5-unit Berkeley property

[Brent Tarnow]

Investment Info:

Large multi-family (5+ units) buy & hold investment.

Purchase price: $1,000,000
Cash invested: $300,000

5-unit Berkeley property, purchased with seller financing

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

Under market rents allowed the property to sell at a reasonable price. Used seller financing to buy runway to survive low rents while units turned over.

It is in an incredible Berkeley location (near Whole Foods), it's a gorgeous Victorian, and it will retain and gain value over time.

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

On market deal, but we were the first to identify that the seller (an aging retiree) didn't want a big chunk of change but preferred monthly payments. Wanted to avoid a tax hit and save the balloon for her granddaughter. So we helped achieve her goals. Therefore, we won the deal without coming in at the highest price.

How did you finance this deal?

Seller financed (see above)

How did you add value to the deal?

For the seller, we gave her just the contract she wanted, including allowing her to finance the sale.

We took the one vacant unit and did short-term rentals (in Berkeley, still easiest to do 30-days or more) for visiting students, professionals and nurses (the hospital is 2 blocks away). Huge premium on those short-term rentals

What was the outcome?

Still own it today. Another unit has turned. Deciding on selling versus holding.

Lessons learned? Challenges?

The City of Berkeley lived up to its reputation, both with fees and administration as well as protecting tenants. I'm in the middle of a big (ridiculous) tenant dispute now, after they refused to pay, refused entry to the building, refused to provide an information. Inheriting tenants in Berkeley is risky and vetting new ones is very important.