Breaking Bad in Spokane - My not so cute little triplex

[Chris Stephens]

Investment Info:

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

Purchase price: $182,000
Cash invested: $320,000

Complete rehab of a triplex that was originally built in 1910. All three units were completely disgusting after decades of drug-using tenants. This was my first long-distance rental. I found a reputable property management firm, a real estate agent, and a decent contractor. The same day that I served eviction notices, Governer Inslee posted a moratorium for evictions and the tenants stopped paying rent. The rehab was originally estimated to last six months at 85k and turned into 14 months @ 138k. Due to supply chain issues, I had to source many of my own materials and personally ship them from wherever I could find them over to Spokane so that my contractor could stay focused on the rehab. My contractor wound up overwhelmed and demoralized. At one point I had to sit him down while I broke out the remaining work, reworked his project plan, and rewrote his bid so that we could get this back on the rails and completed. In 2022 my property was appraised at $460k, generates $4400 in monthly cash flow and I pulled $250k out for my next project. Tons of lessons learned with this property.

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

I was getting back into RE investing and wanted to test out remotely owned rentals and the BRRR method. This was an opportunity to do both and also crack the 1% rule in a rapidly rising market.

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

I researched Spokane for months while searching for a good agent. This home was so ugly and abused that it scared off most investors (listed/pending/relisted cycle). After running the numbers I realized that even if the project ran over (which it did) that it would still pencil from a cash flow and appreciation perspective. The property was listed at ~220k after playing offer ping-pong, we closed at $182k, all cash, no contingencies.

How did you finance this deal?

Cash-out refi of another rental property.

How did you add value to the deal?

Studs-out remodel. We opened up the floor plan, new bathrooms, new kitchens, all new appliances, the whole nine yards.

What was the outcome?

All three units are in exceptional shape and the property generates $4400 per month in income.

Lessons learned? Challenges?

Build a solid network. Keep an eye on your contractor. If they are punching above their weight, don't be afraid to switch contractors or sit them down and walk through the remainder of the project. For major rehabs, it actually helps to have the original contractor roll off before the finishing touches are complete and find someone else to dial down the job with fresh eyes.

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

Yes. Homeland Property Management. These people are the real deal. Full-service property management. Their fee is slightly higher but you definitely get what you pay for. They helped me evict the original tenants and kept an eye on the property for 14 months during the rehab (with no rents coming in). They are super focused on the relationship and have earned my trust. http://homelandrents.com/