New Build Duplex Success

[Solomon Floyd]

Investment Info:

Small multi-family (2-4 units) other investment.

Purchase price: $18,500
Cash invested: $235,000
Sale price: $414,500

We built 7 duplexes to be kept as rentals for the growing
population of Wichita County. These homes will serve
as a strategic investment benchmark to allow for
larger rental growth over the next 3-5 years.
Liquidation of the assets will happen at or after year 10
of holding to ensure that the properties do not fall
behind market trends.

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

I love building high-density single-family rentals that benefit the people who need housing under $300K. The need for homes under $300K is far greater than that of the $500K+ threshold.

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

The city sold me this deal from a tax sale, they were very cooperative and helped us to get our plans approved. I did have to push for them to allow me to build 7 duplexes, but we can to a compromise that allowed us to just do duplexes without limitation.

How did you finance this deal?

I raised the money to purchase the land and get it entitled. The build financing was done through Bank OZK out of Dallas, this took roughly 6 months, but honestly was the best financing we could get with the market adjustments. 12 months to build at 6.5% interest.

How did you add value to the deal?

We brought value to the deal as the developer, sponsor, and builder. This gave us control over the project and lots of flexibility on rental pricing and sales price.

Lessons learned? Challenges?

1. Make sure you understand the money-down situation.
2. It's okay to start with one home at a time.

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

No, both were just okay and there were a lot of mistakes.