Slow BURRRRN (value add) getting started in Albany

[Akshay Nihalaney]

Investment Info:

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

Purchase price: $248,200
Cash invested: $115,000

Large 3 Family House.
Purchased with conventional 25% down with tenant in one of the units.
Made cosmetic upgrades to the 2nd unit, furnished it, and rented out by room to students.
Converted the 3rd unit from a 1BR/1BA to a 3BR/1BA. Renting it by room to professionals.

Hired property manager, but didn't work out for us; so fired them quickly and took over the management.
Changed strategies several times within the first year and learnt a lot from our mistakes.

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

Living in NYC and looking for cash-flowing opportunity at a drive-able distance.
After evaluating different markets, I did not feel long distance investing was for me at this time.
Numbers made sense, seemed low-risk; so just pulled the trigger.

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

On MLS, thru an agent.
Only one unit was occupied and others were vacant. It was listed for a few months, sellers were eager to sell.

How did you finance this deal?

Traditional 25% down with a local credit union.

How did you add value to the deal?

One unit was rented, and I could've rented others as-is; but decided to add value for highest & best use and maximize cash-flow.
One of the units was already occupied.
Made cosmetic upgrades to the 2nd unit, furnished it, and rented out by room to students.
Converted the 3rd unit from a 1BR/1BA to a 3BR/1BA. Renting it by room to professionals.

What was the outcome?

Total Invested: 70K down + 45K in renovations and furnishing = 110K
Monthly cash-flow after full stabilization: $2,500 (after setting aside CapEx & vacancy reserves)
Initial Cash on Cash: 26%

Refinanced:
Appraised for 340K
Refinanced with 80% LTV and pulled out 85K of the invested capital
Cash invested after accounting for refinance: 30K (115K - 85K)
Monthly cashflow after refinance: $2,000.
Cash on Cash after refinance: 80%
Equity after re-finance: 68K

Lessons learned? Challenges?

When purchased, the thought was to rent to families/professionals; pivoted to rent by room to students for a better cash-flow model.

Renovations to the 3rd unit was completed in the middle of Feb. Since, we still had months to go before peak summer rental season, did a 3 month furnished rental to travel nurses.

We now have experience of self-managing with several different strategies - long term rentals, rent by room, medium term rental to travel nurses.