Second time is a Charm, finding profit add solutions

[Chevonne Woodard]

Investment Info:

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

Purchase price: $495,000
Cash invested: $19,000

2nd house hack, 2-Flat with an In-law unit created $300 a month rental rate increase pre-unit. Purchased with a FHA loan and $15k in Seller Assistance during a Sellers Market. Closing Cost and fees totaled around $8,750 including the 3.5% down payment to close this deal.

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

I conducted a property analysis projecting 38% return on Cash, and low rehab investment as building and systems were updated in 2015. Additional key factors for this deal were: prime location, unit size, number of bathrooms, existing tenant for immediate income upon closing, possibility of various rental models (short-term, student housing, and long-term), ease of room additions to floor plan with existing lighting and heat/cool vent layout.

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

I found the deal on Redfin, provided details to my Realtor Paul DeLuca from the Bigger Pockets' Network list. He was amazing to work with immediately setting up the walk through and connecting me with a complete team from financing to attorney and inspectors to get the deal closed in 30 days from offer acceptance. There was some back and forth leading to a $15k Seller contribution, they were motivated, as they were retiring and offloading primary and rental properties.

How did you finance this deal?

Through an owner occupied FHA home loan 3.5% down payment coupled with $15k in Seller Assistance.

How did you add value to the deal?

Made interior and exterior cosmetic updates coupled with building additional bedrooms to two units converting them from 3-bed 2-bath to 4-bed 2-bath. This improvement increased rent by $300 a month above none updated 3 bedroom.

What was the outcome?

Rental income covers 100% of mortgage, $200 current monthly cashflow is based on special owner occupied exemption I qualify for in the City of Chicago minus water/sewer, building utilities, and repair set aside funds, current tenants pay gas and electric. Once property is 100% self-managed rental occupancy monthly cashflow is projected at $1400, amount after applied property tax liability. Redfin has projects an estimated value over $125k of the purchase purchase price.

Lessons learned? Challenges?

There has been a small unforseen plumbing challenge that occurred after the weather broke. Which required time and working with several vendors however having warranty in place allowed matter to be resolved with little financial output.

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

Yes, I worked with Realtor Paul DeLuca (Connected via Bigger Pockets), Success Mortgage Zack Karp, and Attorney Aaron McHenry of Gurney Law Group.