Probate, Mold, & Money

[Masyn Grant Barney]

Investment Info:

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

Purchase price: $420,000
Cash invested: $75,000

I was the buyers agent helping my client secure a legal duplex far under market value. It took several rounds of negotiation including a detailed inspection. It appraised for $30k over list price and has an ARV of about 115% of purchase price requiring about $30K of rehab. With base rents at $1595 +pet fees, utilities, and an added fee for a shorter lease, my client is easily cashflowing just under $600 a month after accounting for vacancy and repairs. It is self managed too.

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

My client as a buy and hold investor looking for cashflow. At todays rates, multifamily is the best way to achieve that through typical long term leases.

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

On the MLS. We followed Brandon Turners advice of finding a deal that was overpriced for us and finding the number at which it made sense. It took several rounds of negotiation and inspections to get to that number, but we did it. We got in with plenty of equity to buffer against the falling market and at a price that allowed him to cashflow quite well.

How did you finance this deal?

10% investor loan through a local credit union. It costs 2-3 points, but is a great way to put less than the traditional 25%+ investment multifamily requires.

How did you add value to the deal?

I added value through very careful negotiation. He added value replacing the floors, bathrooms, adding HVAC, cabinets, and paint.

What was the outcome?

Lots of equity and lots of cashflow in a great rental market.

Lessons learned? Challenges?

Always estimate high on rehab costs. Especially when dealing with potential water damage. The bathrooms had leaking water that lead to several walls and joists being ripped out to properly get rid of the mold and restore its structural integrity.

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

I was the agent, we also worked with a fantastic lender who specializes in those 10% down investor loans. We also had an amazing inspector who came back to verify problems and give us more negotiating power. Our title lady worked through probate issues and helped the listing agent fix the documentation on their side to ensure the property was transferred correctly. It really took the whole team to get this deal done.