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Updated almost 2 years ago,
Third Investment Property Performance Update
Investment Info:
Small multi-family (2-4 units) buy & hold investment.
Purchase price: $133,000
Cash invested: $60,969
In March of 2020, we purchased a 3-unit property in Augusta for $133,000 with a 20% down commercial loan with a 20-year amortization fixed at 5.0% for 5 years. This property consisted of one 2-bedroom unit with a tenant in it, one vacant 3-bedroom unit, and one vacant 3-bedroom unit that we gutted to the studs and converted to a 4-bedroom unit. This project was a giant learning curve for me, as it was the first time that I had ever really done a full remodel.
What made you interested in investing in this type of deal?
I was interested in this deal because of the value add opportunity. This property had great bones, and large units, but needed some major cosmetic updates. We were able to make those cosmetic updates and immediately add value to the property.
How did you find this deal and how did you negotiate it?
This deal was listed on the MLS for $119,900. We used an escalation addendum and that resulted in a purchase price of $133,000.
How did you finance this deal?
We used a 20% down commercial loan through Kennebec Savings Bank. We invested $38,705 in down payments and closing costs. We financed $25,800 of the improvements with the bank we got the loan through, as well as contributed an additional $21,445 of our own money to complete the rehab project.
How did you add value to the deal?
This property consisted of one 2-bedroom unit with a tenant in it, one vacant 3-bedroom unit, and one vacant 3-bedroom unit that we gutted to the studs and converted to a 4-bedroom unit. This project was a giant learning curve for me, as it was the first time that I had ever really done a full remodel. We closed on this building a few days before the 15 day government shutdown, so none of our contractors showed up, and we spent the next six months doing just about everything ourselves. We change
What was the outcome?
Our total cash invested in this deal was just under $61,000. It currently cashflows $26,171 annually yielding a cash-on-cash return of 43%. Today, just 3 years later, this property is worth about $275,000. If we were to sell this property today, our net cash flow on this deal would be $117,191 in just 3 years and out Internal Rate of Return would be 62%.
Lessons learned? Challenges?
This project was a giant learning curve for me, as it was the first time that I had ever really done a full remodel. We closed on this building a few days before the 15 day government shutdown, so none of our contractors showed up, and we spent the next six months doing just about everything ourselves. We changed the floor plan, rewired the unit, and changed out old plumbing. We hung our own sheetrock, laid our own floors, and got a complete education in most things remodeling for free.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
Katie Vickers at Kennebec Savings Bank
- Rylee Knox