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

Triplex Rehab: All three units were completely disgusting after decades of drug-using tenants. I found a reputable property management firm, a real estate agent, and a decent contractor. The same day that I served eviction notices, Governor Inslee posted a moratorium and the tenants stopped paying rent. A six-month, 85k rehab went 14 months @138k. Due to supply chain issues, I sourced many of my own materials and personally drive them over to Spokane so that my contractor could stay focused.

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 (and my savings).

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?

I made every mistake possible with this project but I stayed focused and didn't give up. In 2022 my property was appraised at $460k, generates $4400 in monthly cash flow and I pulled $250k out for my next project.

Lessons learned? Challenges?

Build a solid network. Don't be afraid to switch contractors. At one point I had to sit mine down and re-estimate the remaining work, reworked his project plan, and rewrote his bid so that we could get this back on track. Sometimes it 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. Also, get creative. I had some cabinet doors hand-made to finish my kitchens due to supply chain problems.

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/