I bought a 4plex in LA & I get $1800/month cash flow!

[Jen Day]

Investment Info:

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

Purchase price: $1,305,000
Cash invested: $326,000

I started looking for a multi-family property in February, 2021. After many months of searching, several offers not being accepted, opening escrow on another property and then falling out of escrow (because the appraisal came back 100k under my accepted offer price), I finally found my current property. It was hard not to get discouraged when other deals fell through, but now I am so happy they did because the property I have now is miles better than all of the others. There were so many challenges and things I have learned from my experience. I was also fortunate to get support and advice from my KW Team Leader Diane Brito, and other investor friends who have been through all this before. I am learning to be a landlord as I go, and lucky enough that all my tenants are kind and happy to stay. The renovations and repairs have been very expensive, and like many rental properties, are continuous, but I have many resources for contractors and subs, so I feel fortunate to have great people on my team. Rental properties are an on going adventure, and I am glad I get to share my knowledge with my clients and fellow investors so they can learn from my mistakes and benefit from my successes!

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

After reading books on flipping & investing in rental properties, I quickly realized the best path for me to achieve passive income and build wealth for my future was multi-family properties. More doors, more rental income, and more potential for growth. Of course, there are also more city regulations to follow, more tenants to manage, and more potential for repairs needed. Therefore, I am constantly educating myself in this area of investing.

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

Since I am an agent, I found the deal on MLS after it has been on the market for only 2 days. They had an open house that weekend that I went to, and they received all offers within 3 days. It happened that fast. I represented myself and submitted an offer of 100k under asking (1.3M). They countered with the same asking price. The numbers made sense, and I knew it was a good deal. My counter included an escalation clause of 5k over their best offer, and my offer was accepted.

How did you finance this deal?

I received a conventional loan to finance the deal, and I financed the renovations & repairs myself.

How did you add value to the deal?

The previous owners had not had the resources to keep up the property, so there were many repairs needed. I replaced the roof on all units, replaced the plumbing on 2 units, remodeled the one unit that was delivered vacant, and upgraded the landscaping. To justify all these repairs, I needed to raise the rent on all the tenants over 30%. Because the tenants were happy with the repairs and wanted to continue living there, they all agreed to sign a new lease with the new rent rates.

What was the outcome?

I am holding the 4 plex as a rental property. I inherited 3 tenants for 3 of the units, and one unit was delivered vacant. I currently have all units tenant occupied. After giving all tenants 90 days notice of a rent increase (required by law), as of March 2022 I will have all tenants on a new lease with the new rent amounts coming in each month. After PITI, Cap x, & expenses, this property will bring in $1800/month in cash flow.

Lessons learned? Challenges?

Even with highly recommended inspectors that gave me thorough reports, I sorely underestimated the cost of the renovations & repairs needed on the property. I spent too much too quickly at the beginning, and then started tightening the budget too late. Next time I will be much more detailed on my estimates so that I can be more accurate with what the budget will be, and start the project with a more thrifty mindset.

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

Yes, my mortgage broker Kelvin Craver and his team at Crave Loans was essential to my deal happening. He was very helpful in explaining the process of financing a multi-family deal like this, and making sure I was in the best financial position to succeed with my property.