keeping the property completely occupied and then using those funds to completely remodel one of the units.
What was the outcome?
I'm extremely grateful to have purchased this building as my first investment. I truly feel that I was able to land this deal by studying everyday. If I hadn't educated myself, I wouldn't have moved forward on my offer with such confidence. I remained patient but always stayed ready to pull the trigger. The outcome was that I was able to purchase a building that initially provided $408 in cash flow and turned it into an investment that is now producing $904 with all expenses taken out.
Lessons learned? Challenges?
I learned that every transaction needs to be a win-win for both the buyer & seller. If you're going to request something, make sure you have a good reason for why you are requesting it. I was able to get most of my repair requests accepted by leaving out a lot of the smaller items to help save the seller money, time, & effort. I truly believe that made a huge difference when it came to negotiating repairs. As for pending an offer, always have a reason for your offer price.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
Yes. I am a full-time realtor with Keller Williams Realty and I represented myself on this deal. I primarily specialize in multi family investment properties but I also work with residential & commercial. My goal is to help other people like me to use real estate as a vehicle for financial freedom. If you're interested in investing, selling, or 1031 exchanging in the Anchorage market, then feel free to contact me. I wish you all good health & good fortune in 2021! Happy New Year! 🥳🍾🎉🎊🎈
Thanks Brandi! Appreciate the support!
Congrats from here as well! I actually looked at one extremely similar, possibly the same one, before. Good area and I think you made an excellent investment.
Congratulations on your first investment deal, specially with $0 down. You should be so proud. Keep up the great work @Tae Sung Yoon
Thanks Chris~ It's turned out to be great investment thus far. I've sold three of the fourplexes on the same street so I know that I have instant equity with the way that I purchased it, updated it, & increased the current rents.
Thanks Marlen~ This property has been a blessing thus far. The tax benefits alone will help me save a quite a bit this year. Appreciate the encouragement!
Awesome job, and great before and after photos! Thanks for sharing your experience with this investment!
Congratulations Tae Sung Yoon! I'm jealous that I can't fit the time to pursue my license, I love that clever use of your commission. And what a great looking building, too, I bet those vaulted ceilings attract tenants well! I'm eager to learn from your experience and see what you tackle next =)
Thanks Rachel - Appreciate the support & feedback!
Thanks Georg - I know the feeling. I thought about getting my license 10 years ago and finally made the jump. One thing that I realized is that getting the license is the easy part. The tough part is gaining the experience to negotiate, pend deals using comps & cashflows, using the correct "language" on a contract, & etc. There are a lot more elements to a real estate transaction (especially multifamily) than I had originally thought but it was definitely worth it. Aside from that, the building has been such a blessing & it's been very easy to find tenants. I'm currently working on purchasing another fourplex so hopefully I'll have another post soon. Cheers!
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