Value add duplex into a "four" flex

[James Bailey]

Investment Info:

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

Purchase price: $634,000
Cash invested: $15,000

2/1 Duplex in a B- a neighborhood on a 1/2 acre corner lot. Each side is a 2/1 850 sq ft duplex. Units required minor updating, 15k total. Built a new fence for the backyards of each side. Allowing me to one day build one ADUs on each side of the fence (2) with preapproval from the city.

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

The value adds aspect is incredibly alluring. By adding two ADUs I'm essentially getting four-plex returns for the mortgage payment of a duplex. The one drawback to this is that with the current market, a 2/1 ADU will be about 200-300k.

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

Put in a previous offer on another duplex that the owner had. They asked if we were interested in this one.

How did you finance this deal?

utilizing my broker and mentor. Ended up with a 25% down, 6.75 APR 30-year fixed with a four-year prepayment penalty

How did you add value to the deal?

Modern paint, appliances, and lighting.

What was the outcome?

Utilizing property management they found two so far solid tenants on very good leases.

Lessons learned? Challenges?

Trust the process. Each struggle will make you stronger. I had a lot of doubts about taking this unit on and another duplex at the same time.