Fixer Upper Multi-family in Lincoln Park

[Brittany Kuschel]

Investment Info:

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

Purchase price: $145,000
Cash invested: $60,000

Buy and Hold Fixer Upper (owner occupy while renovating)

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

We were looking to purchase an investment property that we could owner occupy while we house hunted for our dream home. Short term & month to month rentals in our area are lacking, and everything that looked attractive was $2,000+/month. With interest rates at historic lows and a sizeable down payment, our monthly PITI is less than $850/month.

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

I am a licensed Realtor, and was contacted by this seller to provide a market analysis. I made her an offer a few days after walking the property with her tenant.

How did you finance this deal?

We utilized equity from our current primary residence as the down-payment/closing costs, and purchased with conventional financing. While we had hoped to come in with a minimum down payment, we were unwilling to sign loan docs that stated we would occupy the property for more than a year (as our future was uncertain), and thus the lender required 25% down.

How did you add value to the deal?

We painted every room, had new cabinet door fronts built and re-painted kitchen cabinets, replaced countertops. Nearly every room was re-painted, hardwood floors were beneath carpeting and we paid to have those refinished (best decision ever when converting a property to a rental). We took on some landscaping and re-painted a good bit of exterior decking. We replaced some windows as needed. We are finishing the upstairs improvements and putting a kitchen back into the upper level unit.

What was the outcome?

Due to upstairs not having a kitchen, we initially rented entire home for $1950/month (tenants paid utilities & snow removal/lawn care). After an early move-out in lieu of eviction, we re-rented lower level for $950/month with tenant paying some utilities. We are presently putting kitchen back in upper level unit and will be converting this 2 BR/1 BA unit to a fully furnished, month to month rental. Rent projections for this 2 BR unit are $1900/month. Current comparable sales show FMV at 190k

Lessons learned? Challenges?

Doing a good bit of work yourself takes TIME. Also, don't buy a fixer upper and then move less than a year later when pregnant. Our biggest challenge has been time. Also, the MTR conversion has involved much more than anticipated. Our next MTR or STR, we will be leaning on the professionals a bit more. We initially planned to use this property as a BRRRR towards the next acquisition, but our interest rate is so great that we will be utilizing a HELOC if equity is needed.

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

I am a licensed Realtor and I handled paperwork for both sides of this transaction (no commissions collected).