Long-term Buy and Hold Deal on Manchester, CT 2-family

[Michael Noto]

Investment Info:

Small multi-family (2-4 units) other investment in Manchester.

Every Monday I will be highlighting a deal I was apart of either as an investor or agent highlighting a different investment strategy and how it was executed in the local market.

This past fall I was a buyer agent on a 2-family side-by-side duplex deal in Manchester, Connecticut.

Property details:
- 2- family side-by-side duplex
- Each unit identical 2-bed/1-bath layouts
- Natural gas heat
- Each unit has own driveway
- Located close to the highway
- Low B neighborhood

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

Clients are long term buy and hold investors and own the property right next door to this one and another around the corner. That was the initial draw and then once we viewed, it fit what they look for in a property which is something that at most needs basic cosmetic work (think unit turnover type work). The only issues they saw were below market rents and a confusing tenant situation which is outlined below.

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

The property listing stated one of the units was owner occupied and the other had a tenant paying below market rent. Turns out the owner did not live there and other than the fact that the tenants had personal relationships with the landlord we could not get a clear picture on the tenant situation. Because of that we thought the best course of action was to make an offer with the property vacant upon close. After some back and forth the seller agreed to our terms.

How did you finance this deal?

The deal was financed using a conventional investment property loan.

How did you add value to the deal?

Upon purchase 1 of the units was in good shape and rent ready. I leased it up for them for $1400/month within a week. The other unit needed paint throughout, a deep cleaning and a new shower surround. If I had to guess, $5k max in work. They also did some landscaping work to spruce it up a little. That took about 3 weeks to complete and after that I leased up that unit for $1300. Reason for that unit having less rent was kitchen is average and some of the flooring was outdated.

What was the outcome?

Clients have a performing property that in the end has a 1.2% rent to price ratio which in this market is a little above average for a buy and hold rental in a solid neighborhood. Fits perfectly with their current portfolio of other properties in the same area.

Lessons learned? Challenges?

The tenant situation was challenging at first, but in the end is probably why there wasn't insane competition for the property. This is a very desirable owner occupied market and with it being fully occupied w/ very little concrete details given in regards to rent, leases, etc, it may have scared off some of the competition.

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

Brett Santeusanio and his team at Cross Country Mortgage were the lenders on this project and did a great job like usual.