3-Family gut remodel

[Matthew Irvine]

Investment Info:

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

Purchase price: $72,000
Cash invested: $75,000

3-Family gut remodel, large triple decker style building with a flat roof. We opened the living spaces with out altering the bedrooms and adde a half bath in each unit. End product was 3 - 3 bed 1.5 bath units that are each over 900 sqft.

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

At the time me and my brother had just partnered on a turn key townhouse and were looking to step into a larger value add project. We searched the market looking for something in really rough shape and came across this.

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

We found this deal on the MLS, 2018 in northwest CT still had quite a bit of REO inventory, as well as just heavily distressed assets well below market price. This was listed at 90k and we worked back and forth to end up at 72K which honestly felt like we were slightly overpaying.

How did you finance this deal?

Cash

How did you add value to the deal?

Full renovation, all new everything.

What was the outcome?

After fully renting the property we were able to cash out refi at a value of 225k, we were into the building for approx. 185k so this was close to a full cash out. 3 years later with some small rent increases and rising prices we were able to refi again at 275k, the building is currently worth closer to 295k.

Lessons learned? Challenges?

At the time the lesson was to make sure that your desire for a deal doesn't lead to overpaying. We really should have paid less, there are a few unresolved issues that we ran short on capital for on the front end. We have slowly been resolving those on the back of the strong valuations of recent years. If the market hadn't done what it has over the passed few years, those improvements would have been put off even longer.