10 unit seller financing deal in Pittsburgh

[Duc Ong]

Investment Info:

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

Purchase price: $250,000
Cash invested: $40,000

Contributors:
Anthony Angotti

This 10 unit is located about 30 minutes outside of Pittsburgh.

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

The deal was off market, and came through a relationship that my partner had with a former co-worker.

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

This was a JV partnership with a local investor/realtor in the Pittsburgh area. We initially had the deal under contract at $300,000, with $100,000 in seller financing at 0% APR. The lender wanted a better Debt Service Coverage Ratio for their underwriting, so we negotiated the price down to $250,000, with $50,000 seller financing at 11% APR.

How did you finance this deal?

Seller Financing and local bank.

How did you add value to the deal?

Renovated units as they turned, and increased rents to market rates, from about $450/unit to $750/unit.

What was the outcome?

We are almost finished with turning all of the units and getting market rents.

Lessons learned? Challenges?

This was our first commercial deal, greater than 5 units. Because we came into the deal with very little reserves, we had to bootstrap to fund the turns, from cash flows. If we were more prepared, I would have preferred having the capital to do the turns, without tapping into the cash flows.

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

Tony Angotti

[Duc Ong]

@Joseph Firmin because the $50K at 11% turns out to be equivalent to $100K at 0%. It's the same to us and them, but different in the bank's eyes.

@Constance Kawa-Small Yes, Natrona Heights. They were mostly rented, but we turned them and got some of them up to market. It didn't take long to lease up, since my partner does an excellent job of the PM and marketing. It's all about the execution and the people, in this business.