Investment Info:

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

Purchase price: $83,754
Cash invested: $1

This was my first deal and we did a full cosmetic rehab, doing most of the work ourselves. It was a BRRRR, that we executed successfully, although it took us much longer than expected.

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

I love the idea of building sweat equity and investing in cash flow properties. Small multifamily makes a lot of sense to me, although it can be more difficult to manage. The process of finding something that is very ugly, but has good bones and turning it into something beautiful that can put money in your pocket for the rest of your life is appealing.

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

I found it through a direct mail campaign to absentee owners. I negotiated it for the payoff amount because the seller only had about two weeks before he would lose it to the bank and he wanted to save his credit.

How did you finance this deal?

I used private money for the original purchase, then used a mix of private money and me and my business partner's money to pay for the renovation materials.

How did you add value to the deal?

We did a massive renovation. New kitchens, bathrooms, paint, replaced 10 windows, 15 doors, all the outlets, stainless steel appliances, Lifeproof LVP in all carpeted areas, new HVAC in 3 units, vinyl siding, pressure wash, and refinished all the tubs.

What was the outcome?

We came in just over the repair budget of $77,000, with renovation costs of $79,235 and holding costs were higher than we anticipated, coming in at $8,935 (including insurance, taxes, and utilities). Our units rent for $850 per unit. All in we were at $172,015. The appraisal came in at $280,000, and at 75% LTV our cash out refinance was $210,000. Cash flow was $3400 in rents, less 1601 PITI, less 340 PM, less 476 Capex/repairs (14%), less 272 vacancy = $711 true cash flow with high reserves.

Lessons learned? Challenges?

We expected to be done in late September/ early October, but did not finish until January. The cash out refi took even longer since we couldn't complete that process until all units were filled. Then, there was a winter storm and our lender made us have a second appraisal to confirm condition, which took another month. Holding costs also were much higher than we expected, since the project took so long. Overall, it was a great project though and we had enough cushion to still do well.

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

I worked with Title2Land in Baton Rouge as my title company, @AlexBekeza was my mortgage broker (I found him on BP) and he did a great job, the issues were with the actual lender, and those were basically all the professionals we used.