Starting Line - My first dive into Real Estate Investing

[Michael Semcken]

Investment Info:

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

Purchase price: $825,000
Cash invested: $270,000

This is my first dip into the world of Real Estate Investment. I am currently renovating the basements of the property and adding egress windows to make each side a conforming 5 bed 2 bath home (10 bed/4 bath total). Renovations are being paid for by a HELOC which is why my cash investments are high. Renovations are set to be completed around the first week of September and hopefully rented by October. Property management companies estimate I can rent between 2900 and 3300 a side.

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

My wife and I have always been interested in the concept of House Hacking. It wasn't until I sold my first house last year that it gave us the courage to take the dive into Real Estate Investment.

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

We hired a real estate agent with a strong focus on investment properties and she helped us get the deal.

How did you finance this deal?

We did a conventional loan with 25% down.

How did you add value to the deal?

For the renovations, we took out a HELOC that allowed us to take out 90% of the equity of our home. The house was sold as a 7 bedroom, but in actuality both basements were unfinished. We added 3 egress windows to the side with rooms to make it a conforming 5 bedroom and finished out the basement with floors (There was no flooring before). We are adding 3 rooms and a bathroom to the basement on the other side. When all is said and done, the duplex with be a 5 bedroom/2bath on each side.

What was the outcome?

The outcome is to be determined. Once the renovations are finished I hope to immediately reappraise the home and increase the value of my HELOC to prep for buying an additional multifamily home in 6 months. We have our fingers crossed that the property increases in value by $300K.

We plan on living on the other side until about March of next year (we would do it sooner, but we have a baby on the way!)

Lessons learned? Challenges?

I applied lessons learned from my last house moving into real estate investment:
1- I don't want to be a slum lord, but I don't want to overpay for renos. I focused on the basics and didn't get too much into fancy design.
2- I hate basements. They flood, they get musty, and they're dark. I put in nice waterproof-wood look flooring and affordable recessed lighting without making the rooms look cheap to make it feel more like a home than a basement.
3 - TBD: We'll see when renting starts!

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

I worked with Chelsea Steen of Your Castle Real Estate: https://www.chelseasteen.com/

She is honestly the best real estate agent I have ever worked with and I plan on using her for my future investment properties.