Investment Info:
Small multi-family (2-4 units) buy & hold investment in Nashville.
Purchase price: $229,000
Cash invested: $48,000
Purchased a wholesale duplex with the BRRRR strategy in mind, turned over to a house hack and now STR. How many strategies can you get out of one house?! The home sits less than 10 minutes from down town Nashville on a 2.35 acre lot. The lower portion now rented by LTR and I live in the back/upper portion with a closed off STR with private bed and bath to maximize the return on investment. A lot of work went into the project and it cash flows (without reserves taken out) on just the one side.
What made you interested in investing in this type of deal?
I was looking into the Nashville market for about 6 months prior to purchase. Mostly started focusing on this market with the short term rental potential. This market has certain restrictions on STR with zoning/primary residences. After looking a deals on deals I finally found this duplex (I really wanted multi family). I purchased it because one side needed major work from top to bottom and the other was pretty much rent ready.
How did you find this deal and how did you negotiate it?
I networked with local agents and real estate professionals while visiting here for work in fall of 2019. Opened the door to a wholesaler which had been sending me emails and insights on the market for some time. It was a double close and had a 10 day window. I put down earnest money based on photos, analysis, and videos. Always a bit of a risk, but in the end it worked out. Saw the investment in person the day before closing and tried to negotiate more, but they hit their ceiling with the offer
How did you finance this deal?
Used a hard money lender. Pretty expensive process, but it allowed me to get the construction budget paid back in draws & not invest more cash to cover repairs. It was 5% down and a $44k budget allotment (I went over by $5117) My total investment initially was $31,477. With high interest holding cost and budget overages I have invested $48,012 in total. With the refinance, the appraisal came in at $413K leaving me 35% equity in the home. Renters is net $1624 minus PM/water and the PITI is $1517
How did you add value to the deal?
New joist under both baths, fixed 3in floor slope in bed 1. Baths FULLY gutted & the 1/2 bath turned to full. All new plumbing, new tile, new tubs, new vanity, green board, all new. The kitchen gutted except lower cabinets & I resurfaced them, new countertop, new tile work, new sink, appliances. All new LTV in kitch/hall/living, laminate in beds. Added duct and HVAC. 11 new windows, roof repair, landscaping overhaul, driveway rip out and 31 tons of driveway gravel, closed off bedroom to add ext
What was the outcome?
The hard money loan and pay off was $259k. Home apprised for $413,000. Making 35% or 144K in equity. The refinanced PITI is $1517 and Unit A tenants pay $1624 (minus PM and water bill). Unit B's fair market rent potential is $1450. Making the rental income $2880 (minus PM and water bill) - $1517 equaling $1362 cash flow to then take out reserves.
Lessons learned? Challenges?
SO MANY LESSONS! I did not have a construction background at all! I have painted, and done some household items growing up but really had never hired a contractor in my life. I took it in pieces and basically became my own GC, hiring out each contractor for each job, getting multiple bids to get a fair price and understand how I was charged. I learned the process and steps that have to be taken to move to the next phase of the project. My original thought was 6 weeks of reno, it took 13.
