First multi-family purchase

5 Replies

Investment Info:

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

Purchase price: $190,000
Cash invested: $35,000

This was my first multi-family purchase. There are 3 units in the property, a 2 flat house and a detached couch house. I live in 1 of the units in the 2 flat, have a full time resident in the other apartment, and AirBnb the detached coach house.

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

I needed to be able to live in the property in order to qualify for the best loan options, so a small multi where I could occupy one of the apartments was ideal.

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

Through MLS, with my realtor who is a friend. We looked for about 6 months and put in offers on multiple properties before getting this one. I offered at asking as it was priced appropriately.

How did you finance this deal?

FHA loan

How did you add value to the deal?

I rehabbed both of the main house apartments; doing most of the work myself with my family.

What was the outcome?

Just had the house refinanced with an appraisal at $341,000.

Lessons learned? Challenges?

This house had some foundation issues that required repair prior to moving in. Luckily it came up in the inspection so I was prepared and was able to get a closing credit. As with all remodel projects, there were unknown things that came up as we started opening walls and removing finishes. Many things had clearly been done by an owner that did not really know what they were doing. Lots of code violations that we were able to rectify. Overall it's been a great project with great cashflow.

@Sam Wilson - Thanks! I definitely did not expect it to appraise that high. I've owned the house for 3 years. I waited on the refi because I didn't immediately need to pull cash out and I didn't do the whole rehab in 1 shot. So the current housing market really helped with the higher appraisal. I've actually done a few more upgrades since the appraisal that would probably push it up a bit more, but I'm fine with how it ended up. 

This was my 2nd property purchase that I went through on without truly going through the numbers. I ran some quick calculations in my head and of course did a comp study, but all of that in like an hour or less. Both properties have worked really well for me and I haven't figured out if I have gotten lucky or if I have a decent gut instinct. I found both of these properties before I found BiggerPockets, and I love the tools available here to assist me with making the best investment decisions that I can. 

I plan to hold this property and run it as a rental as part of my portfolio. I am a property manager professionally. I'm currently in the market for my next property. The market here is insanely high right now so I'll probably end up waiting a while. But I'm always on the look out for those hidden gems, properties that scare regular buyers but that I get excited about.

@Lindsey Brewer - Definitely more than luck!!  You obviously know the market and have a great eye for finding properties.  

And you are so right!   Good investors look have very different parameters than the average buyer.

I look forward to hearing about property numero 3!

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