Four New Construction SFH in St. Augustine Florida

[Ke Nan Wang]

Investment Info:

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

Purchase price: $140,000
Cash invested: $600,000

We bought a lot with one house on it for $140k. The property is actually 4 buildable lots. So our plan was to tear down the house and build four builder grade investment houses on the spot. We worked with an architect to design these houses to maximize their efficiency for rental properties and they were built to last. Super renter friendly and easy to rent. The entire project took us 6 month to finish and they all rented out for a premium price. Currently four houses are renting for $1950/$1950/$1950/$2350. Three out of the four units had the original tenants so the rent were lower. One unit we re-rented at the highest market price possible. All units got very little maintenance, very small insurance premium.

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

We love to build our own new constructions because once we put together a new construction team that can take a project from A to Z, the project costs less than a resale, and you get brand new properties with a very small maintenance cost and insurance premium. New construction is a lot easier than rehab because there aren't that many surprises. Most of the due diligence is done during site study phase. Once the lot is suitable for the project, it's pretty smooth sailing.

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

The property was surprisingly on the market for almost a year listed at $169k. We made a $145k offer and the seller took it. I am a licensed real estate agent so my commission was about $5k so our cash to close was $140k.

How did you finance this deal?

We used a Commercial Line of Credit against our existing rental portfolio. It's the cheapest loan for us. But if LOC is not available to some people, there are certainly new construction loans people can take out to finance the project.

How did you add value to the deal?

We built four new houses.

What was the outcome?

Great. Houses looked fantastic. Everyone loved our product. Easy to lease and easy to manage. Low/no maintenance. Lowest insurance premium. Each property now is worth at least $330k each on the market so that's 1.32M total. Our cost was $740k. In 6 month we made $580k in equity and generating $98,400 a year in gross income.

Lessons learned? Challenges?

Do your due diligence when purchasing the lot and make sure you can do whatever you plan on doing with the property. Another huddle was you have to either become a licensed contractor or hire a GC who can pull the project off. I was fortunate enough to have my contractor's license so I did the project management myself to save a decent amount of cash.

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

I worked with a local bank named Barwick Bank. They funded the project. I was my own real estate agent and general contractor in this project.