Three units, two structures, one purchase

[Eric Larson]

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $175,000
Cash invested: $10,000

Set of three units (one duplex and one single family on adjacent lots)

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

The seller is an individual that I have worked with before. The units were rented near market levels, but could be increased with minimal difficulty.

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

The seller came to me and asked me about market value for the units. After some discussion and seeing the units, I asked if they would be willing to sell them to me and we negotiated a deal and bought the units.

How did you finance this deal?

We were able to buy these with owner financing initially. After some repairs and improvements, we refinanced with a local bank that we have a relationship with.

How did you add value to the deal?

We bought these near market value at the time. Since they are currently all occupied, we have not made wholesale changes, but those are planned. Over our ownership period so far we have improved exterior appearance and certain internal features so that the units work better for the tenants and we have increased rents marginally.

What was the outcome?

Over the last year or so, we have increased the value and the cash flows very well and since went on to buy more units from the same seller in the same way.

Lessons learned? Challenges?

90% of real estate problems are people problems. Navigate the people problems and the real estate problems are easy. Communication is the key to navigating most people problems.

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

I am a licensed Realtor.