First Investment! (Small Multi-Family)

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First Investment! (Small Multi-Family)

Randall Barrett
Real Estate Agent · Nashville, TN · Member since 2015 · 21 posts · 56 votes

Hi Everyone,

I just posted my first new member post, and figured I'd post my first investment here.

This property needed a lot of work. It's in a great location in Nashville that became highly sought after. It's a triplex that my wife and I bought about 9 years ago and have lived in one of the units since. We inherited tenants that have lived there for 20+ years. Within 2 months one of the tenants passed away and the other vacated. We knew the place would need to be a complete gut once we had vacancy. It took about 2.5 years to renovate the three units one by one. We ran into major problems with our subcontractors which cost us a ton of time and money. The place is finally all finished, filled with tenants and fits the neighborhood.

Heres some numbers...

Purchase Price = $221,000

Renovations = $85,000 + A lot of sweat equity and help from Father and Law.

Gross Income = $3,595

Cash Flow = $1,790

*My wife and I still live there. We decided to furnish one unit for month to month rental, which is going well for us so far. The other unit we rent is long term.

As I'm very new, if anyone has any questions I'd love the challenge in answering them for practice. It was a whirlwind getting this place done with a full time job and 2 babies under years old at home. But now that we're on the other side we're ready to go full steam ahead to the next one!

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Peter Lim
MD · Member since 2017 · 8 posts · 8 votes
8y

HI Randall,

Can you go into more detail about the numbers? Did you use a bank loan to finance the renovations? How did you go about finding suitable tenants? Any advice on finding contractors? 

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  • Tony Savage
    Real Estate Broker · San Diego, CA · Member since 2016 · 187 posts · 117 votes
    8y

    Good job Randall,  I too would like to know if you financed this deal or you went in all cash?  If it was all cash your return is right around 7% annually. Obvioulsy the return would be a lot better if you got financing.

    1Reply
  • Account Closed
    New York City, NY · Member since 2016 · 3 posts · 2 votes
    8y

    Fantastic job - looks great.  Well done!

    0Reply
  • Randall Barrett
    OP
    Real Estate Agent · Nashville, TN · Member since 2015 · 21 posts · 56 votes
    8y
    Originally posted by @Tara Williams:

    Nice work! Sometimes the biggest headaches turn out to be the best investments. What kind of issues did you run into with the subcontractors? I'm just curious because I'm thinking of becoming my own project manager on a rehab and just hire subs.

    Thanks! Hmm.. where do I start?! So many issues, but it was definitely worth all that I learned. Our main issue has been that we were having a hard time finding reasonably priced sub-contractors who showed up when they said they would, did good work, and finished quickly or in a reasonable amount of time. 

    We weren't on top of our sub contractors in the beginning and I'm sure they definitely took advantage of it. They would not show up at all for days and even change their quotes on a whim, but once we were more hands-on and in daily contact, that got better. We also started getting a feel for how long each tasks usually takes and we could just see problems with contractors faster. We started realizing that they just usually don't run the business side of things well and they will take on any job we ask them about because they don't want to lose out on the work. Some weren't telling us they're really busy with other jobs right now, and we'll have to wait, so they take the job and give us a bunch of personal excuses in a row (my wife is in the hospital, my kids are sick) until they can make it to our project. This taught us to be very hands-on and that being a project manager for your reno is definitely a full-time job in and of itself! I know it seems like we should've known this, but we had to learn it the hard way. Just be on top of your people and continue to grow your sub contacts list any way you can. We get a ton of quotes on everything now and we learn new things from each person we talk to and also grow our contacts list. 

    1Reply
  • Alessandra Arbor
    Real Estate Agent · Norwalk, CT · Member since 2018 · 1 post · 0 votes
    8y

    Congratulations on a job well done! 

    0Reply
  • Canel Cole
    Rental Property Investor · Houston, TX · Member since 2018 · 7 posts · 1 vote
    8y
    @Randall Barrett I am also a beginning investor and would like to know what kind of problems you ran into with the sub contractors ?
    0Reply
  • Rotchil Noel
    ORLANDO, FL · Member since 2015 · 30 posts · 35 votes
    8y
    @Randall Barrett That was some hard work but it definitely paid off!
    0Reply
  • Felipe Lois Affini
    Flipper · Anna-TX · Member since 2017 · 71 posts · 76 votes
    8y

    Great Job @Randall Barrett ! 

    If You could, I would like to ask two questions: 1) What is the ARV of the property? 2) Could You give us a little more detail on the monthly costs?

    Thanks and good luck on Your next projects!

    0Reply
  • Tomas Nunez
    Union City, NJ · Member since 2018 · 3 posts · 0 votes
    8y

    Great job!

