Number 10 - 3rd Quad

[Seth Wilcock]

Investment Info:

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

Purchase price: $249,000
Cash invested: $69,065

Contributors:
Mike Ernest

10th deal overall, 3rd quad purchased as part of a package deal with the same seller. This one had a few issues to overcome, but thankfully the sellers worked with us on getting to the finish line. Should be a strong performing property long-term and helped scale my portfolio quickly through "The Stack".

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

Quads and multi-family seem to perform better than SFR's. There seems to be less competition in this space since most of these properties are only attractive to real estate investors and house hackers. I also wanted to scale the portfolio a little faster, and this property helped me increase my door county quickly through "the stack".

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

This property hit the MLS at the same time as 2 other quads that I closed on. Realtor.com sent me an email every day with opportunities, and this one really appealed to me. It was part of a package deal offered by the sellers, and the fact that we were willing to buy all 3 quads so they could complete a 1031 exchange was attractive to the sellers.

How did you finance this deal?

The deal was financed with a 25% down traditional Fannie Mae/Freddie mac conventional loan.

How did you add value to the deal?

This property had a few issues that needed to be dealt with prior to closing. There were four underground storage tanks at the property (my first time dealing with that issue) and the roof definitely needed to be replaced. We negotiated with the sellers to remediate the UST's and replace the roof before closing. This wasn't much of a "value add", but it will decrease Capital Expenditures after closing.

What was the outcome?

After a few delays for the roof replacement, UST remediation, and an appraisal delay, we successfully closed on this property to allow the seller to complete their 1031 exchange.

Lessons learned? Challenges?

The underground storage tanks was definitely a new one for me to address. I had no clue what these were, or how to handle. Apparently, these are pretty severe/major issues. I can honestly say I would have terminated the transaction if the seller had been unwilling to remediate this. The sellers had no knowledge of the UST's, which means they probably bought these homes as a cash deal sight unseen, and probably without an inspection. It was a very costly fix that could have easily been more.

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

Mike Ernest with Team Endicott is a rock star. I also highly endorse Jonathan Hoover with Aegis Environmental if you need help in Indy for underground storage tank remediation and for all of your other environmental cleanup needs.