Investment Info:

Large multi-family (5+ units) buy & hold investment in San Diego.

Purchase price: $1,175,000
Cash invested: $288,000

Stabilizing period. Purchased below market value and rents well below market. The units were in very poor condition. The property is undergoing an extensive remodel and leased out to long term tenants at market rents.

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

I have always wanted to own units. I was able to purchase a duplex in San Diego in mid 2018 and this 6-unit with partner near the end of 2018. Both were value add purchases that, in my opinion, had significant upside in value and rents.

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

This deal came from a property manager that we had known from networking with local agents. We made an offer on the property before it hit the MLS, the seller wanted to test the market, didn't get his price on the open market, and we settled on a price that worked for the seller and ourselves.

How did you finance this deal?

The property was purchased with 25% down and a hard money loan for the remainder of the investment. We needed a quicker close on this, so we had to use the more expensive financing option, but are looking to refinance the property with a commercial loan from a local bank in the coming months.

How did you add value to the deal?

We began with exterior renovations and noticed a couple of tenants that had units that needed the most work. Once the tenants had vacated the property we began to remodel the units completely. We were able to raise the rents significantly with the repairs as the previous owner had let the units deteriorate over the years.

What was the outcome?

We still own the property and should be in a cash flow positive position within the next couple of months when we have full, or close to full, occupancy.

Lessons learned? Challenges?

We have learned a tremendous amount on this project: from dealing with tenants, their rights, timelines and scheduling, and costs to remodel units we are keeping longer term, versus preparing for market to resell (our primary business is fixing and flipping). The only challenge in my opinion is the speed of the transaction. I feel we are pumping in so much capital and not seeing an immediate return. But I am trying to work on my patience.

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

Yes, a property manger/listing agent on acquisition, and a property management to manage the units now, a hard money lender for purchase, and a commercial lender for the refinance. I would be happy to recommend any of the contacts we used. Just reach out to me directly for what you need. I am happy to help.