Closed on my first commercial deal!

[Andrew Freed]

Investment Info:

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

Purchase price: $650,000
Cash invested: $80,000

Found this 5 family right on the MLS for $650K, needs about $50K of repair and over the course of a year, we plan to raise revenue to $8,300! At an average unit price of $130K when units normally trade between $150-200K, we got a great deal! This property will produce a 11% cash on cash return once stabilized.

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

Seemed like a great price per unit in a good area with parking. The property's systems are also in solid condition such as the electrical, foundation, windows and roof.

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

Right on the MLS

How did you finance this deal?

Small local bank, 25% down with a partner. We got the first 12 months interest only, 5.5 interest rate, 25 year AM, no prepayment penalty, and $50K of renovation funds 5/1 ARM

How did you add value to the deal?

Most of the value add is raising rents on under market units. Three of the units are section 8 so we simply need to request a market increase since all are month to month. The remaining 1 beds need cosmetic upgrades. Our plan is to renovate the two one bed units as well as bring the remaining 3 section 8 tenants to market.

What was the outcome?

We will be able to refinance out some of our capital while retaining cash flow.

Lessons learned? Challenges?

Nothing in permanent until you sign the commitment letter. We received term sheet and signed that, however the bank changed the terms on us last minute even though we were led to believe that the terms would remain stagnant.

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

I was the agent on the property. I'm an investor focused agent in my area.