Small multi-family (2-4 units) buy & hold investment.
Purchase price: $199,700
Cash invested: $39,700
This is a colonial style building that was originally a single family home converted decades ago to a duplex. There were tenants in place that the seller was prioritizing, which was why my lower offer came out on top since I indicated that I was interested in keeping any tenants conditional on rent roll. I was not aware of the sellers intention to keep the tenants, so I additionally wrote in my offer that the inspection was for informational purposes with option to negotiate if repairs were >5k.
What made you interested in investing in this type of deal?
In December 2020, we rented an AirBnB in FL for my sister to celebrate her courthouse wedding and the owner, Rick, was there in the morning chatting with our family. I indicated my interest in real estate ever since I was a child drafting floor plans and my father and step mother were RE agents for a while. Rick told me not to get my agents license, but instead just get the education needed to be an investor. I immediately started studying and multi fam was my chosen niche, so duplex it was!
How did you find this deal and how did you negotiate it?
I was renting at the time I was looking for a place, and my landlord has been generous enough to mentor me, so she actually found the listing and sent it to me. I went away for the weekend to TN while my partner back in MA went to the showing with me on the phone. I decided to place an offer a little over the asking price, $198k, at $199,700, which wasn't the highest offer. We actually found vermiculite in the attic and requested that the sellers handle the removal before closing, & they did.
How did you finance this deal?
I closed on a traditional mortgage around $159k financed and then about a $40k down payment, $30k of which was from my family. I do have to pay them back, so my cash flow is not super high, but we are house hacking and saving a lot of personal funds doing it this way. I used Norcom Mortgage, which is a local smaller mortgage company. I really liked the responsiveness of the loan officer I was working with and was able to call her at most any day or time to ask questions, which was helpful.
How did you add value to the deal?
We are working on that part now. The knob-and-tube removal will add a lot of value and with my salary working at a non-profit being pretty low, I qualify for grants through the state to help with that removal. I also want to separate the water heater for the units to increase cash flow by not paying for utilities. The heat also needs to be split off in order to have the units pay for their own heat, so that was another benefit to living here. I want to update the kitchen too, so that would help.
What was the outcome?
So far so good. I have my energy assessment scheduled with Berkshire Gas to start the Mass Save program process to try to qualify for that grant. Hopefully soon, the electrical will be updated and we can start working on the kitchen more. I hope to use the momentum off of this duplex to acquire the next investment and to scale quickly from there. I am working on learning everything I can about how to build the processes I need to scale. It feels good to be in the learning phase figuring it out.
Lessons learned? Challenges?
One thing that came up was the internet cables were cut on the outside of the house, and now I know for future showings and inspections to really look at how tenants will hook up to the internet. I want to make it easier on my tenants, and I am glad that I dealt with figuring that out. I also am realizing how valuable it is to live in the property you will be renting, because there are a lot of little things that need attention and hide easily, so they may go overlooked.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
I worked with Sarah Maney in Greenfield MA, Gruber & Tripp LLC in Greenfield, and Norcom Mortgage in MA and CT. I found them all to be very helpful and will consider working with them again in the future.
Great work Amanda. Looks like you really did your homework here & it shows. The equity that you’re going to build will be great too w/all your renos. Not sure how the heating/cooling is in this home but perhaps you’d consider looking at your states green incentives for installing a heating & cooling air source to your tenants spaces. There are plenty tax incentives & possibly able to increase those rent rolls. Good luck!
Thank you, Santiago! I appreciate that a lot. This first property is really going to serve as a great REI education and I also will have more experience under my belt as I am working on networking more to build a team. Its like my real estate resume in a way. I will absolutely check out those incentives you suggested! I put those on my list of things to ask about after the energy assessment. :)
Nice looking house, congratulations @Amanda Kate Nixon !
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