How I Turned My First Duplex Into 20 Units [Video!]

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Hey there, BP! I am on my way to a real estate closing, where we are selling a group of multi-family properties we purchased in New Jersey about 10 years ago. In this video, I have explained how we turned a duplex we owned in Philadelphia into 5 four-unit multi-family properties located on the same street in New Jersey.

Related: 6 Reasons to LOVE Multifamily Investments Over Single Family Homes

We grew this portfolio over the years and certainly have learned a lot along the way. I hope you find this blog helpful and educational. Mostly importantly, I hope this post inspires you to continue taking action and moving closer to your goals!

Investors: What do you think about this strategy? 

Let us know with a comment!

About Author

Matt Faircloth

In 2005, Matt founded The DeRosa Group along with his wife, Elizabeth. At the time, the two person company owned and managed two assets – a single family home and a duplex. Over the last nine years, they have grown the company to a 12 person team owning and managing over five million dollars in residential and commercial assets throughout the central NJ and Philadelphia area. One of DeRosa’s mantras is “to make money while making a difference.”

34 Comments

  1. ericka williams

    there are a million ways to do real estate and here is a perfect example of one. buy up streets, buy up neighborhoods. I see alot of this in texas currently, where a owner sells multiple duplexes and fourplexes on one street. Its a great way to start. I think if you go owner occupied and move every year you could have low downpayment mortgages, but investors and lines of business credit is a faster route to get there. Thanks for sharing.

  2. Toby Coons

    Matt,

    You talk about how it makes sense to use a 1031. I am assuming since I see you manage over $5 million that you are planning on reinvesting the proceeds from this sale into real estate. IF you don’t mind me asking, what did you purchase with the proceeds? More 2-,3-,4-plexes or a larger, single building?

    • Matt Faircloth

      Hey Toby,

      Believe it or not we didn’t do a 1031 on this deal. We had some very old debt that needed to be paid off to one of our initial investors that got in with us 10 years ago. Had it not been for that I would have done a 1031.
      That being said, I am focused on larger buildings and would have done a 25 or 30 unit building with the proceeds if I didn’t have other plans for them.

      Matt

    • Matt Faircloth

      Hey Christian,
      Great question. The first two that we bought on the 1031 were market rate deals, at 2006 pricing. The market was in the peak of the peak at that time so we definitely overpaid based on today’s market. The next one across the street was at the same price. The last two were in distress and were purchased after the crash so we got them extremely cheap. When we sold we actually let them go for less than we paid in 2006 because the last two were heavily discounted, and we had 9 years worth of amortization on the original purchases. All that allowed for a profitable sale. The lesson there is that long term real estate is very forgiving, over time.
      Take care,

      Matt

  3. Mark Peteritas

    Excellent video, Matt. Very cool to see a small part of what you guys have been working on. I have been working on similar, albeit smaller, investments with this same strategy. It is a great way to affect positive change in a neighborhood and control your own appreciation at the same time. Nice job!

    Mark

    • Matt Faircloth

      Hi Gianni,
      You are welcome. Glad you enjoyed and got some juice from it. How is your progress going so far? Maybe you can find an area near you with a row of multis like this. It was a great way to “cut our teeth” on landlording!
      Matt

    • Matt Faircloth

      Hi Lucia,
      Good to hear from you. A few tips on getting started in small multis…
      – set some solid and achievable goals for where you want to be in 6 and 12 months
      – get to know some other active investors in your area. Try and find a local REIA group
      – Start farming your area. Find a certain geography that meets your investment criteria and get to know where the A, B, C, and D neighborhoods are.
      – If you are not bankable right now, do what you can to get bankable – check your credit score. See if you can get pre-approved.
      – Consider buying a multi 4 units or less and living there. You will get a great mortgage deal and get to live there cheap or for free. Most investors I know got started that way.

      I hope that helps. There are a ton of resources on BP about these things so be sure to search around!

      Matt

  4. Ben Staples

    Hey Matt,

    Thanks so much for taking the time to make this! Very insightful and very happy to see your success.

    You mentioned a few times while these great looking deals came along, you used other investors to help fund them. Could you speak a little more to how this works with long term buy and holds? Any books to recommend around private money deal structuring for long term buy and holds? Was it a longer term loan (3-5 years) with points, or more structured like a partnership?

    Thanks!
    Ben

    • Matt Faircloth

      Hey Ben,
      Thanks for reading and for the comment! We do a lot of partnerships with our investors, most of which are on rental deals. They are typically structured as Limited Partnerships. As the property makes income, they get a portion of the cash flow based on their percent ownership. The deals last anywhere from 3 to 5 years at which point we sell or refinance the property and buy out the investors share of the deal. It’s worked out well for both parties! They get the benefits of ownership of large real estate projects, I get to do deals while leveraging other people’s money.

      For books on this, look into anything by Garrett Sutton (one of Rich Dad’s Advisors) and Brandon Turner’s book on the purchase of his 24 unit book. I just ordered a copy of “Hammock Income” which looks good also. There is a ton of this stuff on Bigger Pockets also so search around. I wrote a few articles on it which might help too.

      Best of luck!!

      Matt

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