Stepping into it... a commercial BRRRR

[Nathan Zierer]

Investment Info:

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

Purchase price: $380,000
Cash invested: $276,000

Contributors:
Sarah Zierer

This is our break into “large” commercial real estate with 8 units, 4 One Bed & 4 Two Bed units. The building was not being managed well and had decades of deferred maintenance. Thankfully though, the bones were in good shape and are making the renovations relatively simple.

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

We were wanting to break into the commercial multi-family space and this is in an up and coming neighborhood.

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

We found the deal via our realtor sending it to us, although it was on the MLS.

How did you finance this deal?

Conventional financing of the purchasing with an 80% LTV through a local lender (referred by @Megan Greathouse, thanks!). The renovations are being self-funded in cash.

How did you add value to the deal?

So far, we are sticking with our original plan to gut the bathrooms down to studs and rebuild, new pre-hung doors, light fixtures, flooring, and paint throughout. We started with 2 units in phase 1, phase 2 will be 4 units, and phase 3 will be the remaining 2 units and common spaces. We would like to put coin operated laundry in the basement once all the work is completed as well.

What was the outcome?

Current 1 beds rent for $500 and 2 beds rent for $600. After renovations, conservatively, 1 bed units should rent for $750 and 2 beds for $900 per month. Projections show $1,500/mo cashflow and infinite ROI as we will pull a little more money out than our total investment. There will be updates to this as work continues…

Lessons learned? Challenges?

TBD

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

Chris Lance - Commercial Realtor
Matt Fagin - Paramount Bank