8 unit with undermarket rents

[Kara Leboeuf]

Investment Info:

Large multi-family (5+ units) commercial investment investment in Queensbury.

Purchase price: $662,500
Cash invested: $86,000

We purchased an 8 unit that was in decent shape with under market rents. We had the seller hold 150,000 private note with a balloon payment at 5 years then did conventional financing through the bank. We immediately raised rents that were on average 700 per unit up to 900-950/unit with out any money in renovations. Market rents after rehab will be about 1200 significantly increasing our monthly cashflow. Then we will be able to refinance around 4 years and pay back the seller and get our original investment back.

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

A newer commercial unit with significantly undermarket rents.

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

We actually found it on the MLS. We originally asked for seller financing and he said no. So we presented him with 3 offers, one with traditional financing and less money to him, and the other 2 were different terms for seller financing where he ended up with more money. He ultimately chose the offer where he made the most money!

How did you finance this deal?

150,000 seller financing and 432,000 financed through the bank

How did you add value to the deal?

Immediately raised rents upon closing. Will slowly rehab units as tenants move out, and raise to market rents which is about 400/more per unit more than what we originally purchased for.

What was the outcome?

success so far!

Lessons learned? Challenges?

There always seems to be a way to convince the seller to do financing. He was first a hard no, but after talking and negotiating with him more we got him on board.

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

We actually did work with a very investor friendly agent who. happened to be the listing agent.