Here are all the details—including numbers, financial analysis and photos—behind Deal #3 in growing my REI portfolio from 2 to 18 Units ($1M+ in Real Estate) in 12 months. All these deals were in Harrisburg, PA.

Here’s a link to my article from December 2019 explaining that process: From 2 to 18 Units ($1M+ in Real Estate) In 12 Months.

Here’s the link to my article with all the details behind Deal #2: From 2 to 18 Units ($1M+ in Real Estate).

After finishing up Deal #2, I found myself in a predicament, which I believe all other real estate investors find themselves in:

1. I was eager to acquire my next property.

2. I didn't have the funds for another purchase (I used savings for the first purchase and exhausted my HELOC for the second purchase.)

3. I couldn’t find any good deals listed on the market.

Finding Cash: The first thing I did was refinance the two properties that I had just rehabbed. They appraised for $145,000 and $150,000. With purchase prices of $116,000 and $110,000 on each property, I ended up pulling out approximately $50,000 out of the refi, which was enough for a down payment on 2 similar properties.

Finding a Deal: Instead of waiting for a good deal to hit the market, I literally did a Google search of every property in certain areas and streets that I was interested in investing. I identified every property that had an apartment, then inputted that information into an Excel spreadsheet. Then, I pulled all the property owners' info from the local county website. After creating my own mailing list, I created my own personalized 1 page letter and did a mail merge. In retrospect, this was extremely time consuming and definitely not the most efficient way to do a direct mailer. But, I didn't have much money to throw into marketing, so I chalk this up to part of the learning experience in my REI education.

I got a handful of responses to my mailer. The majority were just tire kickers / non-motivated sellers. But, one call definitely had potential. He was an investor who was previously local to the Harrisburg, PA area, but had subsequently moved out of state. He had 2 properties in my target market, which he wanted to unload. One was a 2 unit and the other was a 3 unit.

Negotiating the Deal: It was almost too perfect—I had just enough cash for a down payment on 2 properties, and he had exactly 2 properties he wanted to sell as a package. We initially discussed a purchase price in June 2018. He said $240,000 was his floor and also explained that he needed $130,000 on the 3 unit in order to pay off his loan. I knew I could not pay $130,000 for the 3 unit, knowing I would put $25,000 into the rehab, and had concerns that it would appraise for under $155,000. If I was following the same model I used on my first 2 deals, I would have to get the property for around $110,000.

I didn’t want to waste the seller’s time, so I simply told him I couldn’t get to his floor of $130,000 for the 3 unit. I did tell him that I was still interested in purchasing the properties, and that if something changed in the future, to please let me know.

Two months later, in August 2018, the Seller reached back out to me and said he was ready to sell. He said he would now accept $225,000 for both property--$110,000 for the 2 unit and $115,000 for the 3 unit. Now he was very close to numbers that would work for me. I told him that I appreciated his movement. I also told him that I wanted to work something out that is fair to both of us. I said, “I would love to get both properties for $200,000, but I feel as though that’s a too one-sided in my favor.” Then, I simply asked, “How much lower are you able to go where this would still be a fair deal for you?” Without ever having made a counteroffer, he told me he could sell them both for $220,000 ($110,000 for each property), which I ended up accepting.

The Rehab: While I had both properties under contract, the local government notified the Seller that a lead issue had been identified at the property, and therefore, the property was subject to lead abatement before the one vacant unit could be re-rented out. I had contemplated walking away from this deal, but instead found a way to make it work out. Lead abatement requires a complete repainting (interior and exterior), removing certain items, and a window replacement. I was already planning repainting as part of my rehab, so I was able to get the Seller to cover the cost of the window replacement, and I covered all other costs—including painting and lead testing. This deal saved me $5,000.

I ended up putting $26,000 into the property. Here’s a breakdown of the numbers:

Labor............................................................................................................................... $14,145.79

- Replace Rear Deck

- Paint Exterior of Building (2 tone)

- Refinish and Stain Hardwood Flooring

- Install Vinyl Plank

- Interior Painting – Unit #1 and all Common Areas (3 tone)

- Install ceramic tile flooring in baths and Unit #1 kitchen

- Install New Kitchen Cabinets Unit #1

- Subway tile kitchen backsplash in Apartments #1 and #2

- New Plumbing Unit #1 house toilets / sinks / garbage disposals / tubs / faucets

- Install new light fixtures

- New doorknobs and hinges throughout

- Replace electrical outlets and switches

- Repair / Replace damaged window sills

Cabinets ............................................................................................................................ $2,261.25

Materials (Home Depot)................................................................................................... $5,228.42

Stainless Steel Appliances (Lowes).................................................................................... $1,904.82

Granite Counters............................................................................................................... $2,499.00

TOTAL.............................................................................................................................. $26,039.28

Gross Rents: Total $2,795.00

- Apartment 1 (1 bed / 1 bath) $1,000.00

- Apartment 2 (1 bed / a bath) $1,000.00

- Apartment 3, (small 1 bed / 1 bath) $795.00

The Refi: I closed on this property in October 2018. I had the rehab completed within 30 days and was able to refi the next month November 2018. The property appraised for $157,000, which got me a loan of $125,600. I was all in for about $136,000 ($110,000 purchase price plus $26,000 rehab), meaning I had about $10,000 of my own cash sitting in the deal still after the refi. Not a perfect BRRRR, but pretty darn close and still a huge success--especially for just my third deal.

Cash Flow: Here are the current cash flow numbers:

		Monthly	Annual	Notes
Income
	Rental Income
	Unit #1 - 1/1	$1,000.00	$12,000.00
	Unit #2 - 1/1	$1,000.00	$12,000.00
	Unit #3 - 1/1	$795.00	$9,540.00


	Laundry Income
	Storage Income
	Late Fees

	SUBTOTAL	$2,795.00	$33,540.00

Expenses
	Mortgage/Loan	$712.36	$8,548.32
	Taxes	$296.83	$3,562.00
	Insurance	$70.83	$850.00
	Vacancy	$55.90	$670.80	2% of rent
	Repairs	$139.75	$1,677.00	5% of rent
	Cap Ex	$100.00	$1,200.00	between $100 and $200 / month
	Water / Sewer	$73.41	$880.92
	Sewer
	Garbage	$33.32	$399.84
	Gas / Fuel	$28.20	$338.40
	Electricity	$30.76	$369.12
	HOA Fees
	Snow Removal
	Lawn Care / Maint.	$0.00
	Propery Management	$167.70	$2,012.40	6% of rent

	SUBTOTAL	$1,709.07	$20,508.80

	CASH FLOW	$1,085.93	$13,031.20

* A couple of things to note on my cash flow numbers. I have not had any issue renting out any of my apartments. I typically have a new tenant move in the day after an old tenant moves out. So, my vacancy is minimal. I did end up rehabbing the third floor apartment this past January 2020 (almost 1 1/2 years after the purchase) after an inherited tenant moved out. I self manage, so I don’t have to pay the property management cost. I did include it and account for it so that I could always have someone else manage the property one day and it would still cash flow. My repair expense is minimal because just about the entire property has been rehabbed. I did also include an expense item for Cap Ex, because inevitably that will come up. In short, there is a reserve of almost an additional $465 on top of the $1,085 cash flow number above. So, after paying all my reoccurring monthly expenses, there is still an additional $1,550 left over on this property.

Photos: Here are the before and after photos.