Two Properties & One year later!

[Brad Kelly]

Hello BP community! 

I just wanted to share a story on a couple of properties I purchased last year. A little over a year ago I was sitting with my first property a 7-unit all single bedrooms, and looking to buy my next property. I came a crossed a motivated seller who was selling all of his properties off (6 of them). I looked at a few that I thought I'd be interested in, and decided I would like to purchase 2 of them. The first property is a 2-unit: Downstairs apt (4 bed, 1 bath) and Upstairs apt (3 bed, 1 bath). The second property is a 4-unit: All of them are (2 bed, 1 bath). These properties were quite distressed, and the seller hadn't even been to the properties in a couple years. He had a property management taking care of them, and they were doing bare minimum to keep the places held together and rented. Anyways, I saw some potential value in the properties and made an offer. 

I did not have the funds to put the traditional 25% down between the 2 properties so I asked the seller to finance 15% of the down payment, and I would pay the other 10%. After some back and forth we agreed that he would owner finance the 15% over 10 years with a 6% interest rate on a promissory note. The properties together were roughly $153k. He was going to cover about $23k (which actually only ended up being a $10,500 loan because I received a $12,500 credit at closing), and I only had to come up with $15k plus the closing costs. 

Getting the seller to agree to this type of deal was challenging enough, but finding a lender to agree to this type of financing was an entirely new challenge to figure out.  I probably spoke with 10-15 banks/credit unions to finally find one that would agree to this deal. Well, that was until it went to underwriting and they decided they couldn't. There I was back at square one with a couple of weeks wasted. I reached out to my agent and asked if she knew of any lenders I haven't called on yet. She gave me a list of 3 I hadn't spoke with yet, so I called them all. It pays to have a good agent, because one of them was able to do the deal (obviously there were some more obstacles), but the deal went through in August 2019.

This is a look at how each property has gone over the last year:

Property #1

Apartment #1 (4 bed, 1 bath) was renting for $950/mo. I did a quick remodel that took 1 month in February spent about $5k on it and increased the rent to $1,100/mo. I moved one of my tenants over from property #2 into this unit because the other place was too small for them.

Apartment #2 (3 bed, 1 bath) is renting for $895/mo. and I still have the same tenants in there. they did allow me to get in there and take down a wall between kitchen and dining room to open it up and put some new flooring down along with some new appliances that were needed.

I also added coined laundry to this place which brings in $25/mo.

Property #2

Apartment #1 (2 bed, 1 bath) was renting for $695. I had to evict this tenant for a few months of not paying rent, and I just finished remodeling this unit which now rents for $800/mo.

Apartment #2 (2 bed, 1 bath) is renting for $695. This is the most updated unit and I still have the same tenant when I purchased the property.

Apartment #3 (2 bed, 1 bath) was renting for $615. This unit was in very rough shape so I gutted it to the studs and remodeled it. It currently rents for $850/mo.

Apartment #4 (2 bed, 1 bath) was renting for $695. The tenants that were in here just left one day soon after I bought the place, so I did a quick update and it now rents for $750/mo.

I replaced 2 furnaces over the summer in this building.

Between the 2 properties I have put a little over $30k into them throughout the past year. With that, I was able to increase my cashflow $520/mo. for a total cashflow of around $2,500/mo. I was able to place better quality tenants in the units, while increased the value of these properties. I also connected with a few handymen who helped me on these places, and I am still using for projects, and I was introduced to a great HVAC contact. I have put a lot of time and money into these places, but they are starting to pay off with some great cashflow. I am now onto my next project which is a BRRRR on a SFH that I should be closing on in the next week or so.

I really hope this was able to help/inspire someone in one way or another!

Good luck to the BP community and I hope everyone is out there crushing their goals!

-Brad