San Diego/Hillcrest Duplex

[Joshua J Cawthorn]

Investment Info:

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

Purchase price: $1,215,000
Cash invested: $367,500

Used an interest-only loan and put down 30% to acquire this 2-unit building that came with tenants. I moved in to begin making upgrades to the first unit. There is a 396 square foot garage building that will be demolished and replaced with a 500-600 square foot ADU. Currently having the roof replaced, adding 12 solar panels, and installing/connecting a new forced air HVAC system. Once the ADU is built, this property will cash flow $2,482/month. This property WILL cash flow at least $5,482/month.

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

I love house hacking small multi family in southern California, a particularly challenging market because of the high cost of living. Additionally, the garage building is perfect for a value-add ADU play.

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

Worked with an outstanding 1031 broker who understood my goals perfectly.

How did you finance this deal?

This was a tough one to finance because my DTI, as a single income earner, nowhere near qualifies for such a high purchase price. Required a non-conventional loan type called a Cash Flow Loan, which is an interest-only loan that comes with a 5-year prepayment penalty. The expectation is that I won't refinance or touch the loan for five years. Pros and cons.

How did you add value to the deal?

New roof, solar panels, adding an HVAC system, and the replacement of the garage building with a brand new, ground-up construction ADU.

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

I would absolutely recommend ARG 1031 and, specifically, Angelo La Bruna. He is a 1031 expert and a real estate broker. He is outstanding.