First 5+ Unit Building

[Matthew Irvine]

Investment Info:

Large multi-family (5+ units) buy & hold investment.

Purchase price: $265,000
Cash invested: $50,000

5 Unit Apt building. Large Units with decent floor plans, but somewhat of a monster house. Built in the early 1900s it was added to early on and maintained in that form with only minor changes. Wiring and HVAC had been updated after a fire damaged much of the building. 4 3-bed units, 1 2-bed unit. total building size is about 5,500 sqft.

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

After my first deal and many bigger pockets episodes I decided I had to rapidly scale in order to grow. I wanted to go commercial in size (5+) and this is where my search led.

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

The same agent I worked with on my first deal was apart of the brokerage that listed the deal. Very over priced($305,000) but the listing was over 12 months old so I offered $250,000. Countered and agreed at $280,000. After inspection many issues were pointed out, largest being the roof. Re-traded down to 265,000 with some of that coming out of the agents commission as they knew this was the closest they would get to selling this, and they had both sides of the deal.

How did you finance this deal?

I used a local bank that required 25% down.

How did you add value to the deal?

The units where dated and under market rent. I began with the roof, siding and the areas of largest concern. Then slowly upgraded and turned the units as they became vacant.

What was the outcome?

Property was refinanced last year at $400,000, allowing me to pull out more than half of the money I had in the deal.

Lessons learned? Challenges?

Be patient and make sure if you have a major overhaul you know your numbers or bring in some one who does. The income carried the value, but the building was in awful condition and in bringing it to my standards I went way over budget. The rise in market prices saved this from being a very sub-par deal, but only turned it into a decent deal. I learned a lot and don't regret the purchase, but could have better invested that money if I hadn't overreached into such a large project.