MF/Commercial Phase 2 in Transforming area of Billings, MT

[Tiffany Youngren]

Investment Info:

Large multi-family (5+ units) other investment in Billings.

Purchase price: $285,000

7 Residential, 1 Commercial distressed property purchased in May, 2021. Rents were $495-550/month for 6 of the units (4 1BR apartments and 1 Efficiency house) and 2 units were vacant when we purchased the property for $285,000. The previous landlord took no deposits, and criminal activity was the "norm." Now that the area is cleaned up, we purchased another house on the block with another neighboring lot under contract. The whole neighborhood is being transformed with the help of other fix/flip investors and one owner-occupied house.

PHASE 1 (complete): Remodeled a 1 BR house that was vacant and now rented for $850/month. Remodeled a Work/Live commercial + apartment that was vacant and is now rented for $1800/month. We also replaced the roofing for most of the units, cleaned up the properties, replaced windows throughout, and did repairs in several apartments.

PHASE 2 (underway): We will either slowly or quickly be doing total gut remodels on and furnish the remaining 5 units. They will be rented to traveling nurses and other extended-stay short-term renters.

Purchased for $285,000
All-In Final Costs: $375,000
TOTAL: $660,000

Current Value (Phase 1 Complete 12/2021): $710,000

ARV $1,200,000 based on a 5% CAP Rate.

We are currently looking to refinance $700,000 (58% of ARV) to cover Phase 2 and a very modest profit.

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

This was our re-entry into full time real estate investing. We saw so much potential in it and were eager for a big project with big impact. We found it!

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

This was an ON MARKET deal. It was our last purchase through another agent - but our agent is now our managing broker.

How did you finance this deal?

We almost purchased this owner-finance, but ended up getting hard (yet private) money loans. Fortunately, we have been cash-flowing (sometimes .... almost completely cashflowing) in the meantime!

How did you add value to the deal?

We remodeled it, changed the management (which is still a project in the works).

What was the outcome?

We are just entering Phase 2 - depending on this round's financing, we'll do Phase 2 fast or slow.

Lessons learned? Challenges?

So many challenges and lessons learned. I could write a book on just this project. If I were to pick just one - evict problem renters. It's not worth the police calls, thefts, violence, and other trouble that is caused by problem tenants while you're trying to fix the place up. We are identifying non-profits to contribute to that help people who are drug-addicted and homeless since we are not equipped to serve them properly through our real estate investing.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Through this deal, we became eXp agents, which I highly recommend :) We had our own real estate office years ago, but took a break in 2008 until 2021.