Flooded Four Plex
There seems to be a lot of interest in Mult-Family housing on BiggerPockets, and with good reason. Their returns tend to be a bit higher than single family homes. Now those returns don't come free, as multi-family units tend to require a bit more involvement, and here in Las Vegas, the tenants are a more blue collar clientele.
Back in 2010, we came across a four plex at the great price of $75k. It wasn't in the best condition possible, and was completely vacant, but we figured we could make it work.
On the first floor, the bottom first foot of drywall was cut out due to flooding, and all the soft flooring was removed. A lot of the kitchen cabinets needed repairs, and there was a few broken windows, and bad neighbor running power cords to my plugs.
We started with the units on the second floor, primarily because those units needed less work and time, so we could start renting units out faster.
We went with tile flooring for durability, painted cabinets to update the look, tile surrounds in the shower to compete against the other vacant properties, along with paint and carpet.
We managed to rent out a few of the units in a matter of weeks, and got the property under contract for $145,000 cash. Offer was great, other than the new roof request from the buyer. Roof was a bit torn up, so I figured it was a pretty reasonable request.
$5000 and a new roof later, the buyer decided to back out. As one could imagine, I was extremely annoyed, especially since they had the audacity to ask for their entire earnest money deposit back. After threatening to sue them, I got them to release 75% of the EMD to me, and we began remarketing the property.
Few months later, another offer comes at $150,000 cash, but this time, this buyer wanted the exterior of the property painted with BEHR paint (the expensive, overpriced paint at Home Depot). After doing the math, we were still doing pretty well, even after the paint job, so we accepted the offer and painted it as requested.
In the end, this buyer actually preformed and closed, and we did quite well with a $27,600 profit.
Key Stats
Acquisition Date: June 30, 2010
Acquisition Source: REO
Disposition Date: November 5, 2010
Expenses
Acquisition Price: 76,000
Utilities and Assessments: 1509.00
Repairs: 36,536
Total: $114,045
Sale Price: $150,000
Closing costs and commissions : 10,273
Net Proceeds from sale: 137,727
Rent Income:1022
EMD Retained from first buyer: 2920
Profit: $27,626
Comments (1)
Are you making connections with banks for REO's in Vegas? There still has to be a lot of REO inventory there. I wish I had more business sense back in 1984. I had just graduated college with a degree in Finance and the job market was bad. Mortgage rates were well north of 12% for 30 year martgages. My first job was with the FDIC which was closing banks left and right. The S&L debacle was in full swing and the FSLIC had gone under so the FDIC was stepping in. I had so many real estate foreclosures in front of me it was ridiculous! I was on the inside seeing all the deals both good an bad. "Deals" is the wrong word. Because nobody was making a deal - nobody knew these properties were in trouble. My title was "Liquidation Assistant". By that name alone you can surmise my job was to take the loans the FDIC acquired and I had to sort through them and liquidate them. Yup, I had access to all the REO's before they were even vetted to be listed for sale. But I didn't have the money or the knowledge to know that what I had was a goldmine. I made less than $14,000 a year in that job, but if I knew then what I know now, the information I dealt with daily was worth a fortune. Build those REO connections and you'll make money faster than you thought possible. Thanks for the continued writing of your expriences.
Jerry K., about 14 years ago