Vacant Fourplex in North Oakland, FHA financing

[Brent Tarnow]

Investment Info:

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

Purchase price: $1,305,000
Cash invested: $100,000

Vacant 4-unit in North Oakland, on market, purchased with FHA financing. Small cosmetic rehabs, good tenant selection, and it cash flowed from Day 1.

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

After a smaller owner occupied situation with the duplex, we moved into one of the units in the fourplex. The strategy worked once, so we replicated it.

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

On market deal, but it wasn't marketed very well, which is something I always look for. Also, the building was mixed use (one commercial space) that turned off many would-be investors in a property in such a good location. We paid a small premium so that the seller would choose our offer despite the FHA financing.

How did you finance this deal?

FHA. People in the Bay think it's impossible, but many sellers will patiently wait if they (a) trust that you know what you're doing and (b) make it worth their time -- i.e. add $10k to the purchase price for the extra month the closing might take.

How did you add value to the deal?

Mostly small cosmetic improvements -- kitchen upgrades, paint, etc.

What was the outcome?

Lived there for 3 years for free, now it's cash-flowing nicely.

Lessons learned? Challenges?

Commercial spaces are slightly different than residential (obviously), but it's not rocket science. And in some ways, the long term leases that you negotiate with those tenants can be a positive.