Investment Info:

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

Purchase price: $89,000
Cash invested: $89,000

This was the 1st property I ever purchased back in 2020 right as the cultural shock of Covid-19 was taking hold. I became friends with an investor who I met at a local meetup in the San Fernando Valley. He was born and raised in St. Louis and came to LA for the music industry. I eventually did about a dozen loans for him on his BRRRRs in STL. Covid hit him in a very hard way in the sense he had multiple rehabs with hard money loans and you couldn't send workers to the job sites, all of the TV shows he was working on were cancelled as a result of social distancing, and for a brief moment very few lenders were doing loans until some dust settled. This perfect storm put him a tough position against a balloon with no lender willingness to extend based on pandemic fears. After some time on the market I offered him all cash what he owed the lender since I knew he did a great job on the rehab and I hoped this would be seen as a win win. It was! I purchased the property for $89,000 all cash (this was barely less than I had to my name at a time when you couldn't even buy toilet paper). It was already leased for $1,250 (today $1,495). I let the property sit free and clear for about 3 months and then I did a cash out refi. It appraised at $110,000 so I was able to get a loan for $82,500. Mind you I didn't do one penny in rehab because it had just been fully remodeled and so this allowed me to leave very little skin in the game and cash flow a couple hundred bucks a month. Most importantly it gave me the confidence to redeploy the capital on very similar properties in the same neighborhood. This began my brick by brick journey in STL and I'm still friends with the seller to this day.

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

I had done over 50 DSCR loans in St. Louis and specifically in this zip code and the few surrounding it so I had a plethora of appraisals in my workdrive folder to give me the confidence to get started in real estate investing here because it's also a fairly low barrier to entry type of market.

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

Direct to seller. Meetup buddy turned hard money/DSCR client turned seller.

How did you finance this deal?

All Cash and then refinanced via DSCR.

How did you add value to the deal?

I didn't have to. It was turnkey, I just got it well below market based on timing and circumstances.

What was the outcome?

I was officially on the scoreboard as an investor.

Lessons learned? Challenges?

If you show good faith and really get to the heart beat of the deal when negotiating direct to seller, you can make some great scenarios happen.