    0Reply
  • Robin Lewis
    Houston, TX · Member since 2018 · 4 posts · 0 votes
    8y

    I'm in the new stages of all this, and am working on getting the guts for my first flip.  How do you find reliable contractors to help with renovations?  Or did you do all of the reno yourself?

    0Reply
  • Rick MorrisonPro Member
    Investor · San Francisco, CA · Member since 2015 · 4 posts · 2 votes
    8y

    Great rehab @Randall Barrett, question: Of that $221,000 purchase price, what was the downpayment? I'm curious to know what the all-in ROI is.

    0Reply
  • Roger Pinn
    Member since 2018 · 4 posts · 0 votes
    8y
    @Randall Barrett looks amazing
    0Reply
  • Willie Cunningham
    Jefferson Cty, MO · Member since 2017 · 28 posts · 11 votes
    8y
    @Randall Barrett wow! Beautiful results with the renovation. Forgive me but it seems like $80,000 is a lot to invest in a property for over 2 years. I would think that with frugality you could almost build a nice sized home here in Missouri for that price. I’m not trying to seem mean or anything like that. But please help me to understand because if I had to spend that much on a property I would flip out. Once again I say this with all due respect
    0Reply
  • Tara Williams
    Atlanta, GA · Member since 2018 · 12 posts · 2 votes
    8y
    Originally posted by @Randall Barrett:
    Originally posted by @Tara Williams:

    Nice work! Sometimes the biggest headaches turn out to be the best investments. What kind of issues did you run into with the subcontractors? I'm just curious because I'm thinking of becoming my own project manager on a rehab and just hire subs.

    Thanks! Hmm.. where do I start?! So many issues, but it was definitely worth all that I learned. Our main issue has been that we were having a hard time finding reasonably priced sub-contractors who showed up when they said they would, did good work, and finished quickly or in a reasonable amount of time. 

    We weren't on top of our sub contractors in the beginning and I'm sure they definitely took advantage of it. They would not show up at all for days and even change their quotes on a whim, but once we were more hands-on and in daily contact, that got better. We also started getting a feel for how long each tasks usually takes and we could just see problems with contractors faster. We started realizing that they just usually don't run the business side of things well and they will take on any job we ask them about because they don't want to lose out on the work. Some weren't telling us they're really busy with other jobs right now, and we'll have to wait, so they take the job and give us a bunch of personal excuses in a row (my wife is in the hospital, my kids are sick) until they can make it to our project. This taught us to be very hands-on and that being a project manager for your reno is definitely a full-time job in and of itself! I know it seems like we should've known this, but we had to learn it the hard way. Just be on top of your people and continue to grow your sub contacts list any way you can. We get a ton of quotes on everything now and we learn new things from each person we talk to and also grow our contacts list. 

     Sorry you had to learn it the hard way. I appreciate your response. This is a great reminder and learning lesson for me not to be too trusting (which is my natural personality- not a good thing in this business) with people. I’m sure going forward for you the next project will be a little easier with all you have learned from this one. 

    0Reply
  • Randall Barrett
    OP
    Real Estate Agent · Nashville, TN · Member since 2015 · 21 posts · 56 votes
    8y
    Originally posted by @Willie Cunningham:
    @Randall Barrett wow! Beautiful results with the renovation. Forgive me but it seems like $80,000 is a lot to invest in a property for over 2 years. I would think that with frugality you could almost build a nice sized home here in Missouri for that price. I’m not trying to seem mean or anything like that. But please help me to understand because if I had to spend that much on a property I would flip out. Once again I say this with all due respect

    Thanks! Also, I think it's a good point I've been wanting to address. We were very lucky with our location and we've had a lot of appreciation. 

    We definitely spent more than we wanted to. We renovated 3 different apartments in this one triplex property. The first one, we did almost all the work ourselves and it took us a long time to complete (about 8 months), but we had very little experience beforehand. We also had help from my father-in-law who has worked on basic home improvement projects around his home over the years. The other two apartments we ended up using contractors which of course raised our expenses considerably. We still did some work ourselves, but it was worth it to us to get the job done quickly. Lastly, the 2 bedroom apartments in our neighborhood start at around $2k/mo, so it was worth it to us to renovate our apartments to a higher-end style. We were very lucky to get this property when we did (before our neighborhood is what it is today). Our property hasn't been formally appraised, but our guess based on zillow and other what we know about similar properties in the neighborhood is that the property is now worth somewhere around $700k. We have million dollar homes in our little neighborhood and it's a very walkable tourist hot spot. Our property is mixed use zoned (residential & commercial) which raises it's value.  I hope that helps! 

