Duplex Investment - Year 1 review

[Jeff Schemmel]

Investment Info:

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

Purchase price: $310,000
Cash invested: $12,300

Contributors:
Tim Swierczek, Adam Tafel

house-hacking an up/down duplex in Saint Paul. Hoping to achieve $200/m per door on move-out by adding a 2nd bedroom and rehabbing upper floor.

Update 5/2/22 - Renovated the upper unit for $7,000 in 3 weeks - full floor-to-ceiling updates in every room after tenant moved out. New rent increased by $405 per month with new tenants signing a 12-month lease. New cashflow estimate on move-out will be $350/door per month once our lower unit is rented. Still able to add 2nd bedroom on main level.

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

I wanted to find a property I could force equity in. We will eventually add a bedroom and this property had the least cap-ex concerns with new plumbing, electrical, sewer, roof. Windows and siding are older and gutters needed to be replaced, but all in all its visual appeal makes it an attractive rental.

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

My agent Adam Tafel found it on the MLS for me, we came back after a price drop and negotiated a new furnace and closing costs.

How did you finance this deal?

Tim Swierczek managed the lending for this transaction and helped us buy down our interest rate with some extra seller-paid closing costs.

How did you add value to the deal?

We dramatically improved the upper floor, added new gutters to keep the water out of the basement, and will add a 2nd bedroom on the main level before we sell to increase future occupancy.

What was the outcome?

we went into the deal looking for a ~30% cost of living reduction, that was immediate. We wanted $200/door per month cash flow when we moved out which meant we needed to get somewhere around $2600/m total rent. We are projecting $3000/m total rent at this point after our rehab. Our units are really nice and have favorable floor plans, we have always gone with quality finishings and went out of our way to do the work right.

Lessons learned? Challenges?

I learned that buying a home with an attic furnace comes with some challenges, and it's not the most ideal heating situation. I learned that if don't put your foot down and stick to the lease your tenants will think you aren't paying attention. I also learned that making sure tenants have renters insurance is very important.

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

Those I mentioned above are ideal.