Bargain buy to renovate and hold

[Lynne Hart]

Investment Info:

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

Purchase price: $90,000
Cash invested: $50,000

4 family building purchased in distress in Mount Pleasant neighborhood, previously owner occupied for quite some time, the owner could no longer care for it.

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

I had watched this building for some time as it had been over priced and was visibly in poor condition. I was travelling when it occured to me that It had been long enough, I could likely negotiate a lower price. I regularly help out of state or country buyers purchase property, so I figured I should buy one that way myself, sharpening my skills for this class of buyers. 2 birds one stone!

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

A team member of mine did a video walkthrough, and a collegue went along to do an informal inspection. We estimated it needed a new roof and sewer, not to mention an extraordinary cleanout job before rehab. I set the price that I would be willing to buy it, and with no competition, we negotiated over a few thousand dollars. I had a sewer inspection to confirm the gravity of the issue ($7000 sewer job awaited us) and negotiated back down. Purchased and closed from out of the country!

How did you finance this deal?

I used a conventional loan for the purchase, and cash for the renovations.

How did you add value to the deal?

We prettied her up, gave her a new sewer, new roof, new garage roof, cleared out a ton of junk, and put this into production in 2020. Al 2 bed 2 bath units with updated open kitchens and modern baths, some with deep tubs! A 3 car garage in the back is just waiting for us to add electric doors and rent it out.

What was the outcome?

4 units renting at $850 each with remaining opportunity for the garage.

Lessons learned? Challenges?

My tenant selection at first could have been better, or I could blame covid, we turned most of the tenants over within the first year and are stabilizing in the 2nd year.

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

I was the agent, with the help of a team member. I used one of my favorite lenders for the deal (i have several repeat lenders, depends on the deal), and I would always recommend various professionals, depending on what your needs are!