    2Reply
  • Randall Barrett
    OP
    Real Estate Agent · Nashville, TN · Member since 2015 · 21 posts · 56 votes
    8y
    Originally posted by @Olek Sosnowski:

    Hi Randall, how did you finance the purchase? Is it a good CF considering purchase price and rehab costs?

    Alex

    I think the loan was pretty basic, but I was surprised we even got it. The terms I remember were 5.6% loan with $33k down and $3k earnest, and we had to live in it for a year. I don't remember the numbers on closing, because I didn't know to look at all of that then. My father-in-law graciously let us borrow the money for the down payment. He's been a huge supporter of us having real estate and income properties from the beginning!

    When we first got it, it was renting for about $700 per unit and was the ugliest house on the block. Now we can get about $1800 per unit because we're in a newly sought-after high-end downtown neighborhood. 

    We've been very lucky that we were able to make a lot of mistakes along the way (overpaying for contractors, redoing work twice, etc.), because the neighborhood went from up and coming in 2010 to highly sought-after, trendy luxury living by 2016. 

    1Reply
  • Ricky Sabogal
    Flipper/Rehabber · Chesapeake, VA · Member since 2017 · 33 posts · 6 votes
    8y
    Looks amazing!! Congratulations!!
    0Reply
  • Fabian Gonzalez
    Meriden, CT · Member since 2018 · 21 posts · 5 votes
    8y

    Wow! What an amazing rehab. Great job you guys. @Randall Barrett Like many other people have already asked, I am definitely curious as to how you financed your deal? How you funded the rehab costs? Etc.

    1Reply
  • Binh Nguyen
    New York, NY · Member since 2018 · 1 post · 0 votes
    8y
    Looks great! How did you finance the renovation?
    0Reply
  • Rudy Estrada
    Investor · Los Angeles · Member since 2017 · 22 posts · 12 votes
    8y

    Looks really good. Good job!

    0Reply
  • Natalie Young
    Investor · Atlanta, GA · Member since 2016 · 2 posts · 0 votes
    8y

    This looks fantastic! Great way to optimize space. I currently own a duplex and will be looking to renovate again in a few years. May I ask how many rooms per unit in this triplex?

    0Reply
  • Dennis O.
    Silver Spring, MD · Member since 2017 · 5 posts · 1 vote
    8y

    I am inspired and excited for you!

    And that, my brothers and sisters, is how you get out of the rat race and become financially independent.He has already 3x the value of the property by staying there, rehabbing it, and creating multiple streams of income!

    Just out of curiosity what does the AirnB bring in?

    0Reply
  • Daisy Davis
    Rental Property Investor · Atlanta, GA · Member since 2017 · 1 post · 0 votes
    8y

    Thanks for sharing and congratulations! You did an awesome job. Good luck with all your future projects! 

    0Reply
  • Gina AnsonPro Member
    Rental Property Investor · Boise, ID · Member since 2017 · 22 posts · 8 votes
    8y

    Super great job!  Congrats...and, you are not a newbee, just saying! ;)

    0Reply
  • Rachel Fourquet
    Seattle, WA · Member since 2018 · 9 posts · 24 votes
    8y

    Love the renovations! It looks very clean and modern. Our first rental property is in the Green Hills neighborhood in Nashville -- such a great city to be invested in.

    Do you find that it's a lot of management to keep a month to month furnished rental occupied?

    0Reply
  • Randall Barrett
    OP
    Real Estate Agent · Nashville, TN · Member since 2015 · 21 posts · 56 votes
    8y

    @Dennis O.  Still in the rat race for now...but we're on our way I hope! We list our furnished unit with utilities included on Craigslist and rent it for $1900 / mo. We market towards traveling nurses, traveling business people, students in town for internships etc... Our next project is to actually get an Airbnb permit. We don't have one now so we do a minimum one months rent for this unit.

    @Binh Nguyen and others. We financed the renovation buy both being frugal and using my income from my day job. We also used credit cards for much of the materials to get through the rehab as well as doing a lot of the labor ourselves. We moved at a snails pace to to complete the work so we could afford it over time!

    @Natalie Young. Each unit has 2 bedrooms and one full bath. ~700 sq feet each.

    @Rachel Fourquet.  Green Hills is great! I'm currently taking my real estate classes in Green Hills. Congrats on having a rental there...it's still booming. 

    So far we've only turned over our furnished rental twice. Both times were people responding to our Craigslist post. Both were very clean tenants that stayed for 4 months. Us living on site really helps with management....but we haven't had to do much so far. Cleaning took 1/2 day. Not much to restock as if we would have to if it were an Airbnb. So far we like the frequency of 4 months as it forces us to go in and inspect and clean the unit. I still hope to hire a property manager one day so we can leverage our time elsewhere.

    0Reply
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