How I turned $10,000 into $90,000 in 30 days!

[Nicholas Baker Wood]

Investment Info:

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

Purchase price: $321,000
Cash invested: $8,500

I assisted an investor in purchasing the next-door 8 unit building for an extremely reasonable price. The owner of this 10 unit property, who was also a real estate broker looking to retire, reached out to me looking to sell. She let me know that she would sell her building for $275,000.00, and she asked me if I knew anyone who would purchase it. After thinking for about 5 seconds, I told her that I would buy it. This is a 10 unit property off a main road in a thriving commercial district.

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

I primarily find awesome deals for my client, but this one was too good to pass up! This is a low-income housing. I want my tenants to feel respected and valued, and I want to make sure they are treated fairly.

The tenants at this property are wonderful, and I do not plan to raise rents for quite some time, though I have already filled a vacancy at a higher rental rate. I have an on site tenant who keeps the grounds immaculately clean, and helps turn over unit.

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

The seller contacted me directly. As a licensed real estate agent, a commission I earn on a deal is 100% negotiable. In this case, I was confident that the property would appraise close to the $400,000.00 mark, and I told the seller the same. I told her that I would offer her $321,000, in return for a $45,000 commission to be paid to me, the buyer and buyer agent. MY lender was fine with this arrangement, and the property ended up appraising for $365,000 as-is.

How did you finance this deal?

15% down, 20 year Amortization, 5 year balloon. My negotiated real estate commission covered the majority of my down payment.

How did you add value to the deal?

By keeping more money in my pocket during the purchase, I will be able to outfit the storage room as a coin laundry, which will service both this building, and the 8 unit building directly next door. The income from the coin laundry should offset my lawncare, trash, and water charges, and also justify a rent boost, over time, with existing and future tenants. As units turnover, I will do moderate repairs, and boost rents to $650/mo for each 1 bed 1 bath unit.

What was the outcome?

1.) My income for 2022 is $45,000 higher. This will assist me in obtaining future loans, both for personal property and investment property.

2.) The $45,000 commission almost covered the entire 15% down payment. All that remained was roughly $10,000 of closing costs, and about 1% of a down payment.

3.) The property Appraised at $365,000, as is, which was $90,000 higher than her asking price of $275,000. Essentially, I created $90,000+ of net worth with only $10,000 out of pocket, plus the tax.

Lessons learned? Challenges?

In about 2 years, I plan to have rent rolls up to $5,500 - $6,000 / mo, and charging water, trash, and lawn care back to the tenants. The coin laundry will likely bring in $250-$500 / mo. At that time, I would consider selling, and get a check for about $300,000, or cash out refinance when rates drop eventually, and pull out about $200,000 of cash that I can than leverage for an asset of about $1,000,000 - $1,500,000, while retaining this cash-flowing property.