My First Deal with an FHA Fourplex making a 10% cap rate

3 Replies

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $185,000
Cash invested: $6,475

Fourplex that was only half rented but structurally sound in a not great neighborhood. Was my first deal but still knew that this property was way undervalued and just needed a little TLC. Managed to get an FHA on it, did some minor cosmetic changes, raised rents, and am renting out all 4 units and it's cash-flowing really well.

What made you interested in investing in this type of deal?

Long story short, saved up all money from the second job for 3 months and quit the second job, was going to pay off most of my debt but in April 2020 the market was so bad I thought, the only way it can go is up, so I invested in the stock market and made awesome returns. Sold stocks and wanted to use the money to buy a house but then found a triplex that was a great deal. I took too long and a company in Cali stole it from under me. After months found this fourplex and the deal was too good.

How did you find this deal and how did you negotiate it?

Their asking price started at $215K, I offered them $200K but bc it was during covid my preapproval took my bank forever to get processed. Another party got involved and offered them $190k to which they accepted. After a month, the other party couldn't close and they came back to me. My realtor then said, to only offer them $190 to which I did but for them to pay $5K closing costs. They agreed. The appraisal came back at $185k. Offered them $185k with them paying $5K closing and they accepted.

How did you finance this deal?

FHA loan and money I saved up from working a second part-time job that I put into stocks and then cashed out to pay the down payment.

How did you add value to the deal?

A bunch of cosmetic repairs filled the other two units that were vacant, put them all on year-long lease agreements, and raised rents $50/each unit.

What was the outcome?

Valued at $220K from $185k and cash-flowing $732/month

Lessons learned? Challenges?

It's a numbers game. It doesn't matter if I look at 100 deals, as long as I find that great deal, all the work is worth it.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I worked with Vicki Chrysler Hinojosa, she's a real-estate agent and apparently, she has a local outdoor hunting tv show that I didn't even know about until after the deal. She's awesome!

Originally posted by @Dmitriy Fomichenko :

@Rodolfo Suarez congratulations on this investment!

Thanks so much for the encouragement! I’m so fired up that I’m already closing on my second deal in a couple weeks. Didn’t want to at first bc I felt it was too soon since I just started learning about real estate but it’s a duplex and if my numbers are right I’ll be cash flowing about $600/month (which is a really great deal). Part of me feels like I’m going too fast and the other is like “Gotta make up for lost time!”